First Horizon (FHN) Morgan Stanley US Financials, Payments & CRE Conference 2024 summary

Macro environment and interest rates

• Loan demand has slowed recently, though overall sentiment remains positive, especially in the South, which continues to see strong in-migration and economic strength.

• Rate cuts are seen as a catalyst for renewed optimism and activity; however, expectations are for few or no cuts in 2024 due to persistent inflation.

• The Fed is expected to wait for sustained progress toward a 2% inflation target before easing rates, likely over the next several months.

• Deposit competition remains intense due to quantitative tightening and reduced RRP balances, with deposit rates reaching an equilibrium.

Deposits and balance sheet management

• Deposit rates have largely stabilized, with most repricing opportunities already realized; clients are more rate-sensitive and have less money in accounts than previous years.

• Retention of promo-priced clients remains high, and deposit balances are aligned with industry trends, down about 2% quarter-over-quarter.

• Non-interest-bearing deposits have stabilized, and there is little difference in behavior between consumer and commercial clients, aside from seasonality.

• Mix shift from CDs to money markets is occurring, with shorter promotional periods and narrowing rate differentials.

Loan growth and specialty businesses

• Loan growth has slowed, with increased competition, especially in C&I lending; CRE opportunities are limited but pursued when well-structured.

• Loan growth is expected to remain tepid through 2024, with a catalyst needed for acceleration.

• Specialty business lines, such as mortgage warehouse and asset-based lending, continue to perform well, offering high-yielding assets and strong returns on capital.

• Mortgage warehouse lending is seasonal and currently driven by purchase activity, while asset-based lending remains steady.