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First Horizon: Basel III Loser

NEW YORK ( TheStreet) -- First Horizon National Corp. (FHN - Get Report) was the loser among large U.S. financial names on Friday, with shares sliding over 5% to close at $8.09.

The broad indexes saw 1% declines, as investors once again looked across the water for negative inspiration. After eurozone finance ministers approved a 100 billion euro bailout of Spain's banking sector, the Spanish region of Valencia requested its own bailout, after which yields on Spanish 10-year bonds soared 25 basis points to 7.19%.

Meanwhile, yields on 10-year U.S. Treasury paper declined by five basis points to 1.45%.

The KBW Bank Index (I:BKX) declined 2% to close at 44.88, with all 24 index components showing declines.

First Horizon National reported a second-quarter net loss to common shareholders of $124.8 million, or 50 cents a share, matching the consensus estimate among analysts polled by Thomson Reuters, after previously disclosing $272 million in second-quarter charges "for mortgage repurchase and litigation matters," which "a negative impact on earnings per share of approximately $.67 for the quarter."

The company's shares sold off after CFO William Losch said during First Horizon's earnings conference call that bank's June 30 Tier 1 common equity ratio of 10.6% would decline by "about 240 basis points fully phased in or without any offsetting actions, putting it at a pro forma estimated 8.2% spot rate today."

The CFO added that "assuming planned improvements and run-off actions, we would expect a positive approximately 260 basis point impact to the pro forma estimated 8.2% or a theoretical Tier 1 common ratio of over 10% under Basel III."

The company repurchased $36.9 million worth of common shares during the second quarter now has $74.5 million authorized for repurchases, out of its $200 million buyback program.

Deutsche Bank analyst Matt O'Connor rates First Horizon a "Hold," with a price target of $9.50, and after the earnings announcement said that aside from the mortgage repurchase provision, and said Friday that aside from the mortgage repurchase provision, "underlying trends were sluggish-- net II was flattish after a big decline in 1Q12 q/q and fees were weak."
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