Following the news of First Horizon Corp’s (NYSE:FHN) merger with Toronto-Dominion Bank (NYSE:TD) (TSE:TD) being called off, Jefferies analyst Casey Haire believes that the standalone value of FHN stock is in the range of $11 to $13 per share.
Haire did a comparative analysis of FHN using Synovus Financial (SNV) and Hancock Whitney Corp. (HWC) as the analyst is of the opinion that these banks are the best comparable banks due to their similar geographic footprint, size, and profitability profile. The analyst added that both SNV and HWC trade at around 7x the 2023 consensus EPS estimate, which equates to a $13 share price for FHN. On a tangible book value basis, SNV and HWC are both trading at ~1x their stated tangible book value, which equals $11 a share for FHN.
Even RBC’s top-rated analyst Jon Arfstrom seemed upbeat about FHN’s business outlook while retaining a Hold rating on the stock but lowering the price target to $12 from $25. Arfstrom’s new price target implies an upside potential of 9.7% at current levels.
Arfstrom commented, “Despite the deal termination, our view of the company is unchanged, and we believe they can remain a consistent operator in attractive markets with steady credit quality and a focus on positive operating leverage…[and] can continue to operate profitably in the current environment as a standalone entity with no material obstacles.”
Regional banks were on an upswing today in pre-market trading led by PacWest Bancorp (NASDAQ: PACW) which announced a dividend cut. Other banks including Western Alliance Bancorp (WAL), Comerica (CMA), and Zions Bancorp. (ZION) also gained in pre-market trading at the time of writing.
The volatility in regional banks has dragged down the SPDR S&P Regional Banking ETF (KRE) which is down by more than 30% year-to-date.
