Live Markets: First Horizon needs more than stock buybacks to support current valuation, J.P. Morgan says

Pinnacle Financial Partners

13/06/2024 14:57

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    FIRST HORIZON NEEDS MORE THAN STOCK BUYBACKS TO SUPPORT
CURRENT VALUATION, J.P. MORGAN SAYS
    First Horizon's  FHN.N  shares have gained 67% since the
U.S. lender was forsaken by Toronto-Dominion Bank  TD.TO  in May
last year, but its valuation is being held up by stock buybacks
rather than strong core business growth, J.P. Morgan wrote. 
    FHN will need to make good use of its presence in the
fast-growing markets across the southeast U.S. to command a
premium valuation versus peers, according to the brokerage. 
    So far in 2024, the lender's shares have jumped 6%,
outperforming rivals like Pinnacle Financial Partners  PNFP.O 
and BankUnited  BKU.N , which are off nearly 12% each. The KBW
regional banking index  .KRX  is off around 14% so far in 2024.
    Any material loan growth is unlikely in the near-term,
however, as First Horizon's customers are expected to wait for
more clarity on rate cuts before they start borrowing, J.P.
Morgan said, while reiterating its "neutral" rating on the
stock.
    "The company would need to see its stronger than peer
markets start to translate into stronger than peer growth,"
analyst Steven Alexopoulos said. 
    While high interest rates can allow banks to earn more
interest on loans, they can also spook customers, who may defer
their plans to borrow capital.
    Deposit costs are also closely tied to the Federal Reserve's
benchmark rate, and can eat into banks' profitability. 
    Expanding its branch footprint in Dallas and Raleigh, where
the bank currently has a small presence, could help it grow.
Fees from its bond trading and underwriting business could also
help, the brokerage added.
    Canada's TD called off its $13.4 deal for First Horizon in
May last year after months of regulatory uncertainty. 
 
    (Niket Nishant)
     *****
    
      
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