First Horizon Corporation Shares Retreat Despite Strong Q3 2025 Financial Performance

Market Reaction to First Horizon Corporation's Third Quarter 2025 Performance

U.S. equities saw varied reactions within the financial sector on October 15, 2025, as First Horizon Corporation (FHN) shares experienced a notable decline of approximately 9.58% following the release of its third-quarter earnings report, trading at $20.82. This movement occurred despite the regional banking institution reporting financial results that largely surpassed analyst expectations.

Detailed Financial Outcomes

The Memphis, Tennessee-headquartered financial services company disclosed a net income available to common shareholders (NIAC) of $254 million, or $0.50 per share, for the third quarter of 2025. This represents an increase from $233 million, or $0.45 per share, in the second quarter of 2025. Excluding notable items, adjusted NIAC stood at $263 million, equating to $0.51 per share, outperforming the adjusted $229 million, or $0.45 per share, reported in the prior quarter.

Crucially, First Horizon's adjusted earnings per share (EPS) of $0.51 significantly exceeded the consensus analyst estimate of $0.44. Similarly, the bank's revenue reached $889 million, surpassing the anticipated $847.27 million. Other key financial metrics demonstrated strength, including an adjusted return on tangible common equity (ROTCE) of 15.0%, an increase of 135 basis points quarter-over-quarter, and adjusted pre-provision net revenue (PPNR) growing 4% to $351 million. The company maintained a robust capital position with a Common Equity Tier 1 (CET1) ratio of 11.0%, aligning with its near-term target. During the quarter, First Horizon increased share buybacks to $190 million, and tangible book value per share rose by $0.37 to $13.94, primarily driven by net income.

Analysis of Market Divergence

The substantial retreat in First Horizon's stock price, which saw a 12.14% drop to close at $20.22 on the day of the earnings release despite beating both EPS and revenue expectations, highlights a disconnect between the company's reported financial health and immediate investor confidence. While premarket trading initially saw shares rise 4.43% to $24.04, this gain quickly reversed during regular trading hours. This paradoxical market reaction suggests that broader concerns within the regional banking sector, or a cautious investor outlook not directly addressed by the reported figures, may be influencing sentiment.

Analysts from institutions such as RBC Capital Markets, Citigroup, and JPMorgan Chase & Co. participated in the earnings call, underscoring the scrutiny surrounding the financial institution's performance and outlook.

Broader Context and Future Implications

Despite the negative stock performance, First Horizon maintained its existing 2025 guidance, projecting flat to 4% growth in adjusted revenue and flat to 2% growth in adjusted expenses. Net charge-offs are expected to remain within the 0.15% to 0.25% range, with a CET1 ratio target of 10.5% to 11.0%. The stock's current price-to-earnings (P/E) ratio stands at 13.02, and InvestingPro rated its financial health as "GOOD," suggesting underlying fundamental strength. Furthermore, the stock had delivered a 33% price return over the preceding six months, indicating a strong momentum prior to this earnings reaction.

Chairman, President, and CEO Bryan Jordan affirmed the company's strategic execution, stating, "We are pleased to report another strong quarter, a testament to the disciplined execution of our strategy and the expertise of our associates." He also emphasized the company's diversified business model and strong credit quality. CFO Hope Dmuchowski highlighted growth prospects, noting, "We have $100 million plus of opportunities that we expect to get out of our existing client base and franchise over the next two-plus years."

Looking ahead, First Horizon is targeting an adjusted ROTCE of over 15% in 2026 and anticipates mid-single-digit loan growth. The company is also exploring small merger and acquisition opportunities and aims to maintain a 10.75% CET1 capital ratio. However, the competitive lending environment could pressure margins, while potential Federal Reserve interest rate cuts might impact interest income. Economic uncertainties and increased expenses, including a $20 million contribution to the First Horizon Foundation, represent additional factors for investors to monitor in the coming quarters.