Business Overview and History Truist Financial Corporation was formed in 2019 through the merger of BB&T Corporation and SunTrust Banks, Inc., creating the sixth-largest commercial bank in the United States with approximately $442 billion in assets as of the end of 2019. The integration process following the merger presented significant challenges as the company worked to combine operations, systems, and client relationships from the two legacy organizations. This integration work was further complicated by the onset of the COVID-19 pandemic in 2020, which created additional operational and financial pressures. Despite these challenges, Truist remained focused on serving its clients and communities, providing over $2 billion in pandemic-related relief and assistance.
In 2021, Truist made progress in integrating the two companies, achieving targeted cost savings and enhancing its technology and digital capabilities. The company also continued to invest in its talent and expand its presence in high-growth markets across the Southeast and Mid-Atlantic regions. However, Truist faced headwinds from elevated credit costs related to the economic impacts of the pandemic.
Looking ahead to 2022 and 2023, Truist shifted its focus to driving organic growth, improving efficiency, and leveraging its enhanced capabilities to deepen client relationships. The company made strategic divestitures, including the sale of its insurance business, to streamline operations and strengthen its balance sheet. While navigating a challenging operating environment, Truist remained committed to its purpose of inspiring and building better lives and communities.
Today, Truist operates through two primary business segments: Consumer and Small Business Banking (CSBB) and Wholesale Banking (WB). The CSBB segment serves individual and small business clients, providing a comprehensive suite of deposit, lending, and wealth management services. The WB segment caters to corporate, commercial, and institutional clients, offering a diverse range of banking, capital markets, and advisory solutions.
Financial Performance and Resilience Truist has demonstrated its financial resilience through the years, navigating challenging economic environments while maintaining a solid balance sheet. In the fiscal year 2023, the company reported net income of $4.04 billion and total revenue of $23.39 billion. The company's efficiency ratio, a measure of cost-effectiveness, improved from 39.8% in 2022 to 38.9% in 2023, reflecting its disciplined approach to cost management.
Truist's capital position remains strong, with a Common Equity Tier 1 (CET1) ratio of 10.1% as of December 31, 2023, well above the regulatory minimum. This robust capital base has enabled the company to weather economic downturns and continue supporting its clients during challenging times.
For the most recent quarter, 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 $954.8 million.
Geographic Footprint and Market Position Truist's geographic footprint spans across the Southeast and Mid-Atlantic regions, with a significant presence in high-growth markets such as Florida, Texas, and North Carolina. As of 2023, the company operated more than 2,100 financial centers and 3,000 ATMs, serving over 10 million consumer and business clients.
Truist holds leading market share positions in many of its core markets, ranking among the top three banks in deposit market share in several states. This strong regional presence, combined with the company's diversified business model, has contributed to its resilience and ability to capitalize on growth opportunities.
Diversified Revenue Streams and Business Segments Truist's revenue streams are well-diversified, with a balanced contribution from both interest-earning assets and fee-based businesses. The company's CSBB segment generates revenue from deposits, lending, and wealth management services, while the WB segment derives income from commercial banking, capital markets, and advisory activities.
In 2023, Truist's net interest income accounted for approximately 61% of its total revenue, with the remaining 39% coming from non-interest income sources such as investment banking, trading, and service charges on deposits. This diversification helps to mitigate the impact of fluctuations in any single revenue stream.
For the third quarter of 2024, the CSBB segment reported net income of $865 million, a 5.1% increase compared to the prior year period. The segment's net interest income increased by $33 million, primarily driven by higher funding credit on deposits, partially offset by lower average deposit and loan balances. Noninterest income increased by $73 million, mainly due to higher service charges on deposits and residential mortgage income.
The WB segment reported net income of $1.08 billion for the third quarter of 2024, a 33.1% increase year-over-year. The segment's net interest income decreased by $63 million, primarily due to lower deposit and loan balances combined with higher cost of deposits, partially offset by favorable loan spreads. Noninterest income increased by $150 million, driven by higher income from structured real estate and bond/equity origination fees.
The Other, Treasury & Corporate (OTC) segment generated a net loss of $511 million in the third quarter of 2024, compared to a net loss of $529 million in the prior year period. The segment's net interest income increased by $97 million, primarily due to lower average long-term debt, the balance sheet repositioning, and funding charges on loans to other segments, partially offset by funding credit on deposits to other segments. Noninterest income decreased by $74 million, mainly due to an increase in tax gross-up activity offset in the WB segment and lower income from investments held for certain post-retirement benefits.
Acquisition and Integration Expertise Truist has a proven track record of successfully navigating mergers and acquisitions, leveraging its expertise to integrate operations and realize synergies. The company's merger with SunTrust in 2019 was a transformative event, positioning Truist as a regional banking powerhouse with enhanced scale and capabilities.
The integration process has been well-executed, with Truist achieving its targeted cost savings and revenue synergies ahead of schedule. This demonstrated ability to effectively integrate acquisitions and extract value has been a key driver of the company's growth and profitability.
Digital Transformation and Innovation Truist has placed a strong emphasis on digital transformation and innovation, recognizing the changing landscape of the banking industry. The company has invested heavily in enhancing its digital capabilities, including mobile banking, online account opening, and integrated wealth management platforms.
In 2023, Truist reported a 15% increase in digital transactions compared to the prior year, reflecting the growing adoption of its digital offerings among clients. The company's focus on digital innovation has enabled it to improve the client experience, drive operational efficiencies, and maintain a competitive edge in the evolving financial services landscape.
Regulatory Landscape and Risk Management As a large regional bank, Truist operates in a highly regulated environment, subject to oversight from various government agencies, including the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC). The company has dedicated significant resources to compliance, risk management, and regulatory reporting to ensure it meets the evolving regulatory requirements.
Truist's robust risk management framework, which includes credit, market, operational, and compliance risk monitoring, has been essential in navigating the changing regulatory landscape. The company's proactive approach to risk management has helped it maintain a strong asset quality profile, with non-performing assets accounting for just 0.28% of total assets as of December 31, 2023.
Financials In the fiscal year 2023, Truist reported net income of $4.04 billion and total revenue of $23.39 billion. The company's efficiency ratio improved from 39.8% in 2022 to 38.9% in 2023. Truist's Common Equity Tier 1 (CET1) ratio stood at 10.1% as of December 31, 2023. Net interest income accounted for approximately 61% of total revenue, with the remaining 39% coming from non-interest income sources.
For the most recent quarter, Truist reported revenue of $5.085 billion, net income of $1.442 billion, operating cash flow of $859.755 million, and free cash flow of $954.8 million. The company's overall net income available to common shareholders for the third quarter of 2024 was $1.34 billion, a 25% increase compared to the same period in 2023. The company's capital ratios remained strong, with a CET1 ratio of 11.6% as of September 30, 2024.
Liquidity Truist maintains a strong liquidity position, with a diverse funding base and access to various sources of liquidity. The company's robust capital base, as evidenced by its CET1 ratio of 10.1%, provides a solid foundation for managing liquidity needs. Additionally, Truist's well-diversified deposit base and access to wholesale funding markets contribute to its overall liquidity strength.
Outlook and Future Prospects Looking ahead, Truist remains well-positioned to capitalize on the growth opportunities in its core markets. The company's diversified business model, strong balance sheet, and digital capabilities position it to adapt to the evolving financial services landscape.
For the fourth quarter of 2024, Truist expects revenue to decrease 1.5% from the third quarter 2024 adjusted revenue of $5.1 billion. Net interest income is expected to decrease 1.5%, and non-interest income is projected to decline by 2%. Adjusted expenses are anticipated to increase by 4% in the fourth quarter.
For the full year 2024, Truist now expects revenue to be down 0.5% to 1% compared to 2023, which is in line with previous guidance. The company has improved its outlook for adjusted expenses, now expecting them to be slightly lower than 2023, compared to the previous expectation of remaining flat. Truist has also revised its projection for net charge-offs, now expecting them to be closer to 60 basis points for the full year 2024, an improvement from the previous expectation of 65 basis points.
Truist plans to continue its share repurchase program, expecting to repurchase approximately $500 million of shares in the fourth quarter of 2024, similar to the third quarter. The company anticipates an effective tax rate of around 17.5% or 20% on a taxable equivalent basis in the fourth quarter of 2024.
Truist's management team has set a medium-term target of achieving a return on average tangible common equity (ROTCE) in the mid-teens, which would represent a significant improvement from the company's current profitability levels. This goal is supported by the company's initiatives to deepen client relationships, expand market share, and maintain disciplined cost control.
Conclusion Truist Financial Corporation has emerged as a resilient and adaptable regional banking powerhouse, leveraging its strong market position, diversified business model, and commitment to digital transformation. With its deep roots in the Southeast and Mid-Atlantic regions, the company continues to navigate the evolving financial landscape, providing comprehensive banking and wealth management solutions to its clients. As Truist charts its course forward, investors will closely monitor the company's ability to execute on its strategic priorities and deliver consistent financial performance in the years to come.