US regional lender First Horizon to offload $4.5 billion of consumer mortgages

By Reuters News

- First Horizon FHN.N said on Thursday it had struck a deal to sell about $4.5 billion of select lower-yielding consumer mortgages, as the US regional lender looks to boost its earnings.

Shares of the Memphis, Tennessee-based bank, which jumped 4% in morning trading, have slipped 5% this year as of last close.


Here are some other details:

  • The realignment of the mortgage business is part of a broader push by First Horizon to overhaul its balance sheet and focus on core customers.

  • The residential mortgage loan sale will improve the bank's loan-to-deposit ratio, free up balance sheet capacity and support share buybacks.

  • "The strategic actions clean up the optics of the balance sheet and likely produce a more profitable franchise going forward," Citi analyst Benjamin Gerlinger said.

  • First Horizon swung to a loss in the third quarter from a year earlier, as it booked a $473 million loss on the pending mortgage portfolio sale.

  • The bank, which had $84.3 billion in assets as of September 30, plans to partially redeploy proceeds from the mortgage sale into higher-yielding loans in the coming quarters.

  • "We expect the debate to center on how quickly the proceeds are redeployed into higher-yielding commercial loans and whether deposit cost pressure eases enough to support NII as countercyclical fee income softens," Jefferies analyst David Chiaverini said, adding the biggest takeaway from the quarter was the mortgage business realignment.

  • The sale, which is expected to close in the fourth quarter, is anticipated to boost 2027 profit by 4% after tax.

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