2024 Net Interest Income Outlook
Q: What is the outlook for 2024 net interest income and sensitivity to Fed cuts?
A: Truist expects 2024 net interest income (NII) to reflect five 25 basis point Fed rate cuts starting in May. - Loan balances may see slight pressure in the first quarter, down less than 1%, then remain relatively stable. - Deposits are projected to decline about 1.5% in the first quarter and continue declining at a decreasing rate over the year. - The bank is cautious about deposit betas, anticipating a reprice lag. - A scenario with no or significantly delayed cuts would be a headwind. -

Credit Quality and Expected Loss Trends
Q: How do you expect loss trends to evolve, and in which portfolios?
A: Truist anticipates ongoing normalization of credit losses in both consumer and wholesale portfolios. - The consumer side has already seen much of this normalization due to a higher mix of higher-margin consumer finance businesses and less exposure to mortgage and prime auto. - The bank is proactively addressing potential stress areas like commercial real estate (CRE), especially office. - Guidance reflects opportunities to manage potential challenges as structural risks unfold. -

Capital Ratios and Basel III Impact
Q: What is your adjusted Common Equity Tier 1 (CET1) ratio considering AOCI and Basel III impacts?
A: Truist's stated CET1 ratio is 10.1%. - Adjusting for other comprehensive income (OCI), including available-for-sale (AFS) securities and pension, has a 2.9% impact, reducing CET1 to around 7.2%. - Further factors like thresholds and risk-weighted asset (RWA) inflation under Basel III could reduce it by another percent, bringing it to the low 6% range. -

Efficiency and Optimization Efforts
Q: Are your optimization efforts deep enough to improve efficiency ratios?
A: Management is encouraged by momentum in expense declines, particularly in the third and fourth quarters. - The bank is committed to its $750 million savings program, reducing headcount and branches by 4% each. - A simplified organizational structure allows for better decision-making and long-term efficiency improvements. -

Potential Sale of Insurance Business
Q: Can you update us on the potential monetization of the insurance business?
A: Truist acknowledges that the insurance business presents a capital opportunity. - The bank is evaluating alternatives to do what's best for both the insurance business and Truist but did not provide specific timing or details. -

Loan Demand and Growth Outlook
Q: How do you see loan demand trending, and can demand return with rate cuts?
A: Truist expects modest growth in the C&I (Commercial and Industrial) portfolio starting in the second quarter. - Rate cuts are anticipated to slightly benefit demand. - Pressure remains on the consumer side, partly due to the bank reducing focus on less capital-efficient areas like indirect lending. - Recovery in key markets should positively impact loan demand. -

Investment Banking Outlook
Q: What is the outlook for the investment banking business?
A: Truist has a balanced investment banking business and sees positive trends across multiple sectors. - Equity capital markets are starting to recover, with a strong pipeline of IPO components. - On the debt side, natural refinancing opportunities arise from significant maturities in 2024. - The M&A pipeline is robust, surpassing the total closed last year. - Growth is also seen in public finance, building momentum over the past 12–18 months. -

Commercial Real Estate Exposure
Q: What are your concerns regarding multifamily CRE and office exposure?
A: Truist views multifamily as a favored asset class long-term, despite short-term pressures from rate increases and new supply. - Challenges are seen as temporary, with potential increases in watch list and nonaccruals but lower loss risk compared to office. - In the office sector, risks are structural and expected to unfold over the next couple of years. - The bank is proactively managing these risks, with early identification and working with borrowers. -

Deposit Beta Assumptions and Rate Cuts
Q: What are your deposit beta assumptions in light of expected rate cuts?
A: Truist is cautious about deposit betas on the downside. - In the event of rate cuts starting in May, the first half of cuts is expected to be pressured due to ongoing repricing in retail segments. - Cumulative betas are expected to be lower initially, with the NII outlook reflecting these reprice trends. -

Return on Tangible Common Equity Targets
Q: Is a 20% return on tangible common equity still a reasonable goal?
A: Given changes in the environment since 2019, including higher rates and Basel III regulations, a 20% ROTCE is not seen as attainable in the short to medium term. - However, Truist aims to perform at a high level in ROTCE through efficiency improvements and revenue growth, positioning itself as a top performer rather than focusing on a specific target. -

Goodwill Impairment Charge and Merger Synergies
Q: Does the goodwill charge imply merger synergies are less appealing?
A: The goodwill impairment is a result of annual testing, influenced by factors like degraded operating conditions and significant declines in bank stock valuations as of October 1. - It does not impact Truist's financial condition, opportunities, or strategy. - Management indicates that merger synergies are materializing, with growth in net new accounts, primary accounts, market share, and efficiency gains underway. -