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    Truist Financial Corp (TFC)

    Business Description

    Truist Financial Corporation is a financial services company that operates primarily through two business segments: Consumer and Small Business Banking (CSBB) and Wholesale Banking (WB), with additional activities in Other, Treasury & Corporate (OT&C) . The company provides a range of financial products and services, including deposits, payment services, credit cards, loans, mortgages, and investment advisory services to consumer and small business clients through various channels . Truist also offers services to commercial, corporate, institutional, real estate, and wealth clients, including core banking, specialized lending, investment banking, capital markets, and wealth management . The company's strategy focuses on deepening client relationships through its Integrated Relationship Management approach, aiming to meet clients' financial needs with a full suite of products .

    1. Consumer and Small Business Banking (CSBB) - Provides deposits, payment services, credit cards, loans, mortgages, and investment advisory services to consumer and small business clients through branches, ATMs, and digital platforms .
    2. Wholesale Banking (WB) - Offers a comprehensive suite of services to commercial, corporate, institutional, real estate, and wealth clients, including core banking, specialized lending, investment banking, capital markets, and wealth management services .
    3. Other, Treasury & Corporate (OT&C) - Includes additional functional activities that support the company's strategic objectives and financial operations .

    Q3 2024 Summary

    Initial Price$38.82July 1, 2024
    Final Price$41.72October 1, 2024
    Price Change$2.90
    % Change+7.47%

    What went well

    • Truist is growing market share across all business lines, including investment banking where they have increased market share in every discipline and are focusing on net new client growth and increasing primacy with existing clients. Checking primacy and treasury management penetration both increased by 1%.
    • Truist's unique capital advantage allows them to invest in growth opportunities and return significant capital to shareholders, giving them the capacity to grow ROTCE faster than peers. They plan to achieve profitability improvement by deepening existing client relationships without needing to expand into new markets or products.
    • Truist is effectively leveraging both digital and physical channels to enhance customer relationships, employing their "T3" concept (touch and technology equals trust). They have invested in digital capabilities like Truist Assist, allowing clients to interact digitally and transition to human interaction when needed.

    What went wrong

    • Truist Financial has lowered its Return on Tangible Common Equity (ROTCE) targets from the low 20s to mid-teens, which is below some peers aiming for higher ROTCE, raising concerns about profitability and shareholder returns.
    • Management accountability to shareholders is being questioned, especially as executives received special bonus awards despite stock underperformance and lowered ROTCE targets.
    • There is pressure on Net Interest Margin (NIM) and Net Interest Income (NII) due to asset-liability repricing mismatches and hedging activities, potentially leading to NII headwinds in the short term.

    Q&A Summary

    1. Net Interest Margin Outlook
      Q: How will NIM and deposit betas evolve into 2025?
      A: Michael Maguire expects deposit betas to accelerate significantly in the fourth quarter to the mid to high 30%, still lagging asset repricing, leading to some margin compression into the low 305-306 basis points area. He anticipates the margin to stabilize in the first quarter of 2025 and begin improving as further rate cuts occur.

    2. Capital Deployment and Share Buybacks
      Q: Will you increase share buybacks given muted loan growth?
      A: William Rogers stated they plan to maintain elevated share buybacks for some time. While they see opportunities to grow the business and intend to invest capital accordingly, they may recalibrate buybacks if business growth is slower than expected.

    3. Return on Tangible Common Equity (ROTCE) Targets
      Q: Why are ROTCE targets in the mid-teens, below peers?
      A: William Rogers explained that the sale of their insurance business generated significant capital, which initially lowers returns. As they deploy this capital, returns will increase. He believes they have the most ability to grow returns over the medium term, defined as around three years, and expect to improve ROTCE faster than peers.

    4. Positive Operating Leverage into 2025
      Q: What drives positive operating leverage into 2025?
      A: William Rogers highlighted factors like business momentum in investment banking, expected return of loan growth, and controlling expenses. Consumer loan production increased around 3% this quarter. They anticipate deposit betas to transition in the first quarter of next year, contributing to operating leverage.

    5. Management's Commitment to Shareholders
      Q: What key metrics should we monitor for shareholder value?
      A: William Rogers emphasized that everything they do is about shareholders and compensation is based on performance. The primary measures are ROTCE and business growth, looking at total book value per share plus dividends. These metrics are highly correlated to share price return.

    6. Market Share and Wallet Share Growth
      Q: How are you growing market and wallet share?
      A: William Rogers mentioned they have increased market share in investment banking across all disciplines. They focus on net new clients and increasing primacy within existing clients, with checking primacy up 1% and treasury management penetration up 1%. This results in improved returns driven by deeper client relationships.

    7. Interest Rate Swap Position
      Q: Can you provide details on your interest rate swaps?
      A: Michael Maguire stated they added about $15 billion of forward-starting receive-fixed swaps in the quarter, taking the notional up to around $60 billion. They also added about $5 billion of pay-fixed swaps. The receive-fixed swap rate is approximately 3.40% on that notional.

    8. Investments in Risk Infrastructure
      Q: Why increase investments in risk infrastructure now?
      A: William Rogers explained they are continuing investments to build a more enduring and consistent infrastructure. This includes investments in cyber, data management, and elevated expectations in AI. These are continuous improvements reflecting higher industry expectations, not due to merger-related issues.

    9. Digital Strategy and Client Primacy
      Q: How does your digital strategy enhance client relationships?
      A: William Rogers stated that both digital and physical channels are important. They use a concept called T3 (touch and technology equals trust) to provide digital tools like Truist Assist along with opportunities for human interaction. This approach aims to create enduring client relationships by serving clients in the way that suits them best.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Consumer Banking and Wealth3,6133,4963,4133,58314,105---
    Community Banking Retail and Consumer Finance--------
    - Net Interest Income-----(910)(791)(689)
    - Noninterest Income-----(33)(6,710)(70)
    Corporate and Commercial Banking2,3822,2762,2352,2229,115---
    Community Banking Commercial--------
    Community Banking--------
    Residential Mortgage Banking--------
    Dealer Financial Services--------
    Specialized Lending--------
    Financial Services and Commercial Finance--------
    Financial Services--------
    Insurance Holdings8318607217453,157---
    Other, Treasury & Corporate-----(943)(7,501)(759)
    Consumer and Small Business Banking-----3,0973,1353,152
    Wholesale Banking-----2,6642,6812,692
    Total Revenue6,1025,9185,6725,69823,3904,818(1,685)5,085
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Commercial and Industrial------156,400-
    - Florida------2,401-
    - Texas------1,775-
    - North Carolina------2,443-
    - Georgia------2,281-
    - New York------1,532-
    - Virginia------1,184-
    - California------1,778-
    - Pennsylvania------1,302-
    - Maryland------815-
    - Tennessee------815-
    - Illinois------4,180-
    - South Carolina------4,114-
    - New Jersey------3,875-
    - Ohio------3,153-
    - Other------4,545-
    CRE------21,730-
    - District of Columbia------859-
    Total Revenue--------
    KPIs - Metric (Unit)FY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Loans 90 days or more past due and still accruing ($ million)1,361662574534-538489518
    Unused Borrowing Capacity at FRB ($ million)53,29152,73754,63355,252-53,54863,14273,663
    Unused Borrowing Capacity at FHLB ($ million)24,67823,21923,61524,712-25,03132,89236,689
    Available Investment Securities (after haircuts) ($ million)56,62677,87573,01074,717-73,52064,61072,300
    Available Secured Borrowing Capacity ($ million)134,595153,831151,258154,681-152,099160,644182,652
    Nonperforming Loans and Leases Held for Investment ($ million)1,1921,5111,4521,380-1,3941,467-
    Nonperforming Loans Held for Sale ($ million)0137551-2295
    Foreclosed Real Estate ($ million)3333-453
    Other Foreclosed Property ($ million)66565454-565153
    Residential Mortgage Loans in Process of Foreclosure ($ million)226229233214-201184179
    UPB of CRE Mortgages Serviced for Others ($ million)36,24535,07634,17931,681-29,07528,96428,241
    Value of CRE Mortgages Serviced for Others Covered by Recourse Provisions ($ million)9,8299,6989,7189,661-9,6569,6429,615
    Maximum Recourse Exposure from CRE Mortgages Sold with Recourse Liability ($ million)2,8202,8192,8272,813-2,8132,8092,815
    Commercial MSRs at Fair Value ($ million)291292295272-268279255

    Executive Team

    NamePositionStart DateShort Bio
    William H. Rogers, Jr.Chairman and Chief Executive OfficerCEO: Sep 2021<br>Chairman: Mar 2022William H. Rogers, Jr. has been the CEO since September 2021 and Chairman since March 2022. Previously, he was President and COO from December 2019 to September 2021, and Chairman and CEO of SunTrust from January 2012 to December 2019 .
    Michael B. MaguireSenior Executive Vice President and Chief Financial OfficerSep 2022Michael B. Maguire has been the CFO since September 2022. He was previously the Chief National Consumer Finance Services and Payments Officer from September 2021 to September 2022 .
    Hugh S. (Beau) Cummins, IIIVice Chair and Chief Operating OfficerCOO: Nov 14, 2023Hugh S. (Beau) Cummins, III became COO on November 14, 2023. He has been Vice Chair since September 2021 and previously led the Corporate and Institutional Group .
    Scott A. StengelSenior Executive Vice President, Chief Legal Officer, and Head of Government AffairsDec 2023Scott A. Stengel has been in his current role since December 2023. He was previously General Counsel at Ally Financial Inc. from May 2016 to December 2023 .
    Kristin LesherSenior Executive Vice President and Chief Wholesale Banking OfficerFeb 12, 2024Kristin Lesher joined Truist as Chief Wholesale Banking Officer on February 12, 2024. She was previously EVP and Head of Middle Market Banking at Wells Fargo .
    Clarke R. Starnes IIIVice Chair and Chief Risk OfficerCRO: Jul 2009<br>Vice Chair: Sep 2022Clarke R. Starnes III has been Chief Risk Officer since July 2009 and Vice Chair since September 2022. He joined Truist in 1982 and has held numerous leadership roles .
    Dontá L. WilsonSenior Executive Vice President and Chief Consumer & Small Business Banking OfficerNov 2023Dontá L. Wilson was named to his current role in November 2023. He has been with the company for 25 years, serving in various leadership positions .
    Brad BenderChief Risk OfficerNov 13, 2024Brad Bender was appointed Chief Risk Officer on November 13, 2024. He has been with Truist for 20 years, previously serving as Head of Enterprise Operational Services and interim Chief Information Officer .

    Questions to Ask Management

    1. Given your ongoing investments in risk infrastructure, including cyber and data, can you provide more clarity on how these expenditures will impact your expense base and operating leverage, especially considering the elevated expenses expected in the fourth quarter?

    2. You mentioned a commitment to achieving mid-teens ROTCE in the medium term, but with peers aiming for higher returns, what specific strategies are you implementing to accelerate your ROTCE growth and close the gap with competitors?

    3. With loan growth remaining muted and line utilizations at a five-quarter low, how do you plan to drive revenue growth, and are you considering adjusting your capital return strategy, including share buybacks, to enhance shareholder value?

    4. Competitors are aggressively expanding in your markets by hiring and gaining market share; how do you plan to counter this and ensure Truist stops losing market share to these out-of-market competitors?

    5. Given the focus on digital initiatives and the enhancement of your Truist One View platform, what measurable outcomes have you seen in terms of client acquisition and efficiency improvements, and how do these initiatives translate into tangible financial benefits?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateJune 2024
    End Date/Duration2026
    Total additional amount$5.0 billion
    Remaining authorization amount$4.5 billion
    DetailsPart of capital distribution strategy to return capital to shareholders. Allows for open-market purchases or privately negotiated transactions. Subject to capital and liquidity positions, financial performance, and market conditions.

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: Q4 2024 and FY 2024
    • Guidance:
      1. Revenue: Expected to decrease by 1.5% in Q4 2024 from Q3 2024 adjusted revenue of $5.1 billion. Full year 2024 revenues expected to be down 0.5% to 1% .
      2. Net Interest Income: Expected to decrease by 1.5% in Q4 2024 .
      3. Noninterest Income: Expected to decline by 2% in Q4 2024 .
      4. Adjusted Expenses: Expected to increase by 4% in Q4 2024. Full year 2024 adjusted expenses expected to be slightly lower than 2023 .
      5. Net Charge-Offs: Expected to be closer to 60 basis points for FY 2024 .
      6. Share Repurchases: Targeting approximately $500 million in Q4 2024 .
      7. Effective Tax Rate: Expected to approximate 17.5% or 20% on a taxable equivalent basis in Q4 2024 .
      8. Net Interest Margin: Expected to decrease by about 1.5% in Q4 2024, leading to a margin in the 305 to 306 basis points area .
      9. Deposit Balances: Expected to remain relatively stable in Q4 2024 .
      10. Capital: CET1 ratio expected to remain stable .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: Q3 2024 and FY 2024
    • Guidance:
      1. Revenue: Expected to increase by 1% to 2% in Q3 2024. Full year 2024 revenues expected to decline by 0.5% to 1% .
      2. Net Interest Income: Expected to increase by 2% to 3% in Q3 2024 .
      3. Noninterest Income: Expected to remain stable in Q3 2024 .
      4. Expenses: Adjusted expenses expected to increase by 3% in Q3 2024. Full year 2024 expenses expected to remain flat compared to 2023 .
      5. Net Charge-Offs: Expected to be about 65 basis points in 2024 .
      6. Share Repurchases: Targeting approximately $500 million per quarter for the remainder of 2024 .
      7. Effective Tax Rate: Expected to approximate 16% or 19% in Q3 and Q4 2024 .
      8. Client Loan Demand: Expected to remain muted in Q3 2024 .
      9. Deposit Trends: Continued pressure expected .
      10. Net Interest Margin: Increased 14 basis points to 3.03% .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Revenue: Expected to decline by 4% to 5% for FY 2024 .
      2. Net Interest Income: Expected to trough in Q2 2024 and improve in the second half .
      3. Expenses: Expected to remain flat compared to 2023 .
      4. Net Charge-Offs: Expected to be about 65 basis points in 2024 .
      5. Effective Tax Rate: Expected to approximate 16% or 19% .
      6. Capital: Sale of TIH expected to generate significant CET1 basis points .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: Q1 2024 and FY 2024
    • Guidance:
      1. Net Interest Income: Expected to trough in H1 2024 .
      2. Adjusted Expenses: Expected to rise by 4% in Q1 2024, flat or increase by 1% for FY 2024 .
      3. Net Charge-Offs: Expected to be about 65 basis points .
      4. Effective Tax Rate: Expected to approximate 17% or 20% .
      5. Revenues: Expected to remain flat or decline by 1% in Q1 2024, decrease by 1% to 3% for FY 2024 .
      6. Net Interest Margin: Expected to contract in Q1 2024 .
      7. Capital: Focus on building capital, no share repurchases planned .
      8. Asset Quality: Nonperforming loans declined, ALLL ratio increased .
      9. AOCI: Expected decline in AOCI attributable to securities by 2026 .
      10. Long-term Debt Requirement: Estimated shortfall to be met through normal issuance .

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • National, regional, and local financial services providers, including banks, thrifts, credit unions, investment advisers, asset managers, securities brokers and dealers, private-equity funds, hedge funds, mortgage-banking companies, finance companies, financial technology companies, and insurance companies .
    • Non-banking entities, including financial technology companies, which provide financial products and services directly or indirectly through partnerships .

    Latest news

    Recent developments and announcements about TFC.

    Corporate Leadership

      Leadership Change

      ·
      1 day ago

      Who is leaving? Hugh S. 'Beau' Cummins III, Vice Chair and Chief Operating Officer of Truist Financial Corporation, is resigning effective immediately due to material changes in his responsibilities following strategic initiatives.

      Why? His resignation qualifies as 'Good Reason' under Truist's severance plan, entitling him to specific benefits.

      Who is stepping up? Kristin Lesher, Senior Executive Vice President and Chief Wholesale Banking Officer, will manage the enterprise payments business. Michael B. Maguire, Senior Executive Vice President and Chief Financial Officer, will take over Cummins' other responsibilities.

      Leadership Change

      ·
      Nov 13, 2024, 12:00 AM

      Clarke R. Starnes III is retiring as Vice Chair and Chief Risk Officer of Truist Financial Corporation after a 42-year career. Brad Bender, a 20-year veteran of Truist, is stepping up as the new Chief Risk Officer. Bender will oversee risk management, regulatory relations, and financial crimes functions, among other responsibilities. Starnes will remain as a Senior Advisor until April 30, 2025, to ensure a smooth transition .