Why Truist Financial Stock Is Not A Buy Ahead Of Q2 Earnings

Core Viewpoint - Truist Financial Corporation (TFC) has shown mixed results in recent quarters, with a significant recovery in stock price since the banking crisis in 2023, but still faces challenges related to its merger and operational issues [1][21][22]. Financial Performance - Truist's quarterly earnings surprises have been inconsistent, with 2023 showing negative surprises of -5%, -10%, +2%, and -10%, while Q1 2024 saw a positive surprise of 12% above consensus [2][3]. - The current quarterly estimate for Truist is $0.83 per share with total revenues expected to be $4.8 billion [3]. Key Metrics - Truist's net interest margin (NIM) has been disappointing since the merger of BB&T and SunTrust, attributed to rising deposit costs and a competitive loan market [3][4]. - Average total deposits at Truist fell by 4.75% from Q1 2023 to Q1 2024, while U.S. Bancorp's deposits only decreased by 1.42%, indicating a weaker position for Truist [5][16]. - Charge-offs have remained in line with national trends, and current levels are comparable to those seen in the 1990s and early 2000s [19]. Market Position and Competitiveness - Truist is currently the 8th largest regional bank in the U.S. with consolidated assets of $527 billion, but continues to lag behind larger competitors like U.S. Bancorp in terms of loan and deposit growth [21]. - The bank's decision not to increase its dividend after the 2024 stress test results contrasts with U.S. Bancorp's plans to raise its payout, reflecting a more conservative approach by Truist management [22]. Future Outlook - The market is cautiously optimistic about Truist's potential for deposit growth, especially following U.S. Bancorp's positive results, but concerns remain about the bank's operational efficiency and management's ability to deliver on promises [21][23]. - The Federal Reserve's Bank Term Funding Program (BTFP) has provided some stability, but the potential mark-to-market losses in Truist's held-to-maturity portfolio remain a theoretical risk rather than a practical one [20].