The paragraph is from the Truist Financial Corporation's Third Quarter 2024 Earnings Conference Call. It begins with an operator greeting participants and introducing Brad Milsaps, who welcomes everyone and introduces key executives, including the CEO, Bill Rogers. The call will cover the third quarter results, current business conditions, and 2024 outlook. The presentation, containing forward-looking statements and non-GAAP measures, is available on Truist's investor relations website. Bill Rogers initially discusses Truist's commitment to its mission of building better lives and communities, especially significant after two recent hurricanes.

In the aftermath of recent storms in the Southeast, Truist's humanitarian aid team and numerous volunteers have actively assisted affected communities. They have distributed supplies, set up mobile services for essential needs, and ensured Truist facilities remained operational. These efforts are part of Truist's long-term commitment to community recovery. Transitioning to their third-quarter financial results, Truist reported solid underlying earnings with $1.3 billion in net income available to common shareholders, and an adjusted EPS of $0.97 per share. Key contributing factors included a 2.4% revenue growth driven by strong investment banking, trading income, and effective cost management.

The paragraph discusses improvements in efficiency and expense management, noting less than a 1% increase in adjusted expenses quarter-over-quarter and a year-over-year decline for the third consecutive quarter. Projected expenses for 2024 are expected to decrease compared to 2023, surpassing initial expectations. Non-performing loans remained stable, and net charge-offs were better than anticipated. A $25 million loan loss provision was recorded due to Hurricane Helene. The company returned $1.2 billion to shareholders through dividends and stock repurchases, with plans for additional repurchases. The CET1 capital ratio stayed stable, supporting further growth and capital returns. The company is focusing on growth in consumer, small business, and wholesale banking, despite a decline in average loans, by enhancing loan production and expanding wallet share, while investing in technology and risk infrastructure. Achieving strategic growth priorities is essential for meeting mid-term return targets.

The paragraph discusses the positive trends in Consumer and Small Business Banking, highlighting increased loan production, especially in non-real estate lending, and stable consumer loan balances. Despite muted overall deposit growth, the bank successfully added new clients and households through digital and traditional channels, opening nearly 200,000 digital accounts in the quarter with a significant increase in new-to-bank clients compared to the previous year. Additionally, net new checking account growth was positive, with improvements in client primacy and retention attributed to over 130 enhancements made to the digital experience. Credit standards and pricing discipline have not been compromised for growth.

The paragraph discusses the company's growth and strategic focus in its wholesale division. It highlights improvements in production, wallet share, and talent acquisition, resulting in a 1% increase in commercial deposits and a 4% rise in wholesale lending. Despite some challenges from lower line utilization and higher paydowns due to capital markets activities, the company reported its strongest capital markets quarter since 2021, with significant gains in investment banking revenues and record performances in various sectors. The company continues to invest in its wholesale platform, making key hires across several banking sectors and focusing on expanding its middle-market commercial lending segment, particularly in industries that align with its corporate investment banking expertise. Additionally, there is a focus on enhancing digital capabilities to improve the client experience.

During the quarter, Truist enhanced its Truist One View platform by adding a secure chat feature with treasury management specialists, reflecting its strategy to improve client experience and digital capabilities. This led to a 6% increase in mobile app users and a 15% rise in digital transactions compared to the third quarter of 2023. The company saw a significant growth in self-service capabilities, with a 36% increase in Zelle transactions year-over-year. There was also a boost in digital account openings and funding, with mobile device applications increasing by 49%, now making up 72% of total digital applications. Improved digital application experiences resulted in a higher conversion rate, increased productivity, and high digital client satisfaction. Financially, Truist reported a third quarter 2024 GAAP net income of $1.3 billion or $0.99 per share, and an adjusted EPS of $0.97 per share. These figures included adjustments related to the sale of Truist Insurance Holdings and an FDIC special assessment.

The paragraph discusses the financial performance of a company, noting a 2.4% increase in total revenue for the quarter, driven by higher net interest and non-interest income, particularly in investment banking and trading. Expenses rose slightly by 0.9% from the previous quarter but were down 2.3% compared to the same quarter the previous year due to reduced personnel costs. The company's CET1 capital ratio was stable at 11.6% despite earnings and a smaller balance sheet, due to dividend payments and share repurchases. Credit metrics showed improvement with a slight decline in net charge-offs and stable non-performing loans. Average loans dropped $3 billion sequentially, mostly due to weaker commercial demand and lower line utilization, although there was some consumer loan growth. Commercial loans specifically decreased by $3.2 billion, impacted by lower line utilization and increased capital markets activity. Stable consumer loan levels were due to growth in certain areas balancing out declines in residential mortgages. The company anticipates ongoing pressure on average balances in the next quarter due to continued loan paydowns and runoff in specific areas. The discussion then moves to deposit trends.

The paragraph discusses financial updates from a company regarding their deposits, interest income, margin, and non-interest income. In the third quarter, average deposits fell by 1% or $3.7 billion, with $1.7 billion of the decline in brokered deposits impacting deposit costs slightly. Non-interest bearing deposits dropped by 1.4%, comprising 28% of total deposits. Despite fluctuations, deposit balances are expected to stay stable in the fourth quarter. Taxable equivalent net interest income grew by 2.2% or $77 million, aided by strategic balance sheet adjustments and reduced high-cost funding. However, this was partly offset by effective interest-rate swaps and lower commercial loan balances. The reported net interest margin increased to 3.12% mainly due to securities repositioning and reduced high-cost funding. Adjusted non-interest income rose by $45 million or 3.1%, driven by higher other income and investment banking and trading income, which saw a $46 million increase. On a like-quarter basis, non-interest income grew by 11% due to investment-related and service charge income improvements. Non-interest expense is discussed further on Slide 13.

In the paragraph, the company reported a decrease in GAAP expenses by $167 million from the previous quarter, mainly due to a prior $150 million charitable donation and reduced regulatory costs. Adjusted non-interest expenses slightly rose due to increased professional fees and marketing expenses, despite lower personnel costs. Asset quality remained stable, with a decrease in net charge-offs, a stable loan loss provision, and a slight increase in the ALLL ratio to 1.60% due to Hurricane Helene. Non-performing loans were steady, and the office portfolio saw a decrease in loan amounts but an increase in reserves due to ongoing stress. Most office loans are performing as per the original terms, with a decrease in non-performing classifications.

The paragraph discusses Truist's management of its office portfolio, particularly within the commercial community banking and wealth segments, where risks are lower due to more granular loan sizes and frequent guarantor support. Despite projected challenges in the office sector, the company is proactive in addressing potential issues. On the capital side, Truist's CET1 ratio remains stable at 11.6%, with capital returned to shareholders through dividends and stock repurchases. The ratio, considering AOCI impacts, improved from 9.6% to 9.9% due to declining long-term interest rates. Truist feels well-positioned to utilize its strong capital base for growth and shareholder returns, despite awaiting Basel III Endgame rule finalizations. Looking ahead to Q4 2024, Truist anticipates a 1.5% revenue decline due to expected decreases in net interest income from lower commercial loan balances and net interest margin pressures. This outlook assumes two federal funds rate cuts in late 2024.

The company anticipates a 2% decline in non-interest income due to reduced investment banking and trading revenue, despite a strong third quarter. Third quarter adjusted expenses are set to rise by 4% to $2.8 billion to support investments in talent, digital platforms, marketing, and risk infrastructure. For the full year 2024, revenue is projected to decrease by 0.5% to 1%, while adjusted expenses are expected to be slightly lower than in 2023. Net charge-offs for 2024 are revised from 65 basis points to about 60 basis points. The company plans approximately $500 million in share buybacks in the fourth quarter, with an effective tax rate of around 17.5% or 20% on a taxable equivalent basis. The CEO, Bill Rogers, expresses confidence in the company's progress and its strong value proposition.

The paragraph emphasizes Truist's plans to leverage its capital advantage to grow its core banking businesses, enhance profitability, and return capital to shareholders through dividends and share repurchases. The strategy focuses on deepening existing client relationships and expanding current product lines, without experimenting with new markets or products. The company aims to improve its profitability by maintaining cost discipline, investing in talent and technology, and achieving positive long-term operating leverage. Despite not providing specific earnings guidance for 2025, Truist expects positive operating leverage next year. Additionally, the company remains committed to strong risk management and asset quality. The leadership expresses optimism about the future, crediting the team's focus and productivity.

In the Q&A session following an update from Truist, Scott Siefers from Piper Sandler asks Mike Maguire about the fourth quarter margin guidance, specifically regarding net interest income (NII) and the pace at which deposit betas might adjust to support or enhance margins. Mike Maguire responds by discussing the net interest margin (NIM) trends, explaining that most of the third quarter's improvement was due to repositioning, which raised the margin from 3.02% to 3.12%. He mentions a temporary beta lag and anticipates two rate cuts in the fourth quarter. Additionally, he notes some improvement in the third quarter with an average funds rate increase and examines the impact of a 15% beta.

In the paragraph, the speaker discusses their financial outlook for the fourth quarter, expecting significant acceleration but acknowledging potential margin compression with a net interest margin decrease to around 3.05-3.06%. They anticipate margin stabilization in early 2025 with improvements following further interest rate cuts. The speaker, Mike Maguire, addresses a question about their capital flexibility, noting a major balance repositioning earlier in the year and emphasizing their focus on business growth while also buying back shares at high levels. There's no immediate priority for further repositioning, although the option remains available.

In this paragraph, Betsy Graseck from Morgan Stanley asks Bill Rogers about "proper execution" regarding the company's goals. Bill Rogers explains that "proper execution" refers to maintaining and enhancing the momentum the team has built post-merger, focusing on expanding client relationships and executing priorities effectively. He highlights the increase in client relationships and other positive indicators as evidence of progress. Betsy also asks about the role of deposit beta lags in driving positive operating leverage into 2025. Bill Rogers indicates that the company's business momentum, including areas like investment banking, influences operating leverage.

The paragraph discusses the current and future momentum in loan growth, particularly noting a 3% increase in consumer loan production this quarter. Despite a decrease in utilization on the wholesale side, there is confidence that it will return. Key factors affecting growth include loan, executional, and fee dependencies, along with deposit betas. Leadership by Mike and his team, along with Kristin and Donta, has been instrumental in managing deposit betas and controlling expenses, with a focus on correlating expense growth with revenue opportunities. The emphasis is on maintaining positive operating leverage without relying on a single strategy. At the end, Betsy Graseck from the operator acknowledges this with thanks, and Erika Najarian from UBS is introduced for the next question.

In this exchange, Erika Najarian and Mike Maguire discuss the financial projections for the fourth quarter and into 2025. Erika asks about the trajectory of asset and liability repricing and its impact on net interest income (NII) and net interest margin (NIM). Mike responds by acknowledging that the beta will accelerate in the fourth quarter, making the balance sheet more liability-sensitive after being asset-sensitive. He anticipates a slight expansion of the NIM as 2025 progresses. Mike also notes that there are two fewer days in the first quarter, which may impact the NII in terms of actual dollars, despite a stable earning asset base and net interest margin.

The paragraph discusses the company's strategies for managing their interest rate position through two programs: a receive-fixed program for managing net interest income (NII) sensitivity, and a pay-fixed program for managing asset values and capital volatility risk. During the quarter, they added $15 billion in forward-starting receive-fixed swaps, bringing their notional total to around $60 billion, and $5 billion in pay-fixed swaps. Despite a slight headwind from $12 billion of receive-fixed swaps becoming active, they anticipate less headwind in 2025. The received fixed rate is around 3.40%. Erika Najarian asks if NII growth is expected next year. Based on market strengths anticipated for 2025, the company could benefit from capital market strength and potential volatility in their wealth management business following an election or change in administration.

The paragraph discusses Truist's current strategic focus on being proactive and growth-oriented, emphasizing their commitment to achieving positive operating leverage. Bill Rogers explains that the company's expenses are now well-aligned with their revenue opportunities, unlike the post-merger period when they were not. Truist is investing in growth, and this is reflected in their strong quarterly results. Regarding Return on Tangible Common Equity (ROTCE), some investors question why Truist aims for mid-teens when peers target higher, but the text does not directly address this concern. Overall, Rogers underscores that the company is effectively managing expenses and investments to support revenue growth.

The paragraph discusses a company's commitment to operating efficiently and achieving positive operating leverage, with a focus on improving their Return on Tangible Common Equity (ROTCE). The company anticipates rapid growth in returns due to the sale of its insurance business and resulting capital creation. This positions them to deploy capital effectively, potentially growing their ROTCE faster than competitors. Once they achieve mid-teens returns, their business model will evolve further. In response to a question about share buybacks, Bill Rogers states that they will maintain an elevated level for some time, as they continue to see growth opportunities despite potential muted loan growth.

The paragraph discusses the strategic focus on capital investment to support business growth and how there is flexibility to adjust investment levels if necessary. Bill Rogers highlights that Truist has overcome previous challenges related to a deal, and is now focused on growing market share across its businesses. Investment banking has consistently increased its market share across different disciplines this year. The emphasis is on acquiring new clients and enhancing relationships with existing ones. The bank has successfully grown its presence in both wholesale and consumer sectors by increasing treasury and product penetration, respectively, strengthening their market position.

In the paragraph, Mike Mayo from Wells Fargo questions Bill Rogers about the financial expectations and accountability of management at Truist for 2025 and beyond. Mayo seeks clarification on the long-term definition of operating leverage and return targets, as well as the timing involved. He expresses concern about Truist lowering its return targets from the low-20s to mid-teens since 2019, coinciding with the granting of special extra leadership bonus awards to some executive officers, despite existing incentives like PSUs, RSUs, LTIP, and annual bonuses. Mayo also raises concerns about potential morale issues, as not all executives received these awards, noting that Rogers himself didn't receive them, but possibly others in the operating committee did not either.

In the paragraph, Bill Rogers responds to concerns about Truist's stock underperformance despite efforts like restructuring the Board, reorganizing the company, and cutting expenses. He asserts that every slide in their presentations revolves around shareholders, emphasizing the company's focus on shareholder value. Rogers explains that following the sale of TIH, they had to reset their return expectations (ROTCE) because generating significant capital from the sale initially lowered returns. However, he remains optimistic, highlighting that Truist is well-positioned to enhance returns by efficiently deploying this capital within their business and returning it to shareholders.

The paragraph discusses a company's strategy to focus on expanding relationships with existing clients in markets where they already have invested capital and resources. The aim is to achieve higher returns and faster paybacks rather than pursuing long-term ventures in new markets. The medium-term strategy is roughly three years, depending on economic conditions and growth rates. The company plans to use capital as a lever to enhance shareholder returns more effectively than others. They express confidence in their team and commit to maintaining positive operating leverage. Improvements are expected to continue annually, with a transition anticipated next year. The paragraph concludes with a reference to management incentives.

In this discussion, bank analyst Mike Mayo asks Bill Rogers about key metrics that drive shareholder value, noting the numerous financial and non-financial metrics tied to compensation. Bill Rogers emphasizes the importance of Return on Tangible Common Equity (ROTCE) and business growth, highlighting total book value per share, dividends, and ROTCE as primary measures. These metrics are closely linked to share price returns. Matt O'Connor from Deutsche Bank inquires about increased investments in risk infrastructure for the fourth quarter. Bill Rogers explains this as a continuation of efforts to strengthen areas like cybersecurity and data management to create a consistent and enduring infrastructure.

The paragraph discusses a company's ongoing investment in infrastructure and risk management as part of their strategic guidance for positive operating leverage. Despite unique challenges in the fourth quarter, the company is committed to continuous improvement in areas such as data management, AI, and cybersecurity, indicating that these are not one-time efforts but part of a larger strategy. The dialogue also touches on how the company is working to increase market and wallet share in its businesses. However, there's a question of how outsiders can measure the success of these efforts in increasing wallet share.

In the paragraph, Bill Rogers discusses the strategies for increasing wallet share and return expectations in their business by focusing on return on assets (ROA) and improving client primacy. They've seen minor increases in metrics like checking primacy and treasury management. On the topic of digital channels versus physical branches, Rogers emphasizes the importance of both, using a concept called T3—touch and technology equals trust. This approach blends digital tools like virtual assistants with the option for human interactions to enhance client relationships.

The paragraph discusses the importance of balancing digital and physical banking services, particularly during emergencies like storms when digital access may be compromised. It emphasizes the need to maintain both online and offline channels to effectively serve clients and build lasting relationships. The conversation concludes with a note about the end of an earnings call, inviting further questions from the Investor Relations team at Truist.

This summary was generated with AI and may contain some inaccuracies.