First Horizon Corporation · NYSE:FHN
First Horizon — Earnings Presentation (January 2024)
29 slides from First Horizon's earnings presentation, Jan 18, 2024
Slide 1: Q1 Economic Update January 2024
Q1 Economic Update January 2024 1
Slide 2: Moderator: Todd Warrick
MODERATOR Todd Warrick EVP, Corporate/Commercial Market Executive First Horizon E C O N O M I C U P D A T E | January 2024 2
Slide 3: Presenter: Sophia Kearney-Lederman
PRESENTER Sophia Kearney- Lederman Senior Economist FHN Financial E C O N O M I C U P D A T E | January 2024
Slide 4: Disclaimer
Disclaimer This document or presentation was prepared by an FHN Financial Economist and is not subject to all of the independence and disclosure standards applicable to retail investors. This report may not be independent of FHN Financial’s proprietary interests. FHN Financial sales representatives,
Slide 5: Strong economy, falling inflation, and a Fed preparing for rate cuts
Strong economy, falling inflation, and a Fed preparing for rate cuts Sophia Kearney-Lederman Senior Economist January 18, 2024
Slide 6: Economy glides into 2024
Economy glides into 2024 Atlanta Fed GDPNow: Q4 2023 Housing Starts (Nov) Retail Sales (Dec) 2.7% 2.4% Employment Report 3.0% Employment Report, ISM Retail Sales (Oct) (Nov) ISM Manufacturing (Dec) Svcs (Oct) 2.2% 2.3% 2.5% 2.2% 2.5% 2.0% Retail Sales (Nov) 2.6% 1.5% Employment Report (Dec) 2.3% 1.0
Slide 7: 2023 was the year of the resilient economy…
2023 was the year of the resilient economy… Real GDP 8.0% Qtr/Qtr% Annualized with Sector Contributions Forecast 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% Consumption Res Investment Bus. Fixed Invest Inventories Net exports Government GDP -6.0% Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 Source: Bureau of
Slide 8: … yet there was both deflation and disinflation
… yet there was both deflation and disinflation PCE Index Inflation 11.0% Yr/Yr% 10.0% 9.0% PCE: Yr/Yr% 8.0% PCE: Goods, Yr/Yr% 7.0% PCE: Services, Yr/Yr% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% 2019 2020 2021 2022 2023 Source: Bureau of Economic Analysis, FHN Financial 8
Slide 9: Supply chain healing drove goods deflation
Supply chain healing drove goods deflation WCI Container Freight Index Oil & Gas Prices $12,000 USD per 40ft box $6.00 Avg Gas Price, $/gal (left) $5.50 $10,000 Avg Diesel Price, $/gal (left) $5.00 $8,000 $4.50 $4.00 $6,000 $3.50 $3.00 $4,000 $2.50 $2.00 $2,000 $1.50 $0 $1.00 2019 2020 2021 2022 202
Slide 10: Consumers kept spending
Consumers kept spending Goods Consumption $6.50tn Services Consumption SAAR, Bil.Chn.2017$ SAAR, Bil.Chn.2017$ $13.00tn Nominal goods consumption Nominal services consumption $12.50tn $6.00tn Real goods consumption Real services consumption $12.00tn $11.50tn $5.50tn $11.00tn $10.50tn $5.00tn $10.00t
Slide 11: Tight inventory is keeping home prices high
Tight inventory is keeping home prices high New & Existing Home Sales Housing Units Under Construction 1800k SAAR Total 1600k 8.0m Existing home sales (left) 1400k 1 Unit New home sales (right) 5 or more units 1400k 7.0m 1200k 1200k 1000k 1000k 6.0m 800k 800k 5.0m 600k 600k 400k 4.0m 400k 200k 0k 3.
Slide 12: Credit card growth slowing toward pre-pandemic rate
Credit card growth slowing toward pre-pandemic rate Domestically Chartered Commercial Banks: Credit Cards & Other Revolving Plans 25% $1.1tn 20% Credit Cards & Other Revolving Plans, $ (right) $1.0tn Yr/Yr% (left) 15% $0.9tn 10% 5% $0.8tn 0% $0.7tn -5% $0.6tn -10% -15% $0.5tn 2017 2018 2019 2020 202
Slide 13: Households expect to slow spending in 2024
Households expect to slow spending in 2024 SCE Household Spending Survey 10.0% Median change 9.0% Experienced change in spending: Total Expected change in spending: Total 8.0% Expected change in spending: Essentials 7.0% Expected change in spending: Nonessentials 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2
Slide 14: Labor force & participation growth are the Fed’s ally
Labor force & participation growth are the Fed’s ally $23.0tn 170m Real GDP, SAAR (left) 168m $22.0tn Civilian Labor Force, SA (right) 166m $21.0tn 164m 162m $20.0tn 160m $19.0tn 158m 156m $18.0tn 154m $17.0tn 152m 150m $16.0tn 148m $15.0tn 146m 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 Sour
Slide 15: Unemployment rate ticked up, but still very low
Unemployment rate ticked up, but still very low Unemployment rate Peaked at 13.1% in June 2020 5.0% 4.5% 4.0% 3.5% 3.0% Jan '18 Jan '19 Jan '20 Jan '21 Jan '22 Jan '23 Source: Bureau of Labor Statistics 15
Slide 16: Labor demand slowing to more sustainable level
Labor demand slowing to more sustainable level Nonfarm Payrolls Goods Mthly Chg 500k Pvt services Government 450k Payrolls 400k 12-mo average 350k 300k 250k 200k 150k 100k 50k 0k -50k Jan '23 Feb '23 Mar '23 Apr '23 May '23 Jun '23 Jul '23 Aug '23 Sep '23 Oct '23 Nov '23 Dec '23 Source: Bureau of La
Slide 17: Earnings growth still solid
Earnings growth still solid Earnings are growing faster than inflation which means positive real spending power for consumers Average Hourly Earnings $40/hr 9.00% AHE, $/hr (left) 8.00% AHE Growth, Yr/Yr% (right) $35/hr 7.00% $30/hr 6.00% 5.00% $25/hr 4.00% $20/hr 3.00% 2.00% $15/hr 1.00% $10/hr 0.0
Slide 18: Core inflation fell faster than expected in 2H-23
Core inflation fell faster than expected in 2H-23 Fears about inflation re-igniting given the resilient economy have quelled Core PCE (ex food & energy) 1.0% 6.0% Mth/Mth % (left) 0.8% 5.0% Yr/Yr% (right) 4.0% 0.6% 3.0% 0.4% 2.0% 0.2% 1.0% 0.0% 0.0% -0.2% -1.0% -0.4% -2.0% 2019 2020 2021 2022 2023 S
Slide 19: Fed prepping for cuts, but not in a rush
Fed prepping for cuts, but not in a rush Powell: Moving to stage 3, how long to keep rates high Williams: “We aren't really talking about rate cuts right now.” Bostic: Fed can cut “sometime in the third” Waller: “… I see no reason to move as quickly or cut as rapidly as in the past.’ 19
Slide 20: A very dovish shift from September to December
A very dovish shift from September to December 20
Slide 21: Discussions about slowing pace of QT have begun too
Discussions about slowing pace of QT have begun too $6.0t US Treasury Securities $5.5t Mortgage-backed securities $5.0t $4.5t $4.0t $3.5t $3.0t $2.5t $2.0t $1.5t $1.0t 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: Federal Reserve 21
Slide 22: Path to 2.0% is (finally) in sight
Path to 2.0% is (finally) in sight Core PCE, Yr/Yr% 6.00% 0.25% per month '23 YTD avg 5.50% 0.15% per month 5.00% 0.05% per month Fed funds target w/ FOMC median projection (Dec '23) 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2019 2020 2021 2022 2023 2024 Source: Bureau of Economic
Slide 23: Fed funds forecasts point to lower rates this year
Fed funds forecasts point to lower rates this year When and by how much is where they diverge Fed funds futures expected tightening Forecast → 5.50% 5.25% 5.00% 4.75% 4.50% 4.25% Actual 4.00% FHN Financial (Jan 5, 2024) Fed funds futures (Dec 8) 3.75% Fed funds futures (Jan 5) 3.50% Fed funds future
Slide 24: Key takeaways
Key takeaways The biggest difference between 2023 and 2024 for the Fed is that this year, the next move is more likely to be a rate cut than a hike. For the first time since the Fed started tightening, it is optimistic about the direction of inflation. But, it is not ready to declare victory jus
Slide 25: Disclaimer
This document or presentation was prepared by an FHN Financial Economist and is not subject to all of the independence and disclosure standards applicable to retail investors. This report may not be independent of FHN Financial’s proprietary interests. FHN Financial sales representatives, traders an
Slide 26: Q&A
Q&A Sophia Kearney- Todd Warrick EVP, Corporate/Commercial Market Lederman Executive Senior Economist First Horizon FHN Financial E C O N O M I C U P D A T E | January 2024
Slide 27: Closing
Closing Todd Warrick EVP, Corporate/Commercial Market Executive First Horizon E C O N O M I C U P D A T E | January 2024 27
Slide 28: Please reach out to your banker with any questions
Please reach out to your banker with any questions or to set up a meeting with our Economist. A recording of this event will be forwarded next week. Next virtual event: March 21 Market Update: Quarterly Conversations E C O N O M I C U P D A T E | January 2024 28
Slide 29: Thank you.
RY FIRST HORIZON. GY FHN FINANCIAL. Thank you.