01—Abstract
Summary
Summary of the 8-K filed October 17, 2024. Cited figures are marked; the original filing is the authoritative source.
Truist Financial reported third quarter 2024 GAAP net income available to common shareholders of $1.3 billiona, or $0.99 per diluted share, compared with $0.62 in the prior quarter.
The sequential comparison is distorted by the second quarter's $6.7 billionb securities loss tied to the balance sheet repositioning and a $4.8 billion after-tax gain on the sale of TIH. On an adjusted basis, which excludes selected items, diluted EPS was $0.97 versus $0.91 in 2Q24 and $0.80 a year earlier, with adjusted revenue up 2.4% sequentially and adjusted noninterest expense up 0.9%. Adjusted PPNR rose 4.4% to $2.3 billion, and the adjusted efficiency ratio improved to 55.2%.
Credit quality was broadly stable. The net charge-off ratio fell three basis points to 0.55%, driven by lower CRE charge-offs, while the ALLL ratio rose three basis points to 1.60%. Nonperforming loans edged up to 0.48% of loans, and the provision for credit losses was flat at $448 millionc, with some reserve build for Hurricane Helene.
Average loans fell 1.0%d and average deposits fell 1.0%, reflecting weaker commercial utilization and lower time and noninterest-bearing deposits. Net interest margin expanded 10 basis points sequentially to 3.12%, supported by the balance sheet repositioning. Capital remained strong, with a CET1 ratio of 11.6% (preliminary), flat sequentially.
Truist returned $1.2 billion to shareholders, including $500 million in buybacks, and reported a dividend payout ratio of 52% and total payout ratio of 90%. Management guided to 4Q24 adjusted revenue down roughly 1.5% and adjusted expenses up roughly 4% sequentially, and FY2024 adjusted revenue down 0.5% to 1.0% with a net charge-off ratio of about 60 basis points. The company also set a medium-term mid-teens ROATCE target.
02—Key points
Key Highlights
- GAAP diluted EPS of $0.99 and adjusted diluted EPS of $0.97, up from $0.91 in 2Q24 and $0.80 in 3Q23
- Adjusted PPNR of $2.3 billion, up 4.4% sequentially and 13.9% year over year; adjusted efficiency ratio improved to 55.2%
- Net interest margin rose 10 bps sequentially to 3.12% (up 20 bps year over year) after the balance sheet repositioning
- Net charge-off ratio improved to 0.55% from 0.58%, driven by lower CRE charge-offs; ALLL ratio rose to 1.60%
- Average loans fell 1.0% and average deposits fell 1.0%, with declines in C&I loans and time and noninterest-bearing deposits
- CET1 ratio held at 11.6%; $1.2 billion returned to shareholders, including $500 million of buybacks, with $4.5 billion remaining under the $5 billion authorization
- 4Q24 guidance calls for adjusted revenue down ~1.5% and adjusted expenses up ~4% sequentially; FY2024 net charge-off ratio expected near 60 bps
03—Questions
Frequently Asked Questions
Why did reported results swing so much from the prior quarter?
In 2Q24 Truist recorded a $6.65 billion pre-tax securities loss from a balance sheet repositioning, which drove a reported net loss from continuing operations of $3.9 billion. That was largely offset by a $6.9 billion pre-tax gain on the sale of TIH, reported in discontinued operations. 3Q24 contained no comparable items, so the GAAP comparison is distorted. Adjusted figures, which exclude these items, provide a better view of underlying trends.
Is the balance sheet repositioning expected to help future earnings?
Management indicated the repositioning contributed to the 10 bps NIM expansion in 3Q24 by shifting into higher-yielding, shorter-duration securities. The securities portfolio yield rose to 2.97% from 2.76% sequentially. Management stated the repositioning reflects balance sheet optimization, though the filing does not quantify the full future earnings benefit.
How healthy is Truist's credit profile?
Asset quality was stable. The NCO ratio declined to 0.55%, nonperforming loans rose modestly to 0.48% of loans driven by commercial and industrial loans, and the allowance covered nonperforming loans 3.3 times. Hurricane Helene-related reserves contributed to the provision. Management described asset quality as better than its expectations, though the CRE office portfolio (1.5% of loans) remains a monitored exposure.
What does the capital return and guidance outlook imply for investors?
Truist returned 90% of 3Q24 earnings to shareholders, with the dividend at $0.52 per share and buybacks at $500 million. The CET1 ratio of 11.6% is preliminary. Management expects adjusted revenue to decline roughly 1.5% in 4Q24 and adjusted expenses to rise about 4%, which points to near-term pressure on operating leverage. Full-year 2024 adjusted revenue is guided to decline 0.5% to 1.0%.
04—Continue