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    TFC
    Earnings call· Mar 2025(Q1 FY25)

    TRUIST FINANCIAL CORP TFC

    Apr 17, 2025 Source

    Executive summary

    Truist Q1 FY25 — Strategic Growth and Capital Returns Amidst Market Volatility

    Truist navigated increased market volatility and economic uncertainty in Q1 FY25 by delivering solid loan and deposit growth, alongside disciplined expense management. The company revised its full-year revenue outlook downward, primarily due to a more challenging environment for investment banking and lower medium-term interest rates impacting NII. Despite this, Truist remains focused on strategic growth initiatives, maintaining strong asset quality, and leveraging its robust capital position for opportunistic share repurchases and continued investments in talent and technology.

    Highlights

    5

    • Net income available to common shareholders was $1.2 billion or $0.87 per share in Q1 FY25.

    • Average loans increased 1.1% linked quarter, driven by 1% growth in commercial loans and 1.3% in consumer loans.

    • Average deposits increased 0.6% sequentially, or $2.2 billion, with end-of-period deposits up 3.4% or $13.2 billion.

    • Adjusted noninterest expenses decreased 5.4% linked quarter, contributing to stable PPNR and a 130 basis point improvement in efficiency ratio.

    • The company returned $1.2 billion of capital to shareholders in Q1 FY25 through common dividends and $500 million in share repurchases.

    Concerns

    5

    • Total revenue decreased 3.2% linked quarter due to declines in both net interest income and noninterest income.

    • Net interest income decreased 2.4% linked quarter, or $86 million, primarily due to two fewer days.

    • Net interest margin decreased 6 basis points linked quarter to 3.01%.

    • Noninterest income decreased 5.3% linked quarter, or $78 million, primarily due to a $69 million decline in other income.

    • Full-year 2025 revenue outlook was reduced to 1.5%-2.5% growth (from 3%-3.5% previously) due to lower investment banking and trading activity and lower medium-term interest rates.

    Guidance & targets

    15
    CategoryTargetConfidence
    Full-year 2025 Revenue Growth
    1.5% to 2.5% increase
    high materiality
    High
    Full-year 2025 Net Interest Income Growth
    3% increase
    high materiality
    High
    Full-year 2025 Adjusted Expenses Growth
    Approximately 1% increase
    medium materiality
    High
    Full-year 2025 Net Charge-offs
    About 60 basis points
    medium materiality
    High
    Full-year 2025 Effective Tax Rate (GAAP)
    Approximately 17%
    low materiality
    High
    Full-year 2025 Effective Tax Rate (Taxable Equivalent)
    Approximately 20%
    low materiality
    High
    Q2 2025 Revenue Growth
    Approximately 1.5% increase
    medium materiality
    High
    Q2 2025 Net Interest Income Growth
    Approximately 1.5% increase
    medium materiality
    High
    Q2 2025 Noninterest Income Growth
    1% to 3% increase
    medium materiality
    High
    Q2 2025 Adjusted Expenses Growth
    2% to 3% increase
    medium materiality
    High
    Q2 2025 Share Repurchases
    Up to $750 million
    high materiality
    High
    Full-year 2025 End-of-Period Loan Growth
    Low single-digit growth
    medium materiality
    High
    Q2 2025 Average Deposit Balances
    Relatively stable
    medium materiality
    High
    Fixed Rate Asset Repricing Benefit
    40 to 50 basis points lower
    high materiality
    High
    Restructuring Charges
    $40 million to $50 million high side
    low materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Consumer and Small Business Banking
    Solid quarter with strong consumer loan growth, positive net new checking account growth, and significant progress in Premier Banking, driven by improved banker productivity and new hires. Credit standards and pricing discipline are maintained.
    Average loan balances: +1.3% linked quarterResidential mortgage loan growth: statedIndirect auto loan growth: statedService finance loan growth: statedService finance production: +47% year-over-yearNet new checking accounts: >39,000Net new checking account growth: +40% year-over-yearDebit card spend: +4% year-over-yearPremier Managed new deposit production: $1.8 billionPremier Managed new deposit production growth: +23% year-over-yearFinancial plans delivered per banker: +15%New investment production (Premier Banking): $1.6 billion
    		——1.3%—
    Wholesale Banking
    Saw 1% growth in average wholesale loans, driven by new and existing clients and increased production, particularly in C&I loans. Specific focus on capturing more of the middle market is showing momentum.
    Average loan balances: +1% linked quarterC&I loan growth: $2 billion
    		——1%—
    Investment Banking and Trading
    Challenging market conditions led to lower overall M&A and equity capital markets activity, resulting in less-than-expected growth. Clients postponed planned transactions. The business is advice-driven and well-suited to navigate current conditions, with strong talent and product investments.
    Debt Capital Markets: Second best quarter ever
    		————

    Operational metrics

    27
    Net income available to common shareholders
    $1.2 billion
    Q1 FY25

    Reported GAAP net income.

    Adjusted PPNR
    Stablelinked quarter
    Q1 FY25

    Remained stable linked quarter, offsetting revenue decline with lower adjusted noninterest expenses.

    Efficiency ratio
    130 basis point improvementlinked quarter
    Q1 FY25

    Improvement on a linked-quarter basis.

    Total deposit costs
    1.79%decreased 10 basis points sequentially
    Q1 FY25

    Actively managed rate paid resulted in a decrease in deposit costs.

    Interest-bearing deposit costs
    2.46%decreased 16 basis points sequentially
    Q1 FY25

    Sequential decrease.

    Noninterest income
    $78 million decline5.3% versus Q4
    Q1 FY25

    Linked quarter decrease.

    Noninterest income
    $54 million decline3.7% versus Q1 FY24
    Q1 FY25

    Year-over-year decrease.

    Adjusted noninterest expense
    5.4% decreaselinked quarter
    Q1 FY25

    Excludes impact of restructuring charges.

    Adjusted noninterest expense
    1.5% increaseversus Q1 FY24
    Q1 FY25

    Year-over-year increase.

    Loan loss provision
    Exceeded net charge-offs
    Q1 FY25

    Provision exceeded net charge-offs, but ALLL ratio decreased due to growth in certain loan portfolios.

    CET1 capital ratio (including AOCI)
    9.6%declined 10 basis points linked quarter
    Q1 FY25

    Reflects the impact of AOCI.

    AOCI decrease
    $500 million
    Q1 FY25

    Due to the increase in longer-term interest rates experienced during the quarter.

    Capital returned to shareholders
    $1.2 billionConsistent with Q4 FY24
    Q1 FY25

    Total capital returned through common dividend and share repurchases.

    Share repurchases
    $500 million
    Q1 FY25

    Executed during the first quarter.

    Share repurchases
    $500 million
    Q2 FY25

    Already completed in the second quarter.

    Fixed rate assets repricing
    $42 billion
    Remainder of 2025

    Expected to reprice over the remainder of 2025.

    Unemployment rate in CECL model
    5.1%
    Q1 FY25

    Baseline unemployment rate used in the CECL model, adjusted with qualitative overlays.

    Average loans held for investment
    1.1%linked quarter
    Q1 FY25

    Increase due to growth in both average commercial and average consumer loans.

    Average commercial loans
    $1.8 billion1% increase
    Q1 FY25

    Linked quarter increase.

    Average consumer loans
    $1.6 billion1.3% increase
    Q1 FY25

    Linked quarter increase.

    End-of-period loans
    $2.3 billion0.7% increase
    Q1 FY25

    Linked quarter increase.

    Average deposits
    $2.2 billion0.6% increase sequentially
    Q1 FY25

    Sequential increase.

    End-of-period deposits
    $13.2 billion3.4% increase
    Q1 FY25

    Linked quarter increase, with two large short-term client deposits impacting the period-end balances.

    Digital accounts opened
    195,00013% increase over Q1 FY24
    Q1 FY25

    Strong performance in digital client acquisition.

    Truist Assist conversations
    Over 1 million
    Q1 FY25

    AI tool supporting client conversations and driving efficiencies.

    Noninterest-bearing deposits
    27%remixed just a touch
    Q1 FY25

    Share of total deposits.

    C&I loan production
    Upevery quarter
    Last 5 quarters

    Consistent momentum in C&I loan production.

    Industry KPIs

    10
    MetricValueDetails
    LoansIncreased $3.4 billionUSD
    DepositsIncreased $2.2 billionUSD
    Cet1 ratio11.3%%
    Capital returns$1.2 billionUSD
    Allowance reserves1.58%%
    Net interest income$86 million decreaseUSD
    Net interest margin3.01%%
    Net charge offs npls60 basis pointsbps
    Provision for credit lossesExceeded net charge-offs
    Efficiency ratio operating leverage130 basis point improvementbps

    Product announcements

    3
    ProductTypeDetails
    Truist Client Pulselaunch
    Digital Client Interface (Wealth)launch
    Real-time Payments Capabilities (Zelle disbursements)expansion

    Risks & headwinds

    4
    Market volatility and economic uncertaintyCurrent

    Increased

    Mitigation: Steady, reliable, and supportive partner approach; strong balance sheet, expert advice, digital capabilities, and comprehensive suite of products.

    Investment banking and capital markets activity slowdownCurrent

    Materially slowed

    Mitigation: Reduced revenue outlook; focus on advice-driven business model, talent, products, and industry verticals to grow share when markets recover.

    Shift in yield curve and lower medium-term interest ratesFY25

    Slightly lower net interest income; 40-50 bps lower benefit from fixed rate asset repricing

    Mitigation: Revised NII outlook; active management of deposit costs and surgical deposit pricing tools.

    Potential impacts from tariffs and reductions in government spendingOngoing

    Discussed, not quantified

    Mitigation: Actively analyzing exposure to consumer and wholesale clients; strong understanding of exposure and adequately reserved; clients learned from pandemic to manage supply chains better.

    What to watch in Q2 FY25

    5

    Q2 FY25 Revenue Growth

    Q2 FY25
    CurrentQ1 FY25 revenue of $4.9 billion
    TargetApproximately 1.5% increase

    Why it matters

    This will indicate if the revised revenue outlook and sequential growth expectations are being met amidst market volatility🌐.

    Looking into the second quarter of 2025, we expect revenue to increase approximately 1.5% relative to first quarter revenue of $4.9 billion.

    Q&A highlights

    8

    How much of the increased Q2 buyback target reflects confidence in capital versus offsetting a slower loan environment?

    The increased buyback is primarily opportunistic, driven by the current share price and the company's strong capital position, which allows for both growth funding and weathering economic storms. It's not solely an offset to a slower loan environment but a strategic investment in Truist.

    “So a little more opportunistic relative to current share price.”

    asked by Kenneth Usdin · answered by William Rogers

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Priorities and Operating Leverage

    Truist is committed to five key strategic priorities: deepening client relationships, maintaining expense discipline, investing in talent and technology, upholding strong asset quality, and leveraging its capital advantage. The company aims for positive operating leverage in 2025, offsetting a reduced revenue outlook with additional efficiencies. Investments in areas like Premier Banking, middle market, payments, and wealth are driving growth, while new AI tools like Truist Client Pulse enhance client experience and efficiency.

    02

    Consumer and Small Business Banking Momentum

    The Consumer and Small Business Banking segment showed solid performance with average loan balances increasing 1.3% linked quarter, driven by residential mortgage, indirect auto, and service finance. Net new checking account growth was positive, adding over 39,000 accounts, a 40% increase year-over-year. Premier Banking saw significant growth, generating nearly $1.8 billion in new deposit production and $1.6 billion in new investment production, reflecting improved banker productivity and new hires.

    03

    Wholesale Banking and Investment Banking Outlook

    Wholesale loans grew 1% linked quarter, with strong production in C&I loans. While Debt Capital Markets had its second-best quarter ever, overall investment banking and trading revenue faced headwinds due to lower M&A and equity capital markets activity. The company's outlook for investment banking and trading is now flat year-over-year, reflecting client transaction postponements and market uncertainty🌐, though management believes its advice-driven model is well-positioned for recovery.

    04

    Digital Capabilities and Client Experience

    Truist continues to demonstrate strong digital performance, opening 195,000 new digital accounts in Q1 2025, a 13% increase year-over-year, with 77,000 new-to-bank clients. Over 60% of these new digital clients are millennials and Gen Z. The AI tool, Truist Assist, handled over 1 million conversations, with more than 80% resolved without teammate interaction, driving efficiencies and enhancing the client experience.

    05

    Capital Management and Shareholder Returns

    Truist maintains a strong capital position, with a CET1 ratio of 11.3% and 9.6% including AOCI. The company returned $1.2 billion to shareholders in Q1 FY25 through dividends and $500 million in share repurchases. For Q2 FY25, Truist plans to target up to an additional $750 million in share repurchases, leveraging its capital strength and current trading levels opportunistically.

    06

    Asset Quality and Risk Management

    Asset quality metrics remained stable, with net charge-offs at 60 basis points linked quarter and nonperforming loans at 48 basis points. The allowance for loan and lease losses (ALLL) ratio decreased slightly to 1.58%. Truist is actively analyzing exposure to clients potentially impacted by tariffs and economic scenarios, believing it is adequately reserved, and highlighting its strong credit risk culture and proactive problem loan resolution.

    AI-generated summary of the company’s earnings call. Not investment advice.