First Horizon Corporation · NYSE:FHN
First Horizon — Earnings Presentation (July 2024)
32 slides from First Horizon's earnings presentation, Jul 18, 2024
Slide 1: Q3 Economic Update July 2024
Q3 Economic Update July 2024 1
Slide 2: Moderator: Tiffany Gardner
MODERATOR Tiffany Gardner SVP, Corporate and Commercial Banking First Horizon E C O N O M I C U P D A T E | July 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 | July 2024
Slide 4: Inflation back on track toward 2.0%, Fed prepping for first rate cut
Inflation back on track toward 2.0%, Fed prepping for first rate cut July 18, 2024 Sophia Kearney-Lederman Senior Economist
Slide 5: This cycle has been different
This cycle has been different Fed funds target rate 6.50% Upper bound July ‘23 6.00% Interest Recession shading 5.50% Inflation Rates Fed funds rate 5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% Unemployment 1.00% GDP Rate 0.50% 0.00% Source: Federal Reserve, NBER, FHN Financial 5
Slide 6: Late uptick in Q2 growth expectations
Late uptick in Q2 growth expectations Atlanta Fed GDPNow: Q2-24 Initial 4.5% 3.9% Employment Income & Consumption (May) (May) 3.1% 2.2% 4.0% 3.5% Employment (Jun) 3.0% 2.0% ISM Manf (Apr) Construction (Mar) 2.5% 3.3% Income & Consumption (Apr) 2.7% 2.0% ISM Manf (Jun), 1.5% Construction (May) ISM Ma
Slide 7: Uncertainty around growth momentum in 2H
Uncertainty around growth momentum in 2H Real GDP w/ Atlanta Fed GDPNow 6.0% Qrt/Qtr Annualized w/ Sector Contributions 5.0% Atlanta Fed Q2 GDPNow 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% Consumption Bus. Fixed Invest Residential Invest. Government Inventories Net Exports Real GDP, Qtr/Qtr -
Slide 8: Housing market remains subdued
Housing market remains subdued New & Existing Home Sales Housing Units Under Construction 1100k 8.0m SAAR Existing home sales (left) 1050k 1000k 7.0m New home sales (right) 950k 1 Unit 900k 850k 6.0m 5 or more units 800k 750k 700k 5.0m 650k 550k 600k 4.0m 450k 500k 3.0m 350k 400k 2018 2019 2020 2021
Slide 9: Affordability is still a big issue in housing market
Affordability is still a big issue in housing market Housing cost annual growth Housing cost cumulative growth 170 20.0% Jan 2018 =100 Zillow Home Price Index, Yr/Yr% 160 Zillow Rental Price Index, Yr/Yr% Zillow Home Price 17.5% PCE: Net Household Insurance, Yr/Yr% Zillow Rental Price 150 PCE: Net H
Slide 10: Inflation and higher rates weigh on sentiment
Inflation and higher rates weigh on sentiment University of Michigan Consumer Sentiment by Income Bracket 110 Top 33% Middle 33% 100 Bottom 33% 90 80 70 60 50 40 2019 2020 2021 2022 2023 2024 Source: University of Michigan, Bloomberg, FHN Financial 10
Slide 11: Consumers notably more price sensitive this year
Consumers notably more price sensitive this year Retail Sales: Food & Beverage Stores Retail Sales: Bars & Restaurants $86bn Nominal (left) 15.0% Real* (left) $100bn 10.0% $84bn CPI: Food at home, yr/yr% (right) 14.0% $95bn 13.0% 9.0% $82bn $90bn 12.0% $80bn $85bn 8.0% 11.0% $78bn $80bn 10.0% 7.0% $
Slide 12: ISM indices highlight uncertainty beyond Q2
ISM indices highlight uncertainty beyond Q2 ISM Indices ISM Indices: New Orders Contraction < 50 < Expansion 70 Contraction < 50 < Expansion Manufacturing 70 Manufacturing Services Services 65 65 60 60 55 55 50 50 45 45 40 40 2021 2022 2023 2024 2021 2022 2023 2024 Source: Institute for Supply Manag
Slide 13: Better balance between labor demand and supply
Better balance between labor demand and supply Labor Force, Index Jan '20 = 1.0 1.20 $24.0tn Foreign Born, +16Yr 172m Native Born, +16Yr 1.10 Real GDP (left) 170m $23.0tn Civilian Labor Force (right) 1.00 168m $22.0tn 0.90 2020 2021 2022 2023 2024 166m $21.0tn 164m $20.0tn 162m 160m $19.0tn 158m $18
Slide 14: Hiring has slowed
Hiring has slowed Nonfarm Payrolls Monthly change 600k Service Providing Goods Producing Gov't Total 12mth MA 500k 400k 300k 200k 100k 0k Jan 23 Apr 23 Jul 23 Oct 23 Jan 24 Apr 24 Source: Bureau of Labor Statistics, Macrobond, FHN Financial 14
Slide 15: Labor market is no longer tight
Labor market is no longer tight Job Openings Job Layoffs 13.0m 2.4m 12.0m 2.2m 11.0m 2.0m 10.0m 9.0m 1.8m 8.0m 1.6m 7.0m 1.4m 6.0m 1.2m 5.0m 4.0m 1.0m 2018 2019 2020 2021 2022 2023 2024 2018 2019 2020 2021 2022 2023 2024 Source: Bureau of Labor Statistics, Macrobond, FHN Financial 15
Slide 16: More eyes on employment half of dual mandate
More eyes on employment half of dual mandate Unemployment rate 15.0% 4.25% In June, FOMC median 2022-24 projection for 2024 unemployment was 4.0% 13.0% 4.00% 3.75% 11.0% 3.50% 3.25% 9.0% 2022 2023 2024 7.0% 5.0% 3.0% 1990 1994 1998 2002 2006 2010 2014 2018 2022 Source: Bureau of Labor Statistics 16
Slide 17: Earnings growth continues to decelerate
Earnings growth continues to decelerate Average Hourly Earnings $40 $/hr (left) Yr/Yr% (right) 9.0% 8.0% $35 7.0% $30 6.0% 5.0% $25 4.0% $20 3.0% 2.0% $15 1.0% $10 0.0% 2019 2020 2021 2022 2023 2024 Source: Bureau of Labor Statistics, FHN Financial 17
Slide 18: CPI flat in May and down in June
CPI flat in May and down in June CPI Inflation Contributions 0.75% Core services, m/m (left) Core goods, m/m (left) Food, m/m (left) Energy, m/m (left) Yr/Yr % (right) 7.0% 6.5% 6.0% 0.50% 5.5% 5.0% 4.5% 4.0% 0.25% 3.5% 3.0% 2.5% 0.00% 2.0% 1.5% 1.0% -0.25% 0.5% Jan '23 Mar '23 May '23 Jul '23 Sep '
Slide 19: Energy and goods deflation continue
Energy and goods deflation continue Oil & Gas Prices Truckstop.com Rate $3.25 $6.00 Avg Gas Price, $/gal (left) $3.00 Avg Diesel Price, $/gal (left) $5.50 $2.75 $5.00 $4.50 $2.50 $4.00 $2.25 $3.50 $2.00 $3.00 $1.75 $2.50 $2.00 $1.50 $1.50 $1.25 2018 2019 2020 2021 2022 2023 2024 2018 2019 2020 2021
Slide 20: Even supercore CPI is now moving lower
Even supercore CPI is now moving lower Core CPI Breakout 13.0% 12.0% Core Goods CPI, Yr/Yr% 11.0% 10.0% Shelter CPI, Yr/Yr% 9.0% Core Services ex Housing, Yr/Yr% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% 2019 2020 2021 2022 2023 2024 Source: Bureau of Labor Statistics, FHN Financial 2
Slide 21: Q2 inflation gives Fed more confidence
Q2 inflation gives Fed more confidence PCE, Yr/Yr% 8.00% 0.36% per month Q1' 24 Avg 7.00% 0.23% per month '24 YTD Avg 0.09% per month Q2 '24 Avg* 6.00% Fed funds target (upper bound) 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 2019 2020 2021 2022 2023 2024 *Assumes no change in June PCE Source: Bureau of La
Slide 22: June FOMC projections
June FOMC projections Evolution of median participants' projections: Real GDP Evolution of median projections: Fed funds rate 2.5% 5.50% 5.1% 2.1% 2.0% 5.00% 2.0% 2.0% 1.5% 4.50% 4.1% 1.0% 4.00% 0.5% 3.50% 0.0% 3.1% 2024 2025 2026 2.8% 3.00% Note: Projections for change in real GDP are 4Q/4Q% Evolut
Slide 23: 2024 median higher, dots tighter but still dispersed
2024 median higher, dots tighter but still dispersed Median 23
Slide 24: Old normal could be the new normal
Old normal could be the new normal Fed funds rate 10.0% Old normal Fed funds rate 9.0% Real Fed Funds Rate 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% -6.0% 1985 1990 1995 2000 2005 2010 2015 2020 Note: to be consistent with TIPS, fed funds is deflated by core CPI Sour
Slide 25: The yield curve reflects market expectations
The yield curve reflects market expectations 6.00% The Treasury yield curve 5.50% 5.00% 4.50% 4.00% 3.50% July 1, 2023 3.00% July 17, 2024 2.50% FF 2M 6M 2Y 5Y 7Y 10Y 15Y 20Y 30Y Source: Bloomberg and FHN Financial 25
Slide 26: June CPI ups market odds of September cut
June CPI ups market odds of September cut Market expectations vs FOMC dot plot median 0 Mkt expected cuts in '24 Mkt expected cuts in '24 & '25 1 Median dot end '24 Median dot end '25 CPI report FOMC meeting 2 3 4 5 6 7 8 9 10 Jan-2 Jan-16 Jan-30 Feb-13 Feb-27 Mar-12 Mar-26 Apr-9 Apr-23 May-7 May-21
Slide 27: Key takeaways
Key takeaways Growth momentum is slowing heading into 2H-24 on pickier consumers, a cooling labor market and heighted uncertainty given the US election and geopolitics. Inflation is back on the path toward 2.0% after May and June CPI. There is increased attention on the employment half of the Fe
Slide 28: Disclaimer
Although this information has been obtained from sources which we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any secur
Slide 29: Q&A
Q&A Tiffany Gardner Sophia Kearney-Lederman SVP, Corporate and Commercial Banking Senior Economist First Horizon FHN Financial E C O N O M I C U P D A T E | July 2024
Slide 30: Closing: Tiffany Gardner
Closing Tiffany Gardner SVP, Corporate and Commercial Banking First Horizon E C O N O M I C U P D A T E | July 2024 30
Slide 31: 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: September 17 Market Update: Quarterly Conversations E C O N O M I C U P D A T E | July 2024 31
Slide 32: Thank you
a) FIRST HORIZON. LQ) FHN FINANCIAL. Thank you.