Truist(US:TFC)2022-10-18 15:38Financial Data and Key Metrics Changes - The company reported earnings of $1.5 billion or $1.15 per share on a reported basis, with adjusted earnings totaling $1.7 billion or $1.24 per share, up 3% sequentially [17] - Net interest income grew 10% to a post-merger high of $3.8 billion, benefiting from higher short-term rates and strong loan growth [40] - Adjusted non-interest expense increased by $83 million or 2.6% sequentially, reflecting investments in talent and technology [46] Business Line Data and Key Metrics Changes - Capital markets revenue declined as anticipated, with investment banking and trading income decreasing by $33 million due to lower fees from structured real estate and other areas [42] - Insurance income decreased by $100 million primarily due to seasonally lower property and casualty commissions [42] - Loan growth was strong, with average balances growing by $13 billion or 4.3% sequentially, driven by broad-based growth across various sectors [27] Market Data and Key Metrics Changes - Average deposits decreased by $3.7 billion or just under 1% in the third quarter, driven by tightening monetary policy and reduced savings in response to higher inflation [32] - The company maintained a strong deposit franchise, with cumulative deposit betas at 21%, below modeled assumptions [78] - The company expects loan growth to moderate as clients adjust to higher rates and inflation [31] Company Strategy and Development Direction - The company is transitioning from an integration focus to an operating focus, with a commitment to investing in technology and talent for long-term sustainable growth [8] - Recent acquisitions, including BenefitMall and BankDirect Capital Finance, are expected to enhance capabilities and fill strategic gaps [54][56] - The company is focused on improving client experience and operational efficiency while managing costs effectively [68] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges in the market but expressed optimism about the company's ability to navigate economic uncertainties [70] - The company expects to achieve positive operating leverage for the full year, driven by loan growth and cost management [59] - Management highlighted the importance of maintaining credit quality and prudent underwriting practices amid rising interest rates [102] Other Important Information - The company raised its minimum wage to $22 per hour, benefiting approximately 14,000 teammates, which is expected to improve recruitment and retention [11] - Digital activity has increased significantly post-integration, with client satisfaction improving rapidly [23] - The effective tax rate for the third quarter was 18.2%, down from 19.5% in the previous quarter [50] Q&A Session Summary Question: Positive operating leverage outlook for the next 12 months - Management indicated that positive operating leverage will be a core focus, with expectations for continued loan growth and cost efficiencies [74][75] Question: Deposit beta performance and expectations - Management noted that the current deposit beta is at 21%, below earlier expectations of 30%, with a terminal beta still uncertain [78] Question: Funding and deposit mix shift - Management expressed satisfaction with the deposit performance, expecting some pressure on deposits and a shift from DDA to interest-bearing accounts [81] Question: Loan growth quality and credit risk assessment - Management emphasized a commitment to credit quality, with a focus on stress testing and prudent underwriting practices [102][103] Question: Shared National Credit exposure and leverage lending - Management reported a diversified SNC book with minimal losses, indicating strong performance in the leveraged finance sector [107][108]