Business Overview and History
Truist Financial Corporation was formed in 2019 through the merger of equals between BB&T Corporation and SunTrust Banks, Inc. Prior to the merger, BB&T was a large regional bank headquartered in Winston-Salem, North Carolina, while SunTrust was a major regional bank headquartered in Atlanta, Georgia. The combined entity has grown to become the sixth-largest commercial bank in the United States, boasting a strong presence across the Southeast, Mid-Atlantic, and Northeast regions.
The path to the merger was not without its challenges. In 2018, both BB&T and SunTrust faced scrutiny from regulators over compliance and risk management issues. BB&T was fined $83 million by the U.S. Department of Justice for deficiencies in its anti-money laundering program, while SunTrust paid $1.2 billion to resolve claims related to its mortgage servicing and origination practices. These issues, along with increasing competition from larger national banks and fintech disruptors, put pressure on the two regional banks to join forces.
The merger process itself was also complex, requiring the navigation of integration challenges, including aligning technology systems, branch networks, and employee cultures. Concerns were raised by community groups about the potential impact on low-income and minority communities served by the merged bank. After a lengthy review process, the merger was approved by regulators in 2019.
Since the merger, Truist has worked to capitalize on the increased scale and capabilities of the combined organization, investing heavily in digital banking and wealth management offerings to better serve its growing customer base. The company has continued to face regulatory scrutiny, paying $579 million in 2023 to the FDIC to help cover losses from bank failures earlier that year.
The company’s diversified business model encompasses two primary operating segments: Consumer and Small Business Banking (CSBB) and Wholesale Banking (WB). The CSBB segment serves retail and small business clients, providing a comprehensive suite of deposit, lending, and wealth management services. The WB segment, on the other hand, caters to corporate, commercial, and institutional clients, offering a wide range of tailored solutions, including investment banking, capital markets, and specialized lending.
Truist’s strategic approach has been marked by a relentless focus on client-centricity, digital transformation, and prudent risk management. The company has invested heavily in enhancing its digital capabilities, with a particular emphasis on mobile banking and self-service tools, enabling it to meet the evolving needs of its diverse client base.
Financial Performance and Resilience
Despite the challenges posed by the COVID-19 pandemic, Truist has demonstrated remarkable financial resilience. As of September 30, 2024, the company reported total assets of $523.43 billion and a strong Common Equity Tier 1 (CET1) capital ratio of 11.60%, well above the regulatory minimum.
For the nine months ended September 30, 2024, Truist reported net interest income of $10.50 billion and non-interest income of $2.28 billion. The company’s net income from continuing operations was $1.33 billion, reflecting its ability to navigate the complexities of the current economic environment.
For the most recent quarter ended September 30, 2024, Truist reported revenue of $5.085 billion and net income of $1.442 billion. The company’s operating cash flow for the quarter was $859.755 million, while free cash flow stood at $954.800 million.
In terms of segment performance, the Consumer and Small Business Banking (CSBB) segment reported net income of $865 million for the third quarter of 2024, up 5.1% compared to the prior year period. However, average loans and leases held for investment in CSBB decreased 5.6% year-over-year, primarily driven by lower balances in the prime auto, residential mortgage, unsecured, small business, and home equity portfolios. Average deposits in CSBB decreased 3.9% year-over-year.
The Wholesale Banking (WB) segment reported net income of $1.1 billion for the third quarter of 2024, an increase of 33.1% compared to the prior year period. Average loans held for investment in WB decreased 5.0% year-over-year, primarily due to declines in the commercial and industrial loan portfolio. Average deposits in WB decreased 3.3% year-over-year.
Liquidity
Truist’s liquidity position remains robust, with an average consolidated Liquidity Coverage Ratio (LCR) of 112% for the three months ended September 30, 2024, exceeding the regulatory minimum of 100%. This strong liquidity profile has enabled the company to support its clients and communities during times of economic uncertainty.
Weathering the Pandemic and Hurricane Helene
The COVID-19 pandemic presented significant challenges for the banking industry, but Truist demonstrated its resilience and adaptability. The company quickly pivoted to support its clients, offering loan forbearance programs, small business relief, and digital banking solutions to ensure uninterrupted access to financial services.
More recently, Truist faced the impact of Hurricane Helene, which devastated parts of North Carolina in the third quarter of 2024. The company responded swiftly, pledging $725 million through a three-year initiative to support small businesses, housing, and infrastructure in the affected communities. Truist’s commitment to its purpose and its ability to mobilize resources during times of crisis have reinforced its reputation as a trusted partner.
Navigating Regulatory Landscape and Enhancing Risk Management
As a large, complex financial institution, Truist operates in a highly regulated environment. The company has invested heavily in strengthening its risk management framework, with a focus on compliance, cybersecurity, and enterprise-wide risk oversight. This proactive approach has enabled Truist to navigate regulatory changes and maintain the trust of its stakeholders.
In 2024, Truist announced the retirement of its long-serving Vice Chair and Chief Risk Officer, Clarke R. Starnes III, and the appointment of Brad Bender as his successor. Bender, a 20-year Truist veteran, brings a wealth of experience and a proven track record in managing risk, which will be crucial as the company continues to navigate the evolving regulatory landscape.
Technological Advancements and Digital Transformation
Truist’s commitment to digital innovation has been a key driver of its success. The company has consistently invested in enhancing its digital capabilities, including the development of its Truist One platform, which offers seamless omnichannel experiences for its clients.
In the third quarter of 2024, Truist reported strong growth in its digital initiatives, with a 6% increase in mobile app users and a 15% rise in digital transactions compared to the prior-year period. These improvements, coupled with a focus on digital account openings and enhanced client experience, have contributed to the company’s ability to acquire new clients and deepen existing relationships.
Outlook and Strategic Priorities
Looking ahead, Truist remains focused on executing its strategic priorities, which include driving revenue growth, maintaining disciplined expense management, and continuing to enhance its risk management capabilities. The company has set a medium-term target of achieving a return on average tangible common equity (ROTCE) in the mid-teens, reflecting its confidence in its ability to generate sustainable profitability.
For the fourth quarter of 2024, Truist expects revenue to decrease 1.5% from the third quarter of 2024 adjusted revenue of $5.1 billion. Net interest income is expected to decrease 1.5%, primarily driven by lower commercial loan balances and some pressure to the net interest margin due to a temporary lag in deposit beta. Non-interest income is projected to decline by 2%, driven primarily by lower investment banking and trading revenue. Adjusted expenses are expected to increase 4%, driven by investments in areas such as talent, digital platforms, marketing, and risk infrastructure.
For the full year 2024, Truist anticipates revenues to be down 0.5% to down 1%, reflecting their updated outlook for the fourth quarter. Adjusted expenses are expected to be slightly lower than 2023 adjusted expenses, an improvement from their previous expectation for expenses to remain approximately flat. Net charge-offs are now expected to be closer to 60 basis points in 2024, down from their previous expectation of about 65 basis points.
Truist is targeting approximately $500 million of share repurchases in the fourth quarter of 2024, similar to the third quarter. The effective tax rate is expected to approximate 17.5% or 20% on a taxable equivalent basis in the fourth quarter of 2024.
Truist’s strong capital position and diversified business model position it well to navigate the evolving market conditions. The company’s commitment to its purpose, coupled with its focus on technological innovation and prudent risk management, underscores its resilience and its ability to create long-term value for its shareholders.
Conclusion
Truist Financial Corporation has demonstrated its ability to thrive in the face of challenges, leveraging its rich history, diversified business model, and unwavering commitment to its clients and communities. As the company continues to navigate the dynamic financial services landscape, its strategic focus on digital transformation, risk management, and disciplined execution will be instrumental in driving its long-term success.
The company’s performance across its two main operating segments, CSBB and WB, shows divergent trends, with CSBB experiencing moderate declines in loans and deposits, while WB saw a larger decrease in loans but a smaller decline in deposits. The realignment of the Wealth and small business banking business lines, effective January 1, 2024, aims to better align Truist’s organizational structure with its strategic priorities and client focus.
As Truist moves forward, its ability to adapt to changing market conditions, leverage its digital capabilities, and maintain strong financial performance will be crucial in cementing its position as a leading financial institution in the United States.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.