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A Sitting Duck In Memphis?


First Horizon National (FHN), a $37 billion bank holding company in Memphis that operates in 30 states, may be ripe for a buyout. So says Jacqueline Reeves, managing director at investment bank Ryan Beck, who expects little bounce in earnings because of the slowing home mortgage business. "Margins are under pressure," she notes. Reeves forecasts nearly flat earnings of $3.35 a share in 2006 and $3.55 in 2007, vs. $3.40 in 2005. In a buyout, she figures the stock, now at 40.34, would be valued in the low 50s. A biggie such as Wells Fargo (WFC) could use its scale to run FHN more profitably, says Reeves. FHN's strong core deposits and its mortgage and capital markets businesses are part of its attractiveness to a bigger bank, she adds. Theresa Brophy of Value Line (VALU) says the bank's fee income has weakened. Poor quarterly results in March prompted her to cut her 2006 earnings estimates from $3.50 to $2.65. She advises investors to hold off buying until earnings look better." FHN and Wells Fargo both declined comment.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial


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