Fitch Ratings has downgraded the ratings of First Horizon National Corporation (FHN) and lead bank First Tennessee Bank, N.A. (FTBNA). Fitch has also placed FHN's long- and short-term Issuer Default Ratings (IDRs) on Rating Watch Negative. A complete list of rating actions follows at the end of this release.
The downgrade follows FHN's announcement that it will be taking a very large mortgage repurchase provision in 2Q'12. FHN expects to report $250 million in pre-tax charges related to mortgage repurchases, as compared to an average of approximately $50 million the prior three quarters. As a result, FHN will likely report a loss for the full year 2012. Even excluding this charge, FHN's earnings profile had been trending lower than similarly rated peers for several quarters.
Previously Fitch viewed an outsized charge as a negative rating driver, and this provision represents a material charge for the company. Although FHN's ability to quantify potential mortgage repurchase losses was previously limited because it no longer services a large portion of loans sold to the agencies and lacked access to underlying loan data, this charge was still outside of Fitch's expectations.
Fitch will be reviewing all the ratings in the very near term. Accordingly, there is the potential of further downgrades to FHN's rating. FHN's ability to return profitability measures more in line with peer averages will be one of the key rating drivers in the next review. Potential private label put-back risk, which to date has not been an issue for FHN, will also be incorporated in the upcoming review.
Fitch has downgraded and placed on Rating Watch Negative the following ratings:
First Horizon National Corporation
--Long-term IDR to 'BBB' from 'BBB+';
--Viability to 'bbb' from 'bbb+';
--Subordinated debt to 'BBB-' from 'BBB';
--Senior to 'BBB' from 'BBB+'.
First Tennessee Bank, N.A.
--Long-term IDR to 'BBB' from 'BBB+';
--Viability to 'bbb' from 'bbb+';
--Long-term deposits to 'BBB+' from 'A-';
--Short-term deposits to 'F2' from 'F1';
--Subordinated debt to 'BBB-' from 'BBB';
--Preferred stock to 'B+' from 'BB-'.
First Tennessee Capital II
--Preferred stock to 'BB-' from 'BB'.
Fitch affirms the following ratings:
First Horizon National Corporation
--Support at '5';
--Support Floor at 'NF'.
First Tennessee Bank, N.A.
--Support at '5';
--Support Floor at 'NF'.
Fitch has placed the following rating on Rating Watch Negative:
First Horizon National Corporation
--Short-term IDR 'F2'.
First Tennessee Bank, N.A.
--Short-term IDR 'F2';
--Short-term debt 'F2'.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 16, 2011);
--'Bank Holding Companies' (Aug. 16, 2011).
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171
Bank Holding Companies
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648612
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