On Thursday, Citi reaffirmed its positive stance on First Horizon National (NYSE:FHN) stock, maintaining a Buy rating and a price target of $18.50. The firm's outlook is buoyed by First Horizon's strong first-quarter results, which have demonstrated a higher yield on average earning assets (AEA) and reduced liquid deposit costs.
This performance sets the stage for potential net interest margin (NIM) expansion, which is expected to foster a 3% increase in net interest income (NII) compared to the previous year.
The bank's recent financial outcomes have also been bolstered by better-than-expected fixed income trends and a well-managed expense base. These factors are anticipated to contribute to a growing pre-provision net revenue (PPNR) over the summer months. Citi suggests that, given these trends, there could be an opportunity for modest operating leverage.
Credit trends at First Horizon have continued to show robust results, reinforcing the attractiveness of the bank's shares. Citi notes that the stock is currently trading at a 13.2% return on their implied cost of equity metric, which is favorable when compared to regional peers that trade at approximately 12.6%.
The analyst at Citi highlights the potential for net interest margin upside and an aggressive share repurchase plan as key drivers for the current share price, presenting a compelling risk/reward proposition for investors. With the bank's shares trading at appealing levels, Citi's outlook for First Horizon National remains optimistic.
InvestingPro Insights
As investors consider Citi's positive outlook on First Horizon National (NYSE:FHN), real-time data from InvestingPro can provide additional context. The company's adjusted market capitalization stands at $7.78 billion, with a current P/E ratio of 9.67, reflecting investor sentiment on its earnings capacity. Despite a slight dip in revenue growth over the last twelve months as of Q1 2024, with a -7.19% change, First Horizon has demonstrated a strong operating income margin of 35.69%, which suggests efficient management and profitability.
InvestingPro Tips indicate that analysts have revised their earnings projections upwards for the upcoming period, reflecting optimism in the company's financial trajectory. Additionally, First Horizon has maintained its dividend payments for 14 consecutive years, offering a current yield of 4.23%, which could be attractive to income-focused investors. The company has also experienced a significant price uptick over the last six months, with a total return of 30.71%, signaling a positive market response to its operational performance.
For investors looking for a more comprehensive analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/FHN. To gain access to these insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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