Tennessee's biggest bank boosted its earnings by 7 percent in the third quarter over a year ago as higher interest rates and an improving economy in Tennessee helped boost both loan volume and interest margins.
First Horizon Corp,. the parent company of First Tennessee Bank, earned $68.9 million, or 28 cents per share, in the three months ended Sept. 30. Earnings, adjusted for nonrecurring costs, came to 32 cents per share.
The results beat Wall Street expectations. The average estimate of 10 analysts surveyed by Zacks Investment Research was for earnings of 30 cents per share.
The Memphis-based bank holding company posted revenue of $360.6 million in the period. Its adjusted revenue was $322.2 million, which was below the average consensus of $340.5 million among analysts surveyed by Zacks.
First Tennessee said its net interest income was up 13 percent, driven by average total loan growth of 6 percent and growth in higher-return specialty areas such as loans to mortgage companies and asset-based lending. First Tennessee Bank deposits were up 8 percent and the bank maintained its No. 1 deposit market share position in the state of Tennessee in metropolitan Chattanooga. Consolidated net interest margin expanded to 3.19 percent from 2.96 percent.
"Our third-quarter results were solid with very good balance sheet and revenue growth, as well as our continued focus on controlling costs," said Bryan Jordan, First Horizon's chairman and CEO. "Our people did an excellent job of focusing on customers and growing the business while dedicating significant amounts of time to planning the integration of our pending merger with Capital Bank."
First Horizon announced in March it would buy the Charlotte, N.C.-based Capital Bank Financial Corp for $2.2 billion to boost its presence in the Carolinas and Virginia.
First Horizon shares rose 11 cents per share Friday to close at $18.92. First Horizon shares are down nearly 6 percent since the beginning of the year, but the company's stock has increased 22 percent in the last 12 months.
Wells Fargo suffers from mortgages
Wells Fargo's third-quarter profits took a beating this quarter, falling 18 percent, after the bank had to set aside about $1 billion for legal expenses related to its mortgage practices before the financial crisis.
The legacy from last decade's housing bubble bit Wells at a time when the San Francisco-based bank is trying to move beyond its phony account scandal from last year and another more recent scandal tied to its auto lending business.
Wells Fargo said Friday that it earned $4.6 billion in the third quarter, or 84 cents a share, down from $5.64 billion, or $1.03 a share, in the same period a year earlier. The bank's results missed the forecasts of Wall Street analysts, who were looking for the bank to post a profit of $1.02 a share, according to FactSet.
Wells Fargo's expenses jumped in the quarter, mostly because of an additional $1 billion set aside for previously disclosed investigations into its pre-crisis mortgage practices.
Wells has been trying to move beyond the recent problems that have turned it from one of the banking industry's most beloved brands into one of its most tarnished. The bank has acknowledged that its employees, fueled by unrealistic sales goals, opened as many as 3.5 million bank accounts without customers' permission.
Wells also admitted that it sold auto insurance to auto loan customers who did not need it, and a significant number of those customers were unable to afford both their car loan and the insurance, which resulted in those cars being repossessed.
Shares of Wells Fargo dropped by 2.75 percent, or $1.52 per share, to close Friday at $53.69.
Bank of America profit rises 13 percent
Bank of America's third-quarter profits jumped 13 percent, the bank said Friday, helped by higher interest rates and an increase in lending.
The Charlotte-based bank said it earned $5.59 billion in the third quarter, or 48 cents per share, compared with $4.96 billion, or 41 cents per share, in the same period a year ago. The results beat Wall Street analysts' expectations, which were looking for a profit of 46 cents per share, according to FactSet.
Bank of America's consumer banking division had a solid quarter, reflecting the trend up in interest rates in the past year, which has allowed banks like BofA to charge more to borrow. Net interest income was up 9 percent. The bank also increased its number of loans outstanding, which brought in additional interest income as well.
Like JPMorgan Chase and Citigroup, which reported their quarterly results on Thursday, Bank of America saw a slowdown on its trading desks, which hurt the results of its investment banking division. Sales and trading revenue fell 13 percent year-over-year, with that decline being primarily tied to a drop in trading revenue for its fixed income, currencies and commodities desks.
Bank of America said had to set aside some additional money to cover soured credit card loans. Delinquencies in credit cards have been trending upward in the last several quarters, despite record low unemployment, and nearly every bank has said they have had to provision more money for potential losses.