# First Horizon’s SWOT analysis: stock shifts from acquisition target to buyer

First Horizon Corporation (NYSE:FHN), a prominent banking institution operating primarily in the Southeast region, has undergone a significant strategic pivot in recent months. Once viewed as a potential acquisition target following the failed Toronto Dominion deal, the company has now signaled its intention to become an acquirer in the regional banking space. This transformation has prompted analysts to reassess their outlook on the stock, with several firms recently adjusting their ratings and price targets.

Strategic Redirection Reshapes Investment Thesis

First Horizon’s management has increasingly indicated openness to pursuing whole bank acquisitions, marking a departure from previous strategic positioning. This shift follows the canceled acquisition attempt by Toronto Dominion, which fell through due to regulatory concerns. The prospect of FHN being sold in the near term is now considered unlikely by market observers, with most analysts suggesting a sale would not materialize for at least 12-18 months.

The strategic redirection has had tangible impacts on valuation models. Some analysts have removed acquisition premiums previously factored into price targets. Wells Fargo Securities recently revised its price target from $25.00 to $23.00, explicitly citing the removal of a $3 takeout premium from its valuation methodology.

Management commentary has reinforced this strategic shift, with executives expressing confidence in their ability to integrate potential mergers. This stance represents a notable change from previous reluctance toward acquisition-driven growth and suggests the company is positioning itself as a consolidator rather than a consolidation target in the regional banking landscape.

Financial Performance and Outlook

First Horizon demonstrated solid financial performance in early 2025, reporting core earnings per share of $0.42 in the first quarter. This result was primarily attributed to effective expense control and margin expansion, according to RBC Capital Markets. Management has expressed confidence in driving Pre-Provision Net Revenue (PPNR) growth and achieving their 2025 outlook across various interest rate and macroeconomic scenarios.

Revenue trends for fiscal year 2025 are tracking toward the high end of management’s flat to +4% guidance range. Similarly, expenses are trending toward the upper limit of the flat to +2% range. These trends reflect both the company’s growth initiatives and the challenging operating environment facing regional banks.

Looking forward, analysts project earnings per share to grow steadily over the next several years. Consensus estimates for FY25 range from $1.67 to $1.88, with projections for FY26 between $1.91 and $1.94, and FY27 estimates reaching $2.20 to $2.30. This trajectory represents approximately 8% EPS growth and 5% PPNR expansion in 2026, which some analysts note is lower than midcap banking peers.

The company’s net interest income and net interest margin are expected to stabilize at lower levels due to anticipated Federal Reserve rate cuts. Temporary revenue boosts observed in the third quarter of 2025 are expected to normalize in the fourth quarter due to seasonal factors and the impact of these rate reductions.

Growth Initiatives and Capital Deployment

First Horizon has embarked on what analysts describe as an "early-stage growth pivot" focusing on technology enhancements and fee business expansion. These initiatives aim to diversify revenue streams and reduce reliance on net interest income, which faces pressure in the current rate environment.

The company’s loan portfolio is expected to benefit from lower interest rates and a generally constructive macroeconomic backdrop. Analysts anticipate loan growth will accelerate in coming quarters, though commercial real estate payoffs continue to create headwinds in this segment.

Capital deployment represents another key aspect of First Horizon’s strategy. The company has pursued what some analysts characterize as an "aggressive capital return strategy," which could enhance return on tangible common equity (ROTCE) metrics. Share repurchase forecasts have been increased in several analyst models, contributing to improved EPS projections for 2026 and 2027.

Balance sheet adjustments are also underway, with the company working to optimize its deposit mix while managing overall loan levels. These efforts aim to position First Horizon favorably for various interest rate scenarios while maintaining strong capital ratios.

Market Challenges and Competitive Landscape

First Horizon faces several challenges in the current banking environment. Deposit pricing remains competitive across the industry, though costs are expected to decline gradually as the Federal Reserve implements rate cuts. The company must navigate this competitive landscape while managing its interest rate sensitivity.

Regulatory considerations loom on the horizon as First Horizon approaches $100 billion in assets. This threshold typically triggers enhanced regulatory scrutiny and compliance requirements, potentially increasing operating expenses. Total assets stood at $83.191 billion according to recent reports, placing the company within range of this regulatory milestone.

Credit quality represents another area of focus for investors. While current metrics remain solid, some analysts have flagged potential risks in a less optimistic macroeconomic scenario. Barclays noted an increase in Allowance for Credit Losses and higher capital targets, which they attributed to current uncertainties in the economic environment.

The company’s specialized fixed income capital markets activities through FTN Financial Group provide some diversification from traditional banking revenue streams. This segment could offer counter-cyclical benefits as interest rate volatility creates trading opportunities.

Bear Case

How might potential acquisitions at dilutive premiums impact shareholder value?

First Horizon’s strategic pivot toward becoming an acquirer introduces execution risk that was not previously factored into investment theses. If management pursues acquisitions at premium valuations, the transactions could prove dilutive to earnings per share and tangible book value in the near term. Integration challenges might also emerge, particularly if cultural or operational incompatibilities arise between First Horizon and acquired institutions.

The banking sector has witnessed numerous examples of mergers that failed to deliver anticipated synergies or required longer-than-expected timeframes to realize benefits. First Horizon’s limited recent experience as an acquirer raises questions about the company’s ability to identify appropriate targets, negotiate favorable terms, and execute successful integrations.

Additionally, pursuing acquisitions would likely reduce capital available for share repurchases and dividends in the near term. This shift could disappoint investors who had positioned in FHN stock anticipating significant capital returns rather than growth-oriented capital deployment.

What risks does FHN face from weaker net interest income due to dovish Fed policy?

First Horizon’s asset sensitivity exposes the bank to margin pressure in a declining rate environment. As the Federal Reserve implements expected rate cuts, the company’s net interest income could face greater compression than peer institutions with more balanced interest rate risk profiles.

The bank’s deposit costs have remained elevated due to competitive pressures, and while these expenses should eventually decline following rate cuts, the lag effect could temporarily squeeze margins. This dynamic would be particularly challenging if loan yields reprice downward more rapidly than deposit costs.

Limited expense flexibility compounds this challenge, as the company has already implemented significant efficiency measures. With expenses trending toward the high end of guidance ranges, the ability to offset net interest income pressure through cost reductions appears constrained. Technology investments and regulatory costs associated with approaching the $100 billion asset threshold further restrict expense flexibility.

Bull Case

How might an aggressive capital return strategy enhance FHN’s performance metrics?

First Horizon’s capital position provides flexibility for significant shareholder returns through dividends and share repurchases. Accelerated buyback activity could meaningfully reduce share count, driving earnings per share growth even in a challenging revenue environment.

The company’s return on tangible common equity (ROTCE) stands to benefit from both earnings growth and a reduced equity base resulting from share repurchases. This improved ROTCE could warrant a higher valuation multiple relative to banking peers, particularly if the company maintains strong capital ratios while executing the buyback program.

Additionally, a substantial dividend yield provides downside protection by offering income-focused investors a compelling reason to hold shares through market volatility. The combination of dividends and share repurchases creates multiple avenues for shareholder value creation independent of acquisition activity.

How might accelerating loan growth and better deposit pricing drive future performance?

Lower interest rates typically stimulate loan demand across various categories, particularly in consumer segments such as mortgages and auto loans. First Horizon’s regional footprint in the Southeast positions the bank to capitalize on demographic trends favoring population growth and economic expansion in these markets.

As the Federal Reserve implements rate cuts, deposit pricing pressures should gradually ease. This dynamic would allow First Horizon to improve its funding costs over time, potentially expanding net interest margin even in a lower rate environment. The company’s efforts to optimize its deposit mix further support this potential margin improvement.

Counter-cyclical fee income opportunities could emerge as interest rate volatility creates demand for the bank’s fixed income capital markets services through FTN Financial Group. This diversification of revenue streams would reduce reliance on net interest income and potentially offset some of the asset sensitivity challenges facing the core banking business.

SWOT Analysis

Strengths

• Solid franchise with established presence in attractive Southeast markets
• Effective expense management demonstrated through recent quarterly results
• Strong capital position enabling both growth initiatives and shareholder returns
• Specialized fixed income capital markets capabilities through FTN Financial Group
• Management team with proven ability to navigate challenging operating environments

Weaknesses

• Limited expense flexibility amid technological and regulatory cost pressures
• Asset sensitivity creating vulnerability in declining rate environments
• Commercial real estate payoffs creating headwinds for loan growth
• Approaching $100 billion asset threshold with associated regulatory complications
• Recent strategic pivot creating uncertainty around capital allocation priorities

Opportunities

• Potential for accretive whole bank acquisitions in fragmented regional banking market
• Technology and fee business expansion initiatives to diversify revenue streams
• Accelerating loan growth potential in lower rate environment
• Counter-cyclical fee income rebound possibilities
• Improved deposit costs following Federal Reserve rate cuts

Threats

• Competitive deposit pricing pressures in key markets
• Dovish Federal Reserve policy impacting net interest income
• Credit quality deterioration in less favorable macroeconomic scenarios
• Increasing regulatory expenses as the bank approaches $100 billion in assets
• Integration risks associated with potential acquisitions

Analysts Targets

• Evercore ISI - October 16th, 2025: "In Line" (downgraded from "Outperform"), $20.00 (revised from $26.00)
• Wells Fargo Securities - October 16th, 2025: "Equal Weight", $23.00 (revised from $25.00)
• Truist Securities - May 12th, 2025: "Hold", no price target mentioned
• RBC Capital Markets - April 17th, 2025: "Outperform", $22.00 (revised from $24.00)
• Barclays - April 17th, 2025: "Overweight", $23.00

This analysis is based on information available from April 17th, 2025, through October 16th, 2025.

InvestingPro: Smarter Decisions, Better Returns

Gain an edge in your investment decisions with InvestingPro’s in-depth analysis and exclusive insights on FHN. Our Pro platform offers fair value estimates, performance predictions, and risk assessments, along with additional tips and expert analysis. Explore FHN’s full potential at InvestingPro.

Should you invest in FHN right now? Consider this first:

Investing.com’s ProPicks, an AI-driven service trusted by over 130,000 paying members globally, provides easy-to-follow model portfolios designed for wealth accumulation. Curious if FHN is one of these AI-selected gems? Check out our ProPicks platform to find out and take your investment strategy to the next level.

To evaluate FHN further, use InvestingPro’s Fair Value tool for a comprehensive valuation based on various factors. You can also see if FHN appears on our undervalued or overvalued stock lists.

These tools provide a clearer picture of investment opportunities, enabling more informed decisions about where to allocate your funds.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.