Shares of First Tennessee National Corp. rallied Thursday after the company announced it would beat analyst consensus estimates for this quarter by at least 15%.

"Our earnings have gone way beyond what analysts thought," said Ralph Horn, chairman and chief executive officer of the Memphis company, in an interview.

According to Thomson Financial/First Call, as of Thursday morning analysts had expected the company to report earnings of 54 cents a share for the third quarter and $2.06 for the full year.

First Tennessee also predicts that per-share earnings will top the consensus in the fourth quarter and next year, Mr. Horn said.

"Wall Street still sees us as mortgage originator, and investors think that is what drives our earnings" but fail to give full credit to the divestiture of slow-growing business lines such as credit cards and student loans, Mr. Horn said.

Last year First Tennessee underwent a restructuring that cost around $20 million to $30 million, shifting its mortgage focus from wholesale to retail, Mr. Horn said. The company also strengthened its capital markets business and its market share in retail and commercial banking in Tennessee, he said. First Tennessee also does business in Mississippi and Arkansas.

David Trone of Prudential Securities Inc. said that First Tennessee's fixed-income underwriting and advisory capabilities helped the company benefit from an increasing need among smaller banking companies for assistance in managing their assets and liabilities.

However, First Tennessee stock fell 12.87% from July 2 through Wednesday as investors dumped rate-sensitive financials in anticipation of a more stable rate environment. But analysts agreed First Tennessee has managed to break free from that group. On Thursday the stock was up 4.22%.

Mr. Trone, who is generally bearish on regional banks, said the company, which currently trades at 15.67 times earnings, deserves a higher valuation. The stock could well end up trading around 19 times 2002 earnings, against an average of 15.5 times for the other companies he follows, Mr. Trone said. He rates First Tennessee a "buy," Prudential's top rating.

On July 18 the $19.2 billion-asset company reported operating earnings of 50 cents, a penny short of analyst expectations but up 19% from a year earlier. Total revenues grew 38% from last year; total mortgage origination was up 56%, and fee income from capital markets activities was up 246%, to $65.7 million.

Meanwhile on Thursday, American Express fell 3.95% after analyst Michael R. Hughes of Merrill Lynch & Co Inc. lowered its earning estimates by a penny, to 40 cents, for this quarter, and by 4 cents, to $1.45, for the full year.

Capital One Financial Corp. also fell, by 4.27%, despite an upgrade Wednesday to "strong buy" from "buy" by Jordan Hymowitz, an analyst with FleetBoston Robertson Stephens Inc. in San Francisco.

Mr. Hymowitz said that investors have recently been too hasty in selling shares of Capital One along with the stock of other card companies. "Capital One has the best credit and the highest reserve," he said.

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