- First Horizon surpassed sell-side expectations in the second quarter, but most of the upside was driven by lower-value reserve releases and core spread performance was weaker than expected.
- It's far too early to write off the "new First Horizon" story, as the company is still early in the integration of Iberiabank and this remains a challenging operating environment.
- Execution is critical to the First Horizon story -- in terms of differentiated loan and spread growth, positive operating leverage, and healthy operating returns.
- Long-term core earnings growth of around 4% and near-term ROTCEs in the mid-teens can support a fair value in the high teens, but this is still a "show me" story and the Street wants to see differentiation.
For further details see:
First Horizon Undervalued, But Really Needs To Show Differentiated Growth To Re-Rate