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Truist Earnings: Expense Control Is Working and Near-Term Capital Flexibility Is Crucial to Growth

We are confident that Truist will be able to manage core expenses to remain relatively stable for the rest of the year.

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Truist Financial Corp

Key Morningstar Metrics for Truist Financial

What We Thought of Truist Financial’s Earnings

Truist Financial TFC reported net income to common shareholders of around $1.1 billion, or $0.81 per diluted share, on $4.9 billion of net revenue. An incremental $75 million special assessment charge related to the FDIC increasing its estimated loss from the March 2023 banking events, restructuring charges, and the acceleration of inventive compensation for Truist Insurance Holdings reduced earnings per share by 16%. We do not anticipate a material change to our fair value estimate of $50 per share based on the sale of TIH, and we continue to view shares as undervalued.

Net interest income fell 13% year over year because of shrinking loan balances, higher funding costs, and the continued shift into interest-bearing deposits. Management has lowered its interest rate forecast to just three cuts, and any fewer than that will pressure full-year NII. NII for the year should trough after the second quarter while still coming in lower than in 2023. Investing the proceeds from the TIH sale and repositioning the balance sheet will be positive drivers for Truist’s NII. Still, it will probably not fully offset the tailwind from elevated deposit pricing. The NII portion of the revenue will be a key determinant of whether Truist can grow its top line from 2023, and there is still much uncertainty around rate cuts and the balance sheet repositioning planned to replace lost insurance income.

We saw 6.1% growth in overall fees this quarter from the prior quarter, primarily due to strong investment banking and trading income. Management expects this area to show continued strength throughout the year and thinks they can keep fees stable from the prior year, excluding TIH income. We are confident that Truist will be able to manage core expenses to remain relatively stable for the rest of the year. Although there will be some volatility, we think this full-year guidance is not too far off from where Truist will end up.

Truist Stock vs. Morningstar Fair Value Estimate

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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Michael Wong

Sector Director
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Michael Wong, CFA, CPA, is director of equity research, financial services, North America, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

Michael previously served as chair of the valuation committee. Before assuming his current role in 2017, he was a senior equity analyst, covering investment banks and brokerages. Before joining Morningstar in 2008, he worked in corporate and public accounting.

Wong holds a bachelor’s degree in business administration, with concentrations in accounting, corporate finance, and financial services from San Francisco State University, where he graduated summa cum laude. He also holds the Chartered Financial Analyst® designation and is a Certified Public Accountant. Wong has also passed the Certified Financial Manager (CFM) and Certified Management Accountant (CMA) exams.

Wong won the “Technology Thought Leadership” award at the 2016 Industry Awards for his report, The Financial Services Observer: The U.S. Department of Labor’s Fiduciary Rule for Advisors Could Reshape the Financial Sector. In 2011, he ranked second in the Investment Services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. Wong was awarded the summer 2005 Johnson & Johnson Institute of Management Accountants CFM Gold Medal.

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