M&A SentimentShares traded off after management suggested potential interest in bank M&A as a buyer, contrary to expectations of FHN as a takeout candidate.
Strategic DirectionManagement's openness to pursuing M&A as a buyer—rather than remaining a potential target—shifted investor sentiment, which had overwhelmingly pegged them as a takeout target, and contributed to the post-earnings share sell-off, as the market recalibrated expectations for future strategic direction and potential takeout premium.
Valuation ConcernsFHN shares trade at 11x 2026e EPS or a 13% premium to our coverage universe median. While we are comfortable with our Neutral rating, we are monitoring whether First Horizon can close the gap to its 15%+ ROTCE target and start translating its high-growth Southeast markets into above-peer balance sheet growth over the next few quarters.