First Horizon Corp Q4 2024 Earnings Call Transcript

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

Question: Michael Rose - Raymond James Financial, Inc - Analyst : Hey, good morning, everyone. Thanks for taking my questions. Understanding that you guys did the securities portfolio restructuring, but the guidance is relatively the same if I think I heard you right. At least last, before you gave the update this quarter, you were kind of contemplating positive operating leverage would be a little bit more challenging. Seems like with the restructuring would be a little bit easier. But does that give you the flexibility to maybe accelerate some of your investment priorities. Now that you have this kind of extra $35 million a year in interest income or would you expect positive operating leverage to maybe widen out here? Thanks.

Question: Michael Rose - Raymond James Financial, Inc - Analyst : Very helpful. And then maybe just as my follow up, if you could just, kind of discuss, I saw the comment about warehouse this quarter and the benefit from share. Again, it was obviously a very positive surprise. Can you just talk about the prospects for that business and then just in your core banking business on the commercial side. Are you starting to see anything more than just optimism around pipelines building? I mean, would you expect utilization rates to maybe pick up a little bit from here? Just trying to get a sense for what the demand schematic looks like. Thanks.

Question: Michael Rose - Raymond James Financial, Inc - Analyst : Hey, thanks for taking my questions. Appreciate the color. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 16, 2025 / 2:30PM, FHN.N - Q4 2024 First Horizon Corp Earnings Call

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Thanks, good morning.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Hope, maybe a question for you. Can you talk a little bit about near term margin expectations? It feels like you have some momentum, you've got the restructuring benefit, lower deposit rates, maybe less cuts. Maybe a little better warehouse balance starting point. But do you expect some continued momentum in the margin from here? I'm just curious on some of your kind of near to medium term thoughts.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Okay. Okay. But it sets up pretty well for the first quarter, I guess is my point. It feels that way. Is that fair?

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Yeah. Okay. That's helpful. Good. And then Bryan very big picture for you. But what are you expecting or hoping for on regulatory changes and what would be good for First Horizon? Thanks.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Yeah. Okay. Thank you.

Question: Ebrahim Poonawala - Bank of America Securities - Analyst : Hey, good morning. -- I just wanted to follow up. I think Bryan, you began talking about just the commercial pipelines. Not sure if you spelled out what loan growth assumptions you have underlying your revenue/NII and outlook. And where are the obvious areas where you think like lending could pick up over the next 3 months to 6 months? I mean, I'm assuming some of the administration's agenda on domestic CapEx is more of a 26 event by the time we see that in bank lending. But wondering if there are two or three areas that you think line utilization in certain industries, et cetera, where we could see a bit more immediate pick up over the coming months.

Question: Ebrahim Poonawala - Bank of America Securities - Analyst : Understood. And I guess a separate question, apologies if I missed it. When we look at the slide 16, the sort of steps towards the 15% plus ROTCE, given where we are today, given all the things that you lay out. Like, how do you think about the time frame of what's the best case scenario of how quickly could we get there?

Question: Ebrahim Poonawala - Bank of America Securities - Analyst : That's helpful. Thank you.

Question: Jared Shaw - Barclays Capital, Inc. - Analyst : Hey, good morning, everybody. I guess maybe sticking with the capital question with that whole discussion, it sounds like it's still with the goal of getting back to a 10.5% CET level, what would have to happen for you to feel comfortable, even lower than 10.5%. I think when you look at what sort of drove the industry up to that, it was more credit concern, more liquidity concern, a different regulatory backdrop. Is there a time frame where you could see that below 10.5%?

Question: Jared Shaw - Barclays Capital, Inc. - Analyst : Okay. Alright, thanks. And then it was my follow up just on credit. Good trends on the charge off level. Can you give just a little color on what drove some of the increase in MPLs, on the CRE side and how we should think about the allowances as a ratio to loans going forward from here if it should be?

Question: Jared Shaw - Barclays Capital, Inc. - Analyst : Great. Thanks very much.

Question: Chris McGratty - Keefe, Bruyette & Woods, Inc. - Analyst : Oh, great, good morning. Bryan or Hope on the revenue guide, the high end of the revenue guide, is that a scenario where you get the for the current forward curve? I know you have three cuts in your guide. But would that be -- would that map to a no cut or maybe one cut scenario?

Question: Chris McGratty - Keefe, Bruyette & Woods, Inc. - Analyst : Okay, great. That helps a lot. I missed the prior question the timing of the bond restructuring. Could you just remind me when the quarter that happened? And then also do you have any -- I know you provided the spot deposit costs, but do you have the spot yield on the bond portfolio given the restructuring?

Question: Chris McGratty - Keefe, Bruyette & Woods, Inc. - Analyst : Okay, great.

Question: Anthony Elian - J.P. Morgan - Analyst : Hi, everyone. Just to follow up on the deposit cost question, you had one of the slides, your spot rate of 2.8% which is about 30 base points lower than the quarter's average. I guess, does that fully reflect the benefits you expected -- you expect from the cuts fed rate cuts in September or are there any more incremental declines in deposit costs you would expect from here just from those cuts at the end of last year?

Question: Anthony Elian - J.P. Morgan - Analyst : Thank you. And then my follow up, if your revenue guide comes in closer to the lower end or flat for this year, could you just talk about the levers you have on the expense side for that to come in at the lower end or the up 2% range as well? Thank you.

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

Question: Timur Braziler - Wells Fargo & Company - Analyst : Hi, good morning. My follow up question for me on the deposit side. Just looking at non-interest bearing still seems to be some pressure within that category in a couple of years in a row. Now where those balances are declining. Any way you could frame what the excess liquidity remains in that category and how much more potential risk it could be from further remixing out of DDA in '25?

Question: Timur Braziler - Wells Fargo & Company - Analyst : Okay, great. And I apologize if this was already touched on, but just looking at higher rates and the effect on commercial real estate, I guess in the near term expectations around pay down activity, do the higher rates actually slow the pace of pay downs. Maybe we see an acceleration as some property owners look to get out of some properties that they were hoping they could refile at lower rates. And I guess looking longer term, is there some sort of tail risk with rates are at with rates are where they are today or would rates have to go materially higher before you see some tail risk on the credit side there?

Question: Timur Braziler - Wells Fargo & Company - Analyst : Great. Thank you.

Question: Christopher Marinac - Janney Montgomery Scott LLC - Analyst : Thanks, good morning. I wanted to ask about looking back on 2024 on technology spending and sort of kind of what you accomplished in the year and does that transition into more in 2025? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 16, 2025 / 2:30PM, FHN.N - Q4 2024 First Horizon Corp Earnings Call

Question: Christopher Marinac - Janney Montgomery Scott LLC - Analyst : Great. Thank you both for that color and it does sound like that, part of the growth that you have in expenses this year will cover some additional tech spend. I mean, is that a fair impression without getting into too many details?

Question: Christopher Marinac - Janney Montgomery Scott LLC - Analyst : Great. Perfect, Hope. Thanks for reiterating. I appreciate it.

Question: Brennon Crowley - Robert W. Baird - Analyst : Hey, good morning, guys. Thanks for taking my questions. I wanted to revisit capital and in particular the restructuring. Obviously, the yield pickup is great here. I'm just wondering if you guys could help us understand your thinking around the trade off between buybacks and potentially further restructuring going forward or if it was a one time event. And if you are considering for the repositioning, is there sort of an earn back benchmark that you guys retarded?

Question: Brennon Crowley - Robert W. Baird - Analyst : Yeah. No, that all makes sense. I appreciate the color. And then just as a quick follow up, I wanted to zoom in on the service charge line item and I'm just wondering if the Q4 numbers kind of the run rate moving forward now that we have the full quarter of updated overdraft charges and then if there was any ECR benefits and lower rates embedded in the quarter. If you could quantify that would be helpful as well.

Question: Brennon Crowley - Robert W. Baird - Analyst : Great. Thank you.