First Horizon Corp. is not looking back following the scuttled acquisition by TD Bank Group, with executives saying Tuesday that they're playing offense after many months of regulatory uncertainty.
The Memphis, Tennessee-based bank has gained significant momentum in the weeks since the two banks
Though First Horizon's executives did all they could to complete the merger, they've since "hit the ground running" in their quest to "build a banking franchise in the South that is going to be unparalleled," Jordan said.
Deposits have grown, employees are reengaged, and clients are breathing a sigh of relief as they've learned they won't be switched away from First Horizon's systems. A few of them are happy to stick with First Horizon since they didn't want to bank with a Canadian-owned bank, according to Anthony Restel, the company's president of regional banking.
The deal's failure has given First Horizon's bankers a chance to finally "run our own playbook" after years of being constrained, Restel said. The last few years included a global pandemic,
"Our people are energized," Restel said Tuesday. "We've got a tremendous amount of new account originations. … Our people are super pumped to be out and deliver for their clients and be active, playing offense again when we haven't been doing that for the last couple of years."
The company's stock price climbed 5.63% on Tuesday to $11.44 per share.
First Horizon recorded its best month for deposits in May, Chief Financial Officer Hope Dmuchowski said, noting that her inbox was "flooded with emails" from clients who decided to move more money to the bank after the TD deal was called off on May 4.
Deposits rose last month by roughly $1.5 billion to $61.8 billion, reversing a decline in April. One large nonprofit that the bank has spent years courting became a customer and moved over $50 million, Dmuchowski said.
The growth hasn't been cheap, though. The rates that First Horizon is paying to its depositors continue to rise given the "extremely competitive market," Dmuchowski said.
Though First Horizon is focused on deposit growth, some competitors are beating it with unusually aggressive interest rates, she said. Some clients are telling First Horizon that other banks are offering to pay above the federal funds rate — a sign of how competitive the deposit market has gotten in the wake of a few high-profile bank failures.
"We're not competing in a normalized deposit market right now," Dmuchowski said.
For First Horizon, one selling point in the wake of the recent bank failures is its strong capital position. The bank's common equity tier 1 ratio was 11.3% last quarter, above its peers' median ratios of 9.9%.
"With banks being where we are — having top-tier capital, it is a differentiator," Dmuchowski said, adding that she's "become a pro at explaining to clients" how they should think about common equity tier 1 ratios.
The bank is hanging onto its capital, rather than using it to buy back shares, which may be a disappointment to some investors hoping for higher capital returns.
"We are still scratching our head a little on the lack of buyback," Brian Foran, an analyst at Autonomous Research, wrote in a note to clients after the investor day event.
Foran acknowledged the logic in hanging onto capital amid economic uncertainty and questions about looming regulatory changes. And he wrote that First Horizon's message that "capital is a competitive advantage right now makes sense."
But he added that "it would seem like there is room" to buy back stock while remaining comfortably above the bank's peers.
When asked about buyback plans, Dmuchowski said "this is not the market to do it right now," arguing that the banking industry and economy need to stabilize first.
First Horizon expects the economy to slow significantly in the second half of the year, Jordan said, noting that the current environment doesn't feel "very growth-y." The recovery is likely to be fairly slow, he added, since the Federal Reserve is unlikely to cut rates sharply due to fears that inflation will reemerge.
Asked about the potential for another merger, Jordan said the bank has been in "merger-integration mode" for the last few years and wants to focus now on making investments to its current business.
On Tuesday, First Horizon also faced what might be described as the $100 billion question. Banks are subject to an "extraordinarily expensive" regulatory regime once they cross the $100 billion-asset mark, and those banks may be subject to even tougher rules following the recent bank failures, Jordan said.
First Horizon had roughly $80.7 billion of assets in the first quarter. Jordan said he wants to see "how the regulatory framework plays out" before considering a major change.
"We're not afraid to grow through M&A, and if the right opportunities present themselves, we'll figure it out at the time," Jordan said. "But our focus right now is operating our business and making the investments."
First Horizon has invested heavily in its tech capabilities, but it has room to improve, he said.
"I'm a big believer that you can't win with technology, but you can darn sure lose without it," Jordan said. "And we want to make sure that our technology infrastructure is highly competitive."
