10-QPeriod: Q3 FY2020

TRUIST FINANCIAL CORP Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 2, 2020For Securities:TFCTFC-POTFC-PRTFC-PI

Summary

Truist Financial Corporation (TFC) reported its third-quarter 2020 financial results, demonstrating resilience amidst the ongoing COVID-19 pandemic and the significant integration of the merger with SunTrust. Net income available to common shareholders saw a substantial increase of 45.3% year-over-year, reaching $1.1 billion, though diluted EPS decreased to $0.79 from $0.95 in the prior year's quarter. This divergence was influenced by higher merger-related and restructuring charges, incremental operating expenses, and a significant increase in the provision for credit losses. The company's total assets grew to $499.2 billion, driven by increases in interest-bearing deposits with banks, securities, and loans. Deposits also saw robust growth, increasing by $36.0 billion year-over-year, supported by government stimulus programs and a flight to quality. Despite a decrease in Net Interest Margin (NIM) to 3.10% due to lower interest rates, the company's diversified noninterest income streams, particularly insurance and wealth management, showed strong growth, bolstered by the merger's scale. Truist maintained strong capital and liquidity positions, with a CET1 ratio of 10.0% and an average Liquidity Coverage Ratio (LCR) of 117%. The company's proactive management of credit risk, evidenced by a higher ALLL to nonperforming loans coverage ratio, and its commitment to client and community support during the pandemic, highlight its strategic focus.

Financial Highlights

39 data points
Beta

Net Income

$1.14B

EPS (Diluted)

$0.79

Total Assets

$499.18B

Cash & Equivalents

$37.11B

Free Cash Flow

$295.00M

Financial Statements
Beta
Interest Expense$261.00M
Net Income$1.14B
EPS (Basic)$0.79
EPS (Diluted)$0.79
Shares Outstanding (Basic)1.35B
Shares Outstanding (Diluted)1.36B

Key Highlights

  • 1Net income available to common shareholders increased by 45.3% year-over-year to $1.1 billion, while diluted EPS was $0.79.
  • 2Total assets grew to $499.2 billion, with total deposits increasing by $36.0 billion year-over-year.
  • 3Net Interest Margin (NIM) decreased by 27 basis points to 3.10% due to the low-interest-rate environment.
  • 4Provision for credit losses increased significantly to $421 million, reflecting increased economic stress due to COVID-19, merger impacts, and the adoption of CECL.
  • 5Noninterest income increased by 69.6% year-over-year to $2.2 billion, driven by merger synergies and strong performance in insurance and mortgage banking.
  • 6Noninterest expense increased by 104.1% year-over-year to $3.7 billion, largely due to merger-related costs and increased operating expenses.
  • 7Capital and liquidity remain strong, with a CET1 ratio of 10.0% and an average LCR of 117%.

Frequently Asked Questions

The merger significantly impacted Truist's financial results, leading to substantial increases in total assets, deposits, net interest income, and noninterest income. However, it also resulted in higher merger-related and restructuring charges, incremental operating expenses, and a higher provision for credit losses, impacting profitability metrics like diluted EPS and ROE compared to the prior year.

Truist's NIM decreased to 3.10% in Q3 2020 compared to the prior year. Management attributes this to the low-interest-rate environment, which compressed yields on loans and securities and the cost of deposits. The company is managing this through a focus on deposit costs and loan portfolio management.

The provision for credit losses increased significantly due to the ongoing COVID-19 pandemic, which has led to economic stress, uncertainty about borrower performance, and impacts on specific industries. The adoption of the Current Expected Credit Losses (CECL) methodology also contributed to the increase in the allowance for credit losses. Truist is actively monitoring clients, managing its loan portfolio, and adjusting its reserves accordingly.

Truist maintains strong capital and liquidity. As of September 30, 2020, its Common Equity Tier 1 (CET1) ratio was 10.0%, and its average Liquidity Coverage Ratio (LCR) was 117%, both well above regulatory minimums. The company also issued preferred stock and long-term debt during the period to further strengthen its capital position.