First Horizon Corp Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Hey, thanks. Good morning, can you talk a little bit more about the deposits, pricing competition you're seeing you flagged late in the quarter and what are you seeing give us some examples of that? And what do you think changes or eases that environment?

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Okay. If we don't get a cut, Hope do you expect this kind of pressure to persist? And I guess, um, you know, to kind of clean this up was talk a little bit about the higher end of the lower end of the NII guide and kind of what gets you to the higher end or lower end. Thank you.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Okay. All right. Thank you very much. Appreciate it.

Question: Michael Rose - Raymond James Financial, Inc - Analyst : Good morning, everyone. Thanks for taking my questions. I'm just if I use the midpoint of the guidance you guys are looking at negative operating leverage this year. I know maybe a little too early to kind of count talking about 2025, but do you think positive return to positive operating leverage next year is in the cards and kind of what are the factors rates, improvement in fixed income and momentum and fees, stuff like that would kind of get you there assume a little bit more balance sheet growth and as well?

Question: Michael Rose - Raymond James Financial, Inc - Analyst : Okay, great. Maybe just as a follow-up, as we do think about, hopefully a better growth environment for you you've clearly benefited from some little bit momentum in mortgage warehouse just as rates come down a little bit, and we're back to a normal seasonal market. But C&I loan utilization is still relatively low you've had some fund up some multi-family construction, things like that just Bryan, can you can you discuss kind of the demand outlook and what you're hearing from your customers is it going to take a couple of rate cuts to keep that utilization move up and see some better loan growth?

Question: Michael Rose - Raymond James Financial, Inc - Analyst : Thanks. I appreciate you taking my questions.

Question: Anthony Elian - J.P. Morgan - Analyst : Hi, good morning. This is Anthony Elian on for Steve. Just to follow up on the question on loan growth for Michael. So your updated NII outlook assumes a relatively flat balance sheet in the back half of the year. Can you just talk about the drivers of the slowdown in loan growth you expect following a pretty solid quarter. You saw second quarter. I know you mentioned CRE fund notes were slowing.

Question: Anthony Elian - J.P. Morgan - Analyst : And then my follow-up, can you provide more color on the increase in outside services contribute in the press release. This is this is tied to deposit marketing campaigns and third party services for strategic investments. I guess how much of the $10 million increase you saw sequentially is sticky versus onetime in nature? Thank you.

Question: Anthony Elian - J.P. Morgan - Analyst : Thank you.

Question: Ebrahim Poonawala - Bank of America Securities - Analyst : Thank you and good morning. I guess maybe first question is just around Bryan and Hope on fixed income, I think you said the $40 million seems like a good run rate for the back half from what I can recall just in prior cycles, rate cuts, it is counter-cyclical. You should see a lot more bond book restructurings that your clients, et cetera. So I would assume that if the September rate cut outlook firms up and the steepening in the yield curve should push that to pretty strong levels, would be my understanding as well. Am I missing something there or are you just being conservative when you talk about the cap markets outlook.

Question: Ebrahim Poonawala - Bank of America Securities - Analyst : Got it. And one last question, if I may. Your mexican deposit pricing. So there's a lot more, I think, circumspect relative to what I've heard from the banks so far this earnings season. So one, I think the minus is the loan to deposit ratio that you're managing to, which is causing First Horizon to be a lot more active in bringing in deposits or retaining deposits. And am I overstating it because what we're hearing from most banks is some cooling in deposit pricing, things repricing lower from three, six, nine months ago. So I just want to make sure I'm not missing anything?

Question: Ebrahim Poonawala - Bank of America Securities - Analyst : All right. Thanks a lot for taking my questions.

Question: Christopher McGratty - KBW - Analyst : Good morning maybe a run to help them in terms of the spot margin, do you have as of June 30? I'm trying to think about exit exit velocity as you go into next year with what you do with the deposits?

Question: Christopher McGratty - KBW - Analyst : Okay. Great, I must have missed that. Thank you. And then, Bryan, on capital, you're at the [11] you talked about clarity on regulation and clarity on the economy being the keys to going down to [10, 10.5]. Do you think it's a possibility that you could you could have that clarity in the back half of the year? Is that probably a 2025 event to take down the capital ratios?

Question: Christopher McGratty - KBW - Analyst : That's perfect. Thank you.

Question: Casey Haire - Jefferies - Analyst : Good morning, everyone. From the board all up on NII Any any thoughts to using some of the capital towards a bond book restructure and improving the yield there? I know it's a small asset for you, but just wondering some updated thoughts there.

Question: Casey Haire - Jefferies - Analyst : Got you. Okay. And then just switching to credit quality, the NPL migration sounds like it was driven by CRE I was wondering if you give any color on product or geography and what's driving that.

Question: Casey Haire - Jefferies - Analyst : Thank you.

Question: Ben Gerlinger - Citigroup - Analyst : Morning. I was curious if we could talk a little bit about share repurchase activity and other the CET 1, the 10 kind of add probably next year outcome are the banks at a pretty good month so far down just kind of curious how you guys think about the math on buybacks, kind of taking into consideration to that a relative valuation. And then also the total the math is a little bit different because the stocks have gone up. Just kind of curious if you do continue the buyback, could we theoretically see another reauthorization this calendar year? Because if it's viewed more accurate. So just kind of curious, thoughts on overall share repurchase activity. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 17, 2024 / 1:30PM, FHN.N - Q2 2024 First Horizon Corp Earnings Call

Question: Ben Gerlinger - Citigroup - Analyst : Got it. Helpful. And then I hope I know you said expenses in your prepared remarks. I think you said flat to down in the second half of this year is kind of curious. It is always levers you can call it actually has a pretty sizable franchise as you guys have. But is that pushing anything out into 2025 that could be done today and just kind of curious on how you get down both on the cloud.

Question: Ben Gerlinger - Citigroup - Analyst : Okay. That's helpful. But there's nothing being push that. So I'm just trying to think what the hill to climb next year. It's not like in intentionally kind of maybe a little bit bigger by managing to that, correct?

Question: Ben Gerlinger - Citigroup - Analyst : Okay. Thank you.

Question: Sßmuel Varga - UBS - Analyst : Good morning. I wanted to just go back to the NII guide for second. You assume a flattish balance sheet. And obviously with the loan growth year to date, you're kind of close to the middle of the guide you said and obviously seasonality and the LMC vertical isn't going to help for the second half of the year. So I'm just trying to ask, is there any sort of mix shift assumption within that flat balance sheet or should we think that that loans and securities and cash are all sort of staying relatively flat for second half of the year?

Question: Sßmuel Varga - UBS - Analyst : Okay, understood. Thank you. And then just on the deposit side, I'm thinking about I'm late this year, probably 2025 on the sort of the bearing front. I wanted to get a sense for where would you expect that growth to return from the retail franchises of the commercial franchise and sort of what would have to happen for your commercial clients, to actually increase the dollars they hold in those IB accounts.

Question: Sßmuel Varga - UBS - Analyst : Got it. Thanks for all the color. I appreciate it.

Question: Christopher Marinac - Janney Montgomery Scott - Analyst : Good morning, I had a question for you on me. I had a question on the CRE reserves and was curious if there's flexibility there now that those rose in the quarter and given that the lease renewals are very limited, as you had outlined in the slide?

Question: Christopher Marinac - Janney Montgomery Scott - Analyst : Is there flexibility on your reserve? Can you reserve for CRE grow less than we just saw just because you're kind of limited renewals and sort of address what you needed to this last quarter.

Question: Christopher Marinac - Janney Montgomery Scott - Analyst : Thanks for that. And then I just had a question for Hope as it pertains to the technology spend I know you mentioned that there was sort of slow the pace, but as it accelerates, is it going to be treasury management things like you mentioned or would it be upping other initiatives back towards the core at the bank.

Question: Christopher Marinac - Janney Montgomery Scott - Analyst : Great. Thanks very much. I appreciate the time.