Magazine article American Banker

First Horizon's Noisy 1st Quarter Has a Bad Echo

Magazine article American Banker

First Horizon's Noisy 1st Quarter Has a Bad Echo

Article excerpt

First Horizon National Corp.'s messy first-quarter earnings results are still resonating with some analysts.

Jon Balkind of Swiss Reinsurance's Fox-Pitt, Kelton Inc., cut his 2006 and 2007 earnings estimates for the Memphis company on Tuesday and said that despite a number of strategic changes last quarter -- which resulted in several one-time items -- it has more work to do.

Mr. Balkind, who rates First Horizon "underperform," cut 19 cents from his estimate for this year, to $3.14, and 5 cents from his 2007 estimate, to $3.55.

The $37.7 billion-asset First Horizon said last month that its first-quarter profit more than doubled from a year earlier, to $215 million, or 83 cents a share.

But analysts said that as many as 14 one-time items clouded First Horizon's results. It cited a $208 million gain from the sale of its merchant processing business to U.S. Bancorp on March 1 and $83 million of securities losses related to a balance-sheet repositioning, cost-cutting initiatives, and changes to accounting rules. And it posted a $5.4 million loss for mortgage banking, which had a $45.8 million profit a year earlier.

Mr. Balkind said in a note issued Tuesday that although he applauded First Horizon's efforts to "aggressively manage" through a rough patch for its mortgage banking and capital markets businesses, its earnings will probably remain under pressure for now.

"These actions likely only left the company running in place, and not in a position to move earnings materially higher in the near term," he wrote.

Robert S. Patten, a senior financial services analyst at Regions Financial Corp.'s Morgan Keegan Co., said it is difficult to gauge First Horizon's core earnings run rate.

"First Horizon's business mix doesn't give it any advantages, because of its reliance on wholesale funding for strong loan growth, which in this environment is spread challenged," said Mr. …

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