01—Abstract
Summary
Summary of the 8-K filed April 15, 2024. Cited figures are marked; the original filing is the authoritative source.
Truist Financial Corporation (TFC) furnished this Form 8-K under Item 7.01 (Regulation FD) to provide unaudited supplemental quarterly financial information for 2023, recast to present its insurance brokerage subsidiary, Truist Insurance Holdings, LLC (TIH), as discontinued operations.
The recast follows a February 20, 2024 agreement to sell Truist's remaining equity interests in TIH to an investor group led by Stone Point Capital, Clayton, Dubilier & Rice, and Mubadala Investment Company. The transaction is expected to close in the second quarter of 2024, subject to regulatory approvals and customary conditions. The filing states that the information does not restate previously reported results.
Truist expects to file a later 8-K recasting its full-year 2023 consolidated financial statements after its Q1 2024 10-Q. The most important item for investors in the exhibit is the fourth quarter of 2023. Truist recorded a $6.08 billiona goodwill impairment, which drove a pre-tax loss from continuing operations of $5.25 billion and a net loss to common shareholders of $5.17 billion for the quarter.
Excluding the impairment, the quarter's results were shaped by a sharp rise in regulatory costs to $599 millionb (from roughly $75 million in each prior quarter) and higher restructuring charges of $155 million. Net interest income declined steadily through 2023, from $3.87 billion in Q1 to $3.52 billion in Q4, as funding costs rose faster than asset yields. Net income to common shareholders, excluding the Q4 charge, fell from $1.41 billion in Q1 to $1.07 billion in Q3.
On the balance sheet, total assets declined from $574.4 billion at March 31, 2023 to $535.3 billionc at December 31, 2023. Deposits fell from $405.0 billion to $395.9 billion, with noninterest-bearing deposits down about 13% and time deposits rising from $32.3 billion to $43.6 billion, a sign of deposit mix shift and higher rate sensitivity. Long-term debt dropped from $69.9 billion to $38.9 billion.
Total shareholders' equity fell to $59.3 billiond, reflecting the impairment and a larger accumulated other comprehensive loss, which was $(12.5) billion at year-end. Note that these figures are unaudited supplemental data, and the TIH sale remains pending.
02—Key points
Key Highlights
- Truist agreed on February 20, 2024 to sell its remaining equity stake in insurance brokerage subsidiary TIH to a group led by Stone Point Capital, Clayton, Dubilier & Rice, and Mubadala Investment Company, with closing expected in Q2 2024.
- TIH is being presented as discontinued operations. Unaudited supplemental 2023 quarterly data is provided, but previously reported financials are not restated, and a recast 8-K for full-year 2023 is expected after the Q1 2024 10-Q.
- Q4 2023 net loss to common shareholders was $(5.17) billion, driven by a $6.08 billion goodwill impairment and a pre-tax loss from continuing operations of $(5.25) billion.
- Q4 2023 regulatory costs rose to $599 million from about $75 million per quarter earlier in 2023, and restructuring charges reached $155 million.
- Net interest income declined each quarter in 2023, from $3.87 billion in Q1 to $3.52 billion in Q4, as interest expense rose sharply, with deposit interest expense up from $1.13 billion to $1.92 billion per quarter.
- Total assets fell to $535.3 billion at December 31, 2023 from $574.4 billion at March 31, 2023, while total shareholders' equity declined to $59.3 billion from $62.4 billion.
- Noninterest-bearing deposits fell from $128.7 billion to $111.6 billion over 2023, while time deposits rose from $32.3 billion to $43.6 billion, indicating deposit mix pressure.
03—Questions
Frequently Asked Questions
What is the TIH transaction and when is it expected to close?
Truist agreed on February 20, 2024 to sell its remaining equity interests in Truist Insurance Holdings, LLC to an investor group led by Stone Point Capital, Clayton, Dubilier & Rice, and Mubadala Investment Company. Closing is expected in the second quarter of 2024, subject to regulatory reviews, approvals, and other customary conditions.
Does this 8-K restate Truist's previously reported financial results?
No. The filing states that the unaudited supplemental historical information does not revise or restate previously reported consolidated financial statements for any period. Truist expects to file a later 8-K after its Q1 2024 10-Q that recasts the full-year 2023 consolidated financial statements to show TIH as discontinued operations.
What caused the large fourth-quarter 2023 loss?
The primary driver was a $6.08 billion goodwill impairment in Q4 2023, which pushed the pre-tax loss from continuing operations to $(5.25) billion. Regulatory costs of $599 million and restructuring charges of $155 million also weighed on results. The exhibit does not explain the cause of the impairment, so investors should review the forthcoming 10-Q and recast filings for management's rationale.
How did Truist's balance sheet and funding change during 2023?
Total assets fell from $574.4 billion to $535.3 billion between March and December 2023. Total deposits declined from $405.0 billion to $395.9 billion, with a shift from noninterest-bearing deposits ($128.7 billion to $111.6 billion) into time deposits ($32.3 billion to $43.6 billion). Long-term debt was reduced from $69.9 billion to $38.9 billion, lowering the debt balance over the year.
Is Truist's core earnings power still intact excluding the impairment?
Based on the exhibit, pre-impairment earnings declined through 2023. Net income to common shareholders fell from $1.41 billion in Q1 to $1.23 billion in Q2 and $1.07 billion in Q3. Net interest income also fell each quarter as deposit costs rose. Q4 results excluding the impairment are not separately reported in the exhibit, so a full assessment of core earnings requires additional disclosures.
04—Continue