Truist Financial Corporation · NYSE:TFC
Truist Financial — BB&T — Q3 2019 Earnings Presentation
31 slides from Truist Financial's earnings presentation, Oct 17, 2019
Slide 1: Third Quarter 2019 Earnings Conference Call
Third Quarter 2019 Earnings Conference Call October 17, 2019 Kelly S. King Chairman and Chief Executive Officer Daryl N. Bible Chief Financial Officer
Slide 2: Forward-Looking Information
Forward-Looking Information This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, regarding the financial condition, results of operations, business plans and the future performance of BB&T. Forward- looking statements are
Slide 3: Additional Statements
Additional Statements Additional Information about the Merger and Where to Find It In connection with the proposed merger with SunTrust, BB&T has filed with the SEC a registration statement on Form S-4 to register the shares of BB&T’s capital stock to be issued in connection with the merger, as amen
Slide 4: 2019 third quarter performance highlights
2019 third quarter performance highlights1 ▪ Net income2 was $735 million, down 6.8% vs. 3Q18; adjusted net income2,3 was $832 million, up 3.7% vs 3Q18 ▪ Diluted EPS was $0.95, down 5.9% vs. 3Q18; adjusted diluted EPS was $1.07, up 3.9% vs. Earnings 3Q18 ▪ ROA, ROCE and ROTCE were 1.41%, 10.04% and
Slide 5: Selected items affecting earnings
Selected items affecting earnings Diluted EPS ($ in millions, except per share impact) Pre-Tax After-TaxDiluted EPSImpact Pre -Tax After Tax Impact Preferred stock redemption $ (46) $ (46) $ (0.06) Incremental operating expenses related to the merger1 $ (52) $ (40) $ (0.05) Merger-related and restru
Slide 6: Strong loan growth excluding mortgage sale
Strong loan growth excluding mortgage sale Average Loans Held for Investment Average Loans Held for Investment ($ in billions) ($ in millions) 3Q19 v. 2Q19 $150.5 $148.7 3Q19 Annualized $150.0 $147.5 $148.1 $146.2 Average Increase Balance (Decrease) $140.0 Commercial: C&I $ 63,768 7.6 % $130.0 CRE 2
Slide 7: Average total deposits up 5.2% as costs decline
Average total deposits up 5.2% as costs decline Average Total Deposits Average Deposits ($ in billions) ($ in millions) $170.0 1.30% 3Q19 v. 2Q19 3Q19 Annualized $162.0 $160.0 $159.9 1.10% $157.3 $157.8 Average Increase Balance (Decrease) $150.0 1.02% 0.99% 0.95% 0.90% Noninterest-bearing deposits $
Slide 8: Asset quality remains excellent
Asset quality remains excellent Annualized Net Charge-offs / Average Loans ▪ 0.60% Net charge-offs totaled $153 million, up 3 bps as a percent of average loans vs. 2Q19 and up 6 0.41% 0.38% 0.40% 0.38% bps vs. 3Q18 0.40% 0.35% ▪ Loans 90 days or more past due and still accruing as a percent of loans
Slide 9: Allowance coverage ratios remain strong
Allowance coverage ratios remain strong ALLL Coverage Ratios ▪ Coverage ratios remain strong at 2.59x and 3.52x 3.52x for the allowance to net charge-offs 3.46x 3.50x and NPLs, respectively ▪ The ALLL to loans ratio remained at 1.05% 3.05x 2.99x 2.97x – Excluding loans acquired in business 3.00x acq
Slide 10: Net interest margin decrease reflects yield curve flattening
Net interest margin decrease reflects yield curve flattening Net Interest Margin ▪ 3Q19 reported and core NIM decreased 5 3.51% bps vs. 2Q19 3.55% 3.47% 3.49% 3.42% – The mortgage sale and reinvestment of securities 3.45% 3.37% increased average earning assets $2.0 billion and 3.44% 3.35% 3.40% redu
Slide 11: Fee income reflects seasonal factors; solid like-quarter growth
Fee income reflects seasonal factors; solid like-quarter growth Fee Income Ratio Noninterest Income ($ in millions)1 47.0% 3Q19 v. 46.0% 2Q19 3Q19 v. 3Q18 Increase Increase 45.0% 44.4% 3Q19 (Decrease) (Decrease) 44.0% 43.4% Insurance income $ 487 (55.4)% 8.7% 43.0% 42.3% 42.0% Service charges on dep
Slide 12: Increase in expenses reflects merger integration planning
Increase in expenses reflects merger integration planning Efficiency Ratio Noninterest Expense ($ in millions) 2 70.0% 3Q19 v. 3Q19 v. 2Q19 3Q18 60.7% 61.0% 61.3% Increase Increase 59.5% 3Q19 (Decrease) (Decrease) 60.0% 57.6% Personnel expense $ 1,161 14.5% 5.2% 57.3% 56.5% 56.6% 57.1% 55.1% Occupan
Slide 13: Capital, liquidity and payout ratio remain strong
Capital, liquidity and payout ratio remain strong Common Equity Tier 1 11.0% ▪ 3Q19 dividend payout and total payout ratios were 46.9% 10.6% ▪ Suspended share repurchases in 1Q19 ▪ Redeemed $1.7 billion in preferred stock 10.5% 10.4% 10.3% during the quarter and issued a similar 10.2% 10.2% amount o
Slide 14: Community Banking Retail and Consumer Finance
Community Banking Retail and Consumer Finance Revenue ($ in millions) Average Loans5 ($ in billions) $1,363 $1,384 $68.0 $1,303 $1,320 $1,274 $65.4 $66.0 $65.9 $65.5 $80 $3.2 $58 $92 $2.9 $3.1 $3.1 $5.8 $3.2 $56 $49 $135 $5.9 $5.9 $5.7 $6.0 $135 $135 $131 $142 $119 $13.7 $115 $118 $105 $113 $13.0 $1
Slide 15: Community Banking Commercial
Community Banking Commercial Revenue ($ in millions) Average Loans1 ($ in billions) $52.6 $52.6 $52.6 $52.3 $52.2 $704 $681 $703 $689 $702 $2.1 $2.4 $2.4 $2.3 $2.4 $48 $50 $49 $51 $53 $62 $62 $60 $63 $63 $19.6 $19.4 $19.1 $19.0 $19.0 $571 $591 $580 $588 $588 $30.9 $30.8 $31.1 $31.0 $30.8 3Q18 4Q18 1
Slide 16: Financial Services and Commercial Finance
Financial Services and Commercial Finance Revenue ($ in millions) Average Loans2 ($ in billions) $29.6 $30.2 $565 $28.1 $29.0 $534 $539 $27.3 $2.1 $2.1 $505 $2.0 $2.0 $2.0 $494 $110 $1.9 $1.7 $1.8 $81 $102 $1.6 $1.6 $1.8 $1.8 $1.8 $87 $85 $1.9 $1.9 $28 $20 $34 $28 $15 $139 $130 $116 $111 $131 $75 $7
Slide 17: Insurance Holdings
Insurance Holdings Adjusted EBITDA1 ($ in millions) Revenue ($ in millions) 28.8% 26.1% 24.5% 21.4% $595 18.3% $22 $171 $538 $518 $21 $519 $127 $140 $111 $19 $25 $87 $475 $19 $252 3Q18 4Q18 1Q19 2Q19 3Q19 n 1 $273 Adjusted EBITDA — Adjusted EBITDA Margin $258 $238 $232 Other Segment Highlights ($ in
Slide 18: Strong Fee Income Performance – Insurance Holdings Revenue
Strong Fee Income Performance – Insurance Holdings Revenue ($ in millions) ▪ Execution of IHOP initiatives 9.3% delivering robust results across all $519 $475 lines of business ▪ 3Q19 new business up 17% vs 3Q18 with ongoing high retention rates 3Q18 3Q19 > ▪ Favorable market conditions with tighten
Slide 19: Strong Fee Income Performance – Insurance Holdings Adjusted EBITDA
Strong Fee Income Performance – Insurance Holdings Adjusted EBITDA1 ($ in millions) ▪ Continued focus on enhancing 27.6% $111 margin profile while reinvesting for $87 future growth ▪ Strong organic revenue growth combined with prudent cost management driving meaningful margin expansion 3Q18 3Q19 > ▪
Slide 20: 4Q19 BB&T outlook
4Q19 BB&T outlook Category 4Q19 Average total loans held for investment Flat vs. 3Q19 Credit quality NCOs expected to be 35 - 45 bps Net interest margin GAAP and Core NIM down 7 - 9 bps vs. 3Q19 (ex liquidity buildup: GAAP and Core NIM down 3 - 5 bps vs. 3Q19) Noninterest income Up 2% to 4% vs. 4Q18
Slide 21: Merger of Equals Update
Merger of Equals Update Highly Synergistic; Financially Compelling; Transformative 3Q19 Accomplishments Next Steps • Executive Management (EM) continues to meet weekly • Finalize divestiture process with Department of Justice to guide organizational design and oversee integration • Receipt of remain
Slide 22: Slide 22
Slide 23: Appendix
Appendix
Slide 24: Supplemental information: Purchase accounting summary
Supplemental information Purchase accounting summary (Dollars in millions) Acc. Yield PA Mark Acquired Loans1 Non-PCI Loans2 Liabilities3 Securities4 Balance, June 30, 2019 $ (266) $ (77) $ (11) $ (345) Net interest income: Normal accretion/amortization 16 5 1 1 Cash recoveries/early payoffs 9 3 — 4
Slide 25: Non-GAAP reconciliations: Efficiency ratio
Non-GAAP reconciliations Efficiency ratio (Dollars in millions) Quarter Ended Year-to-Date Sept. 30 June 30 March 31 Dec. 31 Sept. 30 Sept. 30 Sept. 30 2019 2019 2019 2018 2018 2019 2018 Efficiency ratio numerator - noninterest expense - GAAP $ 1,840 $ 1,751 $ 1,768 $ 1,784 $ 1,742 $ 5,359 $ 5,148 A
Slide 26: Non-GAAP reconciliations: Tangible common equity
Non-GAAP reconciliations Calculations of tangible common equity and related measures (Dollars in millions, except per share data, shares in thousands) As of / Quarter Ended Sept. 30 June 30 March 31 Dec. 31 Sept. 30 2019 2019 2019 2018 2018 Common shareholders' equity $ 29,177 $ 28,650 $ 27,770 $ 27
Slide 27: Non-GAAP reconciliations: Core NIM
Non-GAAP reconciliations Core NIM (Dollars in millions) Quarter Ended Sept. 30 June 30 March 31 Dec. 31 Sept. 30 2019 2019 2019 2018 2018 Net interest income - GAAP $ 1,700 $ 1,690 $ 1,696 $ 1,705 $ 1,687 Taxable-equivalent adjustment 23 24 24 24 27 Net interest income - taxable-equivalent 1,723 1,7
Slide 28: Non-GAAP reconciliations: Diluted EPS
Non-GAAP reconciliations Diluted EPS (Dollars in millions, except per share data, shares in thousands) Quarter Ended Sept. 30 June 30 March 31 Dec. 31 Sept. 30 YTD Sept. 30 2019 2019 2019 2018 2018 2019 2018 Net income available to common shareholders - GAAP $ 735 $ 842 $ 749 $ 754 $ 789 $ 2,326 $ 2
Slide 29: Non-GAAP reconciliations: Operating leverage
Non-GAAP reconciliations Operating leverage1 (Dollars in millions) Quarter Ended Sept. 30 June 30 Sept. 30 % Growth 3Q19 vs. 2019 2019 2018 2Q19 3Q18 (annualized) Revenue2 - GAAP $ 3,003 $ 3,042 $ 2,926 (5.1)% 2.6% Taxable equivalent adjustment 23 24 27 Gain on residential mortgage portfolio sale (4
Slide 30: Non-GAAP reconciliations: Performance ratios
Non-GAAP reconciliations Performance ratios (Dollars in millions, except per share data, shares in thousands) Quarter Ended September 30, 2019 Common Tangible Assets Equity Common Equity2 Net income - GAAP $ 828 Net income available to common shareholders - GAAP $ 735 $ 735 Allowance release related
Slide 31: Non-GAAP reconciliations: Insurance Holdings Adjusted EBITDA
Non-GAAP reconciliations Insurance Holdings Adjusted EBITDA (Dollars in millions) Quarter Ended Sept. 30 June 30 March 31 Dec. 31 Sept. 30 2019 2019 2019 2018 2018 Segment net interest income $ 28 $ 25 $ 23 $ 22 $ 23 Noninterest income 491 570 515 496 452 Total revenue $ 519 $ 595 $ 538 $ 518 $ 475