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Truist Financial Corp (TFC) Q3 2024 Earnings Call Highlights: Strong Investment Banking Revenue …

 

  • Net Income: $1.3 billion or $0.99 per share on a GAAP basis.

  • Adjusted EPS: $0.97 per share.

  • Adjusted Revenue Growth: Increased by 2.4% on a linked quarter basis.

  • Adjusted Expenses: Increased by less than 1% linked quarter and declined year-over-year for the third consecutive quarter.

  • Loan Loss Provision: $25 million related to Hurricane Helene.

  • Capital Return: $1.2 billion returned to shareholders through dividends and $500 million in share repurchases.

  • CET1 Capital Ratio: Remained stable at 11.6%.

  • Consumer Loan Production: Increased by 3% linked quarter.

  • Investment Banking Revenue: Increased 79% year-over-year and 43% year-to-date.

  • Net Charge-Offs: Declined by 3 basis points linked quarter.

  • Average Loans: Decreased by $3 billion or 1% sequentially.

  • Average Deposits: Decreased by 1% sequentially or $3.7 billion.

  • Net Interest Margin: Increased 10 basis points to 3.12% linked quarter.

  • Non-Interest Income: Increased by 3.1% linked quarter.

  • Office Portfolio: Down $232 million linked quarter, with a reserve increase to 10.4%.

Release Date: October 17, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Truist Financial Corp (NYSE:TFC) reported solid underlying earnings with a net income of $1.3 billion or $0.99 per share.

  • The company achieved a 2.4% increase in adjusted revenue on a linked quarter basis, driven by strong investment banking and trading income.

  • Truist Financial Corp (NYSE:TFC) demonstrated expense discipline, with adjusted expenses increasing by less than 1% linked quarter and declining year-over-year.

  • The company returned $1.2 billion of capital to shareholders through dividends and share repurchases, with plans to repurchase an additional $500 million in the fourth quarter.

  • Truist Financial Corp (NYSE:TFC) showed strong growth in digital capabilities, with a 6% increase in client mobile app users and a 15% increase in digital transactions year-over-year.

Negative Points

  • Average loans decreased by $3 billion or 1% sequentially, reflecting weaker commercial client demand and line utilization.

  • Average deposits decreased by 1% sequentially, with a decline in non-interest-bearing deposits.

  • Net interest income is expected to decrease by 1.5% in the fourth quarter, driven by lower commercial loan balances and pressure on net interest margin.

  • The company recorded a $25 million loan loss provision related to Hurricane Helene, impacting overall financial results.

  • Truist Financial Corp (NYSE:TFC) faces ongoing pressure from deposit betas, which are expected to lag asset repricing in the near term.

Q & A Highlights

Q: Mike, could you unpack the Q4 margin guidance for overall NII and discuss how deposit betas might catch up to support the margin? Also, what are your thoughts on the company’s overall rate sensitivity? A: Mike Maguire, CFO: The bulk of the improvement in the third quarter was driven by repositioning. As we look into the fourth quarter, we expect two rate cuts and some margin compression due to a temporary beta lag. We anticipate the margin to stabilize in the first quarter of 2025 and improve as further cuts occur.

Q: Bill, you mentioned proper execution to deliver on goals. Could you elaborate on what you mean by proper execution? A: William Rogers, CEO: Proper execution involves expanding relationships with existing clients. Post-merger, our focus is now on executing priorities with clarity. We aim to continue the momentum in expanding and growing client relationships, as evidenced by increased primacy rates and net new growth.

Q: As we think about positive operating leverage into 2025, how much is driven by deposit beta lags catching up with Fed funds? A: William Rogers, CEO: Several factors contribute, including business momentum, loan growth, and fee dependencies. We expect deposit beta to transition in the first quarter of next year. Controlled expenses are also crucial, and we aim to correlate expense growth with revenue opportunities.

Q: Can you provide more detail on financial expectations for 2025 and beyond, and key metrics that should drive a higher stock price? A: William Rogers, CEO: Our focus is on ROTCE and business growth. We aim for absolute growth in book value per share plus dividends and ROTCE. Our strategy is to execute opportunities within our existing franchise, with a medium-term target of around three years for improved returns.

Q: Can you elaborate on the investments related to risk infrastructure mentioned for the fourth quarter? A: William Rogers, CEO: These investments are part of a continuous effort to enhance our risk infrastructure, including cyber and data management. They are factored into our guidance for positive operating leverage next year and are essential for meeting client, regulatory, and shareholder obligations.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

 

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