First Horizon talking to regulators to use excess

First Horizon talking to regulators to use excess

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BANGALORE (Global Markets) - First Horizon National Corp's (FHN.N) second-quarter profit topped Wall Street estimates, boosted by improving credit quality in its markets, and the lender said it was working with regulators to deploy its excess capital.

Large regional banks like PNC Financial (PNC.N), BB&T (BBT.N), US Bancorp (USB.N) and others have boosted their dividends after receiving regulators' blessings, in a sign that the U.S. banking environment is improving.

"I don't know how long that (capital deployment) will take. But that is something that we intend to work on and we will continue to work through that process," Chief Executive Bryan Jordan said on a call with analysts.

Jordan, however, did not give a firm guideline on when the capital deployment would occur.

"First Horizon needs to redeploy around $500 million in excess capital," Anthony Davis, analyst with Stifel Nicolaus & Co, said.

However, any capital deployment will likely come with more clarity on the bank's private-label buyback liabilities.

First Horizon has been under cloud due to the possibility that it may have to buy back some of the mortgages it securitized and sold to private investors, before it sold off its mortgage business to Metlife Inc's (MET.N) banking unit.

"We are still waiting for development in rep and warranty issues. I don't think they need to enter into settlement like Bank of America (BAC.N) or other larger banks though," analyst Anthony Davis said.

Bank of America, the largest U.S. bank by assets, said it expects to take more than $20 billion in charges after settling toxic loan cases with mortgage bond investors.

As of the second quarter, First Horizon said it had not received any requests for private label repurchases.

FEWER LOAN LOSSES

Despite the overhang of possible mortgage putbacks, First Horizon, the largest bank in Tennessee, set aside just $1 million to cover future bad loans, signaling an improved credit outlook in its South-Eastern U.S. markets.

First Horizon, which counts hedge fund RS Investments, T Rowe Price Associates, Marisco Capital and Vanguard Group Inc among its top investors, also said its net charge-offs fell more than 50 percent to $66 million.

Second-quarter net income available to common shareholders was $42.6 million, or 16 cents a share, beating analysts' estimates of a profit of 11 cents a share.

The company's non-performing assets fell to $747.9 million from $899.8 million.

First Horizon's shares were up 3 percent at $9.75 in midday trade on the New York Stock Exchange. They touched a high of $10.18 earlier in the session.

(Reporting by Tanya Agrawal in Bangalore; Editing by Gopakumar Warrier)