TRUIST FINANCIAL CORP Q3 FY2025 earnings call

Strategic Investment

• Announced a strategic investment to accelerate performance by building better lives, deepening relationships with existing clients, and attracting new clients in strong markets. Investing in building 100 new insight-driven branches, renovating locations, enhancing digital capabilities, elevating marketing, and hiring premier advisors.

Third Quarter Results Highlights

• Reported net income available to common shareholders of $1.3 billion, or $1.04 a share. Average loan balances increased 2.5%. Adjusted non-interest income increased 9.9% late quarter. Adjusted expenses up just 1% late quarter, driving 270 basis points of positive operating leverage. Net charge-offs declined. Returned $1.2 billion of capital to shareholders during the quarter and plans to target $750 million of share repurchases during the fourth quarter.

Business Segments Progress

• Consumer and small business banking: Positive net new checking account growth, consumer loan and deposit growth. Premier banking sees significant increases in loan and deposit production per banker. Digital strategies deliver results with digital transactions rising 7% year over year and digital channels accounting for 40% of new to bank clients. Wholesale: Loan growth, improvement in investment banking and trade revenue, and progress in key focus areas like payments. Wealth: Net asset flows positive, AUM from wholesale and premier clients up. Payments: Scaling with new solutions and treasury management revenue growth.

Consumer and Small Business Banking

• Had solid quarter of consumer loan and deposit growth, net new checking account growth. Net new checking account growth remained positive in the third quarter with over 20,000 new consumer and small business accounts added. Average consumer and small business deposit balances increased modestly late quarter and 1.9% versus the third quarter of 2024. Average loan balances increased 2% late quarter and 7% versus the third quarter of 2024.

Wholesale

• Average wholesale loans increased 2.8% late quarter and 4.8% year over year, driven by growth from new and existing clients and increased production. Saw consistent quarterly growth in balances, fueled by new client acquisition across diverse sectors.

Wealth

• Net asset flows remain positive, and year-to-date AUM from wholesale and premier clients is up 27% versus the prior year.

Payments

• Payments business continues to scale, launching new solutions that delivered speed, simplicity, and security to clients. These enhancements, along with targeted talent investments, drove an 11% year-over-year increase in treasury management revenue.

Fourth Quarter

• Plans to target approximately $750 million of share repurchases during the fourth quarter.

2025 Full Year

• Expect net charge-offs of 55 basis points in 2025, compared with previous guide of 55 to 60 basis points. Effective tax rate to approximate 17.5% or 20% on a taxable equivalent basis in 2025.

2026 and Beyond

• Expect to grow revenue in 2026 at a higher rate than in 2025. Plan to increase share repurchase program in 2026 to $3 billion to $4 billion. Target a 15% ROTCE in 2027.

Market Concerns

• Questions about exposures to certain borrowers like Tricolor and First Brands. Discussion of NDFI portfolio, including its size, diversification, and how it ranks relative to peers, with concerns from the market about scrutinizing such portfolios.

Q: John Pancari asked about breaking out 2026 revenue growth, spread revenue vs fee revenue, and operating leverage acceleration.

A: William Rogers Jr. said NII growth is a key part, deposit growth is accelerating, fee income momentum continues. Brad Milsaps said they're shaping more than guiding, expecting higher revenue growth in 2026 with higher operating leverage.

Q: Scott Siefers asked about deposit pricing and growth momentum into next year.

A: Brad Milsaps said they feel good about deposit pricing momentum, with beta expected to move to mid-40% area. William Rogers Jr. talked about leading indicators of deposit growth like net news, premier production, and treasury management pipelines.

Q: Erika Najarian asked about the walk to 15% ROTCE and net interest margin trajectory.

A: Brad Milsaps said net interest margin expected to progress in fourth quarter and beyond, with business initiatives and ROA profile driving improvement. Erika Najarian clarified that 2026 revenue growth is more than double 2025's.

Q: Ken Usdin asked about fixed-rate benefits in the medium term.

A: Brad Milsaps said fixed-rate benefits will be a tailwind in 2026 but diminish over time, driven by loan and bond repricing and portfolio churn.

Q: Ebrahim Poonawala asked about credit quality, including NDFI and consumer subprime.

A: Brad Bender said NDFI portfolio is highly diversified with strong structural protections. On consumer, majority of subprime is in auto portfolio with most consumer portfolios being high-quality superprime.

Q: Matt O'Connor asked about capital levels, buyback flexibility, and loan growth in commercial real estate.

A: William Rogers Jr. said they have flexibility in buybacks while keeping conservative capital structure. On commercial real estate loan growth, it's an inflection with prepayments load involved.

Q: Chris McGratty asked about non-accrual loans and ROE target.

A: Brad Bender said non-accrual loan increase has been reserved for, and the ROE target of 15% in 2027 is for full year.

Q: Betsy Graseck asked about First Brands' credit impact and underwriting in the environment.

A: Brad Bender said First Brands' exposure is accounted for in the forward guide. William Rogers Jr. said underwriting is vigilant with focus on diversified portfolio.

Q: Steven Alexopoulos asked about NDFI portfolio risk ranking and market scrutiny.

A: Brad Bender said NDFI portfolio is 11% of total lending portfolio, ranks ninth out of 11, well-diversified, and they will continue credit discipline. William Rogers Jr. said it's an investment-grade looking portfolio with long-tenured relationships.

Q: Gerard Cassidy asked about measuring AI investment success and First Brands exposure.

A: William Rogers Jr. said AI's success will be reflected in business efficiency, growth, and client-centricity. Brad Bender said First Brands' exposure is less than $200 million, early to give details on the relationship.