10-QPeriod: Q3 FY2018

TRUIST FINANCIAL CORP Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 26, 2018For Securities:TFCTFC-POTFC-PRTFC-PI

Summary

Truist Financial Corporation (TFC), formerly BB&T Corporation, reported solid financial results for the nine months ended September 30, 2018. Net income available to common shareholders increased significantly to $2.31 billion, or $2.94 per diluted share, compared to $1.61 billion, or $1.97 per diluted share, in the prior year period. This growth was driven by a combination of increased net interest income and robust noninterest income, particularly from insurance operations bolstered by the acquisition of Regions Insurance. The company maintained a strong capital position, with its CET1 capital ratio at 10.2% and a Tier 1 capital ratio of 11.9%, well above regulatory minimums. Asset quality remained stable, with nonperforming loans as a percentage of total loans held for investment at 0.37%, and the allowance for loan and lease losses (ALLL) at 1.05% of loans and leases. The company also demonstrated effective management of its balance sheet and liquidity, with a strong Loan-to-Deposit ratio and a Liquidity Coverage Ratio (LCR) of 137%.

Financial Highlights

36 data points
Beta

Net Income

$839.00M

EPS (Diluted)

$1.01

Total Assets

$222.88B

Cash & Equivalents

$3.15B

Free Cash Flow

$1.55B

Financial Statements
Beta
Interest Expense$382.00M
Net Income$839.00M
EPS (Basic)$1.02
EPS (Diluted)$1.01
Shares Outstanding (Basic)771.56M
Shares Outstanding (Diluted)781.87M

Key Highlights

  • 1Net income available to common shareholders increased by 43.7% to $2.31 billion for the first nine months of 2018 compared to $1.61 billion in the prior year.
  • 2Diluted Earnings Per Share (EPS) grew to $2.94 for the nine months ended September 30, 2018, up from $1.97 in the same period last year.
  • 3Total noninterest income rose by 2.4% to $3.64 billion, significantly supported by a 12.8% increase in insurance income, partly due to the acquisition of Regions Insurance.
  • 4The provision for credit losses for the nine months ended September 30, 2018, was $420 million, a slight increase from $409 million in the prior year.
  • 5Noninterest expense decreased by 7.9% to $5.15 billion for the nine months ended September 30, 2018, largely due to a loss on early extinguishment of debt in the prior year.
  • 6Total assets grew to $222.89 billion as of September 30, 2018, from $221.64 billion at December 31, 2017.
  • 7The company maintained strong capital ratios, with CET1 capital at 10.2% and Tier 1 capital at 11.9% of risk-weighted assets.

Frequently Asked Questions

The significant increase in net income was driven by a combination of factors, including an increase in net interest income, robust growth in noninterest income, particularly insurance income following the acquisition of Regions Insurance, and a reduction in noninterest expense due to lower merger-related charges and the absence of a significant loss on early extinguishment of debt seen in the prior year. The lower federal income tax rate also contributed positively.

The company's loan portfolio grew to $146.7 billion as of September 30, 2018. Asset quality remained stable, with nonperforming loans (NPLs) as a percentage of total loans held for investment at 0.37%. The allowance for loan and lease losses (ALLL) was $1.65 billion, representing 1.05% of loans and leases held for investment. Net charge-offs as a percentage of average loans and leases were 0.35% for both the nine months ended September 30, 2018 and 2017, indicating consistent asset quality management.

The acquisition of Regions Insurance, completed on July 2, 2018, had a positive impact on noninterest income, contributing $33 million to insurance income in the third quarter and $33 million for the nine months ended September 30, 2018. This acquisition significantly boosted insurance income and overall noninterest income for the period.

The company's net interest income on a taxable-equivalent (TE) basis increased year-over-year, driven by higher overall yields on loans and securities, and an increase in interest income outpacing the rise in interest expense, despite higher funding costs. The net interest margin (NIM) remained relatively stable. The company actively manages its interest rate risk through balance sheet management and the use of derivatives to mitigate potential adverse effects from interest rate fluctuations.