First Horizon Corporation (FHN): SWOT Analysis [10-2024 Updated]

In the dynamic landscape of banking, First Horizon Corporation (FHN) stands out with its strong regional presence and diverse customer base. As we delve into the SWOT analysis for 2024, we will explore the company's strengths, weaknesses, opportunities, and threats that shape its competitive position. From improved net interest margins to potential regulatory challenges, this analysis will provide valuable insights into how FHN can navigate the evolving market. Read on to discover more about the strategic positioning of First Horizon Corporation.

First Horizon Corporation (FHN) - SWOT Analysis: Strengths

Strong regional presence in the southern U.S. with a diverse customer base.

First Horizon Corporation operates over 450 business locations across 24 states, primarily in the southern U.S. This extensive network includes over 400 banking centers in 12 states, allowing them to effectively serve a diverse customer base. As of June 30, 2024, the company employed approximately 7,300 associates, enhancing its ability to cater to both consumer and commercial banking needs.

Improved net interest margin in early 2024 compared to previous quarters, indicating better profitability from lending activities.

As of the second quarter of 2024, First Horizon reported a net interest margin of 3.38%, which remained stable compared to the previous quarter. This improvement is attributed to higher loan volumes and yields, demonstrating the bank's ability to increase profitability from lending activities despite rising funding costs.

Significant increase in net deposits during 2023, demonstrating effective customer retention and growth strategies.

In 2023, First Horizon experienced net deposit inflows of $4.0 billion, reversing a trend of deposit outflows seen in previous quarters. Total period-end deposits as of June 30, 2024, were reported at $64.8 billion, reflecting a strategic focus on customer retention and competitive deposit rates.

Robust noninterest income streams, particularly in fixed income and mortgage banking, which have shown resilience despite market fluctuations.

First Horizon's noninterest income for the six months ended June 30, 2024, totaled $381 million. This figure represents a decline of 33% compared to the same period in 2023, largely due to a previous year's gain on merger termination. However, fixed income revenue increased to $92 million, up 33% year-over-year, and mortgage banking income rose to $19 million, reflecting a 73% increase.

Strong capital ratios with Tier 1 risk-based capital at 12.05% as of June 30, 2024, reflecting financial stability.

As of June 30, 2024, First Horizon reported a Tier 1 risk-based capital ratio of 12.05%, down from 12.42% at the end of 2023. This ratio indicates a solid capital base, which is crucial for absorbing potential losses and maintaining operations during economic downturns. The total risk-based capital ratio was reported at 13.67%.

Financial Metric	Value (as of June 30, 2024)
Net Interest Margin	3.38%
Net Deposits	$64.8 billion
Noninterest Income	$381 million
Tier 1 Risk-Based Capital Ratio	12.05%
Total Risk-Based Capital Ratio	13.67%

First Horizon Corporation (FHN) - SWOT Analysis: Weaknesses

Declining net interest income in the first half of 2024 compared to the same period in 2023, indicating pressure from rising funding costs.

For the six months ended June 30, 2024, First Horizon Corporation reported net interest income of $1.3 billion, which represents a decrease of $65 million compared to $1.365 billion for the same period in 2023. The decline is attributed largely to higher funding costs that have impacted the overall financial performance.

The net interest margin for FHN decreased to 3.38% in the first half of 2024, down from 3.62% in the same period of 2023, reflecting a 24 basis point contraction.

Increased provision for credit losses, suggesting potential challenges in maintaining asset quality amid changing economic conditions.

As of June 30, 2024, the provision for credit losses stood at $105 million, an increase of $5 million from the $100 million provision reported for the same period in 2023. This upward trend indicates a growing concern regarding asset quality amidst evolving economic conditions, as net charge-offs rose to $34 million in the second quarter of 2024, compared to $23 million in the same quarter of 2023.

Significant reliance on noninterest income, which can be volatile and heavily influenced by market conditions.

First Horizon's noninterest income for the six months ended June 30, 2024, totaled $381 million, a decrease of $190 million, or 33%, compared to $571 million for the same period in 2023. This decline was primarily driven by the absence of a significant gain on merger termination that contributed $225 million to noninterest income in 2023.

Key components of noninterest income included:

• Deposit transactions and cash management: $44 million
• Fixed income: $40 million
• Brokerage, management fees and commissions: $25 million
• Card and digital banking fees: $20 million
• Mortgage banking income: $10 million

This income is subject to fluctuations based on market conditions, which poses a risk to the financial stability of the company.

Recent decreases in total deposits and noninterest-bearing deposits reflect competitive pressures in the banking sector.

Total deposits for First Horizon were reported at $64.8 billion as of June 30, 2024, reflecting a decrease of $986 million, or 1%, from $65.8 billion at the end of 2023. Notably, noninterest-bearing deposits declined by $856 million during this timeframe. The competitive pressures within the banking sector have led to increased costs for attracting and retaining deposits.

Details of deposit composition are as follows:

Deposit Type	June 30, 2024 (in millions)	December 31, 2023 (in millions)	Change (in millions)
Interest-bearing deposits	$48,495	$48,625	($130)
Noninterest-bearing deposits	$16,348	$17,204	($856)
Total Deposits	$64,843	$65,780	($986)

This data underscores the challenges faced by First Horizon in maintaining deposit levels amidst an increasingly competitive banking environment.

First Horizon Corporation (FHN) - SWOT Analysis: Opportunities

Potential for growth in commercial lending, particularly with the rise in demand for loans from mortgage companies.

As of June 30, 2024, First Horizon Corporation reported period-end loans and leases of $62.8 billion, which increased by $1.5 billion, or 2%, from December 31, 2023. The growth in commercial loans was notably driven by a $1.3 billion increase in loans to mortgage companies and commercial real estate (CRE) loans.

The possibility of benefiting from future interest rate cuts by the Federal Reserve, which could enhance lending profitability.

The yield curve has been inverted for much of 2023 and into 2024, indicating market expectations that short-term rates have likely peaked. Analysts project one or two rate cuts in the last four months of 2024, which could enhance First Horizon's lending profitability. In the second quarter of 2024, FHN's net interest income was $629 million, reflecting increases from higher loan volumes and yields.

Expansion into new markets or segments to diversify revenue streams and reduce dependency on traditional banking services.

FHN operates over 450 business locations across 24 states, with significant concentrations in Tennessee, Florida, and North Carolina. The regional banking segment contributed net interest income of $1.054 billion for the first half of 2024. This geographical reach presents opportunities for market expansion and diversification of revenue streams beyond traditional banking services.

Adoption of advanced technology and digital banking solutions to enhance customer experience and operational efficiency.

As of June 30, 2024, First Horizon is focused on enhancing its digital banking capabilities to improve customer experience. The bank has been actively increasing investments in technology, which is expected to streamline operations and reduce costs. The potential for improved efficiency can significantly impact profitability in a highly competitive banking environment.

Metric	Value (as of June 30, 2024)	Change from Previous Period
Period-End Loans and Leases	$62.8 billion	+2% ($1.5 billion)
Net Interest Income	$629 million	+0.6% ($4 million)
Commercial Loan Growth	$1.3 billion	Increase from mortgage companies and CRE loans
Total Deposits	$64.8 billion	-1.5% ($986 million)
Tier 1 Capital Ratio	12.05%	Decreased from 12.42%

First Horizon Corporation (FHN) - SWOT Analysis: Threats

Ongoing Regulatory Challenges

The regulatory landscape for banks with assets over $100 billion is becoming increasingly complex. In 2023, the Board of Governors of the Federal Reserve proposed changes that, if implemented, would impose stricter compliance requirements on First Horizon Corporation (FHN) and similar institutions. This could significantly increase compliance costs, which are already a concern. For instance, compliance expenses have risen in response to new regulations, with projections indicating that costs could increase by 10-20% for banks of FHN's size.

Economic Uncertainties

The potential for an economic recession poses a significant threat to FHN. Economic indicators suggest that the risk of recession is present, which could lead to decreased loan demand and increased credit losses. The provision for credit losses for the six months ended June 30, 2024, was $105 million, an increase of $5 million compared to the same period in 2023. A recession could exacerbate these losses, impacting the overall profitability of the bank.

Competitive Pressures

FHN faces stiff competition from both traditional banks and fintech companies. The rise of digital banking services has intensified competition, affecting market share and pricing strategies. As of June 30, 2024, FHN's net interest income was $1.3 billion, a decrease of $65 million compared to the same period in 2023, largely driven by higher funding costs and competition for deposits. This competitive environment is expected to persist, potentially squeezing margins further.

Rising Operational Costs

Operational costs are on the rise, particularly related to insurance and compliance. For the six months ended June 30, 2024, FHN reported noninterest expenses of $1.015 billion, an increase attributed to higher personnel expenses, legal and professional fees, and deposit insurance expense. These rising costs are likely to impact overall profitability and could necessitate strategic adjustments to maintain margins.

Expense Type	Q2 2024 Amount (in millions)	Year-Over-Year Change
Personnel Expense	$279	Decreased by $6 million (2%)
Legal and Professional Fees	$18	Increased by $6 million (50%)
Deposit Insurance Expense	$16	Decreased by $8 million (33%)
Total Noninterest Expense	$500	Decreased by $55 million (10%)

As FHN navigates these threats, its ability to manage costs and adapt to regulatory pressures will be critical to its sustained performance in the banking sector.

In summary, First Horizon Corporation (FHN) stands at a pivotal point in 2024, characterized by its strong regional presence and improved net interest margins, yet facing challenges such as declining net interest income and increased provision for credit losses. The bank's strategic focus on commercial lending and technological advancements presents promising opportunities, while potential regulatory changes and economic uncertainties loom as significant threats. Navigating these dynamics will be crucial for First Horizon's ongoing growth and competitive positioning in the evolving banking landscape.