Truist Financial Corporation · NYSE:TFC
Truist Financial — BB&T — Investor Presentation (December 2014)
51 slides from Truist Financial's investor presentation, Dec 3, 2014
Slide 1: BB&T Investor Presentation Fourth Quarter 2014
BB&T Investor Presentation Fourth Quarter 2014 Daryl N. Bible Chief Financial Officer
Slide 2: Investor Relations Contacts
2 2 Investor Relations Contacts
Slide 3: Forward-Looking Information
Forward - Looking Information This presentation contains “forward - looking statements” within the meaning of the Private Securities Litigation Reform Act of 19 95, regarding the financial condition, results of operations, business plans and the future performance of BB&T that are based on the belie
Slide 4: Important Additional Information and Where to Find It
4 Important Additional Information and Where to Find It In connection with the proposed merger, BB&T will file with the SEC a Registration Statement on Form S - 4 that will include a Pro xy Statement of Susquehanna and a Prospectus of BB&T, as well as other relevant documents concerning the proposed
Slide 5: BB&T is…
5 BB&T is… ▪ A values - driven highly profitable growth organization. While we have had a very successful merger history, our primary focus is on organic growth; nonetheless, we are well positioned for strategic opportunities. ▪ Our fundamental strategy is to deliver the best value proposition in ou
Slide 6: BB&T Corporation Among the Top 10 Largest U.S. Financial Institutions
6 6 1 Excludes home office deposits 2 Number of branches per state as of November 12, 2014 3 Deposit Market Share data as of June 30, 2014 4 Includes pending Citi , Bank of Kentucky and Susquehanna branches. Source : FactSet, FDIC, SNL DataSource State # of Branches 2 Deposits 3,4 State Rank 4 North
Slide 7: Premier Model for Community Banking and Diverse Non-Bank Businesses
7 7 23 Banking Regions Local decision - making Centralized support system Foundation for our sales and service culture model … and Diverse Non - Bank Businesses Premier Model for Community Banking…
Slide 8: BB&T Corporation footprint
8 8 BB&T Corporation * Includes pending Citi, Bank of Kentucky, and Susquehanna branches Corporation footprint as of 11/12/2014
Slide 9: Strategic and Compelling Acquisition of Susquehanna
9 9 Strategic and Compelling Acquisition of Susquehanna Note: Financial data at September 30, 2014 Susquehanna Financial Highlights ▪ Strategically compelling New and attractive contiguous markets Top 5 pro forma market share in Susquehanna’s markets Adds to the diversity of BB&T’s footprint
Slide 10: Strategic and Compelling Acquisition of Susquehanna
10 10 Strategic and Compelling Acquisition of Susquehanna Note: Financial data at September 30, 2014 Loan Composition Deposit Composition Commercial Real Estate 28% Closed End 1 - 4 Family 17% Commercial & Industrial 14% HELOCs 12% Leases 10% Construction 6% Consumer 6% Other 5% Multifamily 2% Trans
Slide 11: Susquehanna Transaction: Significant Market Expansion in Mid-Atlantic Region
11 11 Susquehanna Transaction: Significant Market Expansion in Attractive Mid - Atlantic Region ▪ A leading share in diverse Mid - Atlantic markets Market presence in 12 of the 20 most affluent counties in PA by median household income Strong, stable core deposit base ▪ Combined #5 market share
Slide 12: Susquehanna Transaction: Significant Market Expansion
12 12 ▪ 115 b ranches ▪ Foundation for growth with stable commercial and retail banking base providing ample deposits ▪ Home to distribution hubs for global retailers, manufacturers and distributors serving Northeast and Mid - Atlantic markets ▪ PA is now the 3 rd largest producer of natural gas in
Slide 13: BB&T Has a Proven Ability to Generate Above Peer Returns
13 13 BB&T Has a Proven Ability to Generate Above Peer Returns in Differing Markets Source: SNL Financial. Branch and deposit data as of June 30, 2014 Texas ▪ Acquisition of 63 branches ($3.5 billion in deposits) from Citibank ▪ 37 de novo branches since 2012 ▪ Branch presence has grown from 22 to 1
Slide 14: BB&T's Business Model Thrives Across Markets of Differing Characteristics
14 14 BB&T’s Business Model Thrives Across Markets of Widely Differing Characteristics (1): Total estimated population as of January 1, 2014. (2): Number of firms with sales <$50 million as of November 7, 2014. (3): Real Gross Domestic Product, adjusted for inflation. (4): Represents the average ann
Slide 15: Key Transaction Terms
15 15 Key Transaction Terms Purchase Price ▪ $2.5 billion aggregate consideration ▪ $13.50 per Susquehanna common share (1) Price / LTM EPS: 16.3x Price / TBV: 1.69x 7.4% deposit premium Consideration ▪ 70% stock / 30% cash 0.253 BB&T shares and $4.05 cash for each Susquehanna share ▪ Tax fr
Slide 16: Industry Leading Client Satisfaction
16 16 Industry Leading Client Satisfaction 20% 35% 50% 65% Peer 5 Peer 4 Peer 3 Peer 2 Peer 1 BB&T * From Maritz Research 2013 Retail Client Satisfaction and Loyalty Competitive Survey, represent percentage of “top box” scores, indicating a 9 or 10 rating on a 10 - point scale. Peers include Bank of
Slide 17: Diversification Drives Revenue and Productivity
17 17 Diversification Drives Revenue and Productivity **Based on segment revenues, excluding other, treasury and corporate for period ending 9/30/2014 2.2% 1.8% 1.8% Superior Performance… BB&T National Peers Largest 4 Banks Revenue/average assets 10 - year average 2004 - 3Q14 …With Less Volatility 1
Slide 18: Superior Earnings Growth / Volatility Ratio vs Peers
18 18 0% 10% 20% 30% 40% 50% INCREASED EPS VOLATILITY INCREASED EPS GROWTH Higher Volatility Adjusted Returns Lower Volatility Adjusted Returns 260% Superior Earnings Growth / Volatility Ratio vs Peers Source: Company filings and SNL Note: EPS volatility defined as the standard deviation of quarterl
Slide 19: Broad-based Loan Growth
19 19 Broad - based Loan Growth ▪ Average total loan growth for 4Q14 is expected to be down an annualized 1 - 2% vs 3Q14 due to the mortgage strategy and loan sale ▪ Excluding mortgage loans, average loans expected to be up 1 - 2% Expect growth in both CRE categories, Direct retail and Other lendi
Slide 20: BB&T Portfolio Mix Improvement Over Time
20 20 ▪ Target mix will provide BB&T with a risk / return advantage ▪ Constructed with a bias for stable earnings ▪ Designed with a bias against tail loss events ▪ Designed to provide a balanced portfolio addressing all our clients’ needs ▪ Pro - forma merger with Susquehanna and Bank of Kentucky re
Slide 21: Improved Deposit Mix and Cost
21 21 Improved Deposit Mix and Cost $127.9 $125.9 $125.7 $129.6 $130.6 0.31% 0.28% 0.27% 0.26% 0.26% 0.20% 0.30% 0.40% $90.0 $100.0 $110.0 $120.0 $130.0 $140.0 3Q13 4Q13 1Q14 2Q14 3Q14 Total Interest-Bearing Deposit Cost Average Total Deposits ($ in billions) ▪ Strong DDA growth of 15.9% annualized
Slide 22: Deposit Growth Over Time
22 22 Deposit Growth Over Time $ 22.9 $ 28.9 $ 33.9 $36.7 $20,000 $24,000 $28,000 $32,000 $36,000 $40,000 2011 2012 2013 3Q14 Average DDA Growth ($ in billions) 20.4% 22.7% 26.4% 29.2% 16.0% 20.0% 24.0% 28.0% 32.0% 2011 2012 2013 3Q14 Substantially Improved DDA Mix DDA as a % of total deposits ▪ Str
Slide 23: Credit Quality Continues to Improve
23 23 Credit Quality Continues to Improve 1 0.50% 0.50% 0.41% 0.47 2 % 0.43 3 % 0.56% 0.48% 0.00% 0.20% 0.40% 0.60% 0.80% 3Q13 4Q13 1Q14 2Q14 3Q14 Annualized Net Charge - offs / Average Loans Core Charge-offs Other Charge-Offs ▪ Core net charge - offs relatively flat ▪ Loans 30 - 89 days past due de
Slide 24: Allowance Coverage Ratios Remain Strong
24 24 Allowance Coverage Ratios Remain Strong 1 ▪ Coverage ratios remain strong at 2.84x and 1.82x for the allowance to net charge - offs and NPLs, respectively ▪ The ALLL release was $17 million for 3Q14 compared to $39 million in 2Q14 ▪ Management anticipates no further ALLL releases in future qua
Slide 25: Net Interest Margin Stabilizing
25 25 Net Interest Margin Stabilizing 3.68% 3.56% 3.52% 3.43% 3.38% 3.39% 3.34% 3.29% 3.22% 3.20% 3.27% 3.25% 3.22% 3.16% 3.07% 2.75% 3.25% 3.75% 4.25% 3Q13 4Q13 1Q14 2Q14 3Q14 Reported NIM Core NIM Peers ▪ 3Q14 NIM declined 5 bps vs. 2Q14 as a result of: Lower yields on new loans Run off of cov
Slide 26: Fee Income Remains Strong
26 26 Fee Income Remains Strong ▪ Investment banking, brokerage fees and commissions, and mortgage banking exceeded forecast for the month of October ▪ Insurance income expected to be seasonally stronger in the 4 th quarter ▪ 3Q14 other income increased primarily due to better results on investments
Slide 27: Progress in Fee Income Diversification
27 27 1 Based on segment revenues, excluding other, treasury and corporate; segment methodologies have changed over time 2 2014 Revenue Mix for quarter ending 9/30/2014 Community Banking 60% Residential Mortgage Banking 9% Dealer Financial Services 8% Specialized Lending 2% Financial Services 10% In
Slide 28: Adjusted Expenses Flat vs 2Q14
28 28 Adjusted Expenses Flat vs 2Q14 ▪ Achieved positive operating leverage in the quarter ▪ Management expects 4Q14 unusual items (estimated): Mortgage - related expenses $22 million Legal expenses $8 million MSR revaluation income $10 million Gain on NPL sale $20 million (allowance release
Slide 29: Strong Funding and Liquidity
29 29 Strong Funding and Liquidity ▪ BB&T’s 3Q14 LCR was 132% vs. the January 1, 2016 minimum requirement of 90% ▪ BB&T’s 3Q14 liquid asset buffer is 14.3% (high quality liquid assets as a percentage of total assets ) ▪ Parent – Sources of Liquidity Cash on Deposit at Bank = $5.9 billion Annual
Slide 30: Among the Lowest Debt Costs
30 30 Among the Lowest Debt Costs 0.65% 0.75% 0.75% 0.75% 0.82% 0.85% 0.85% 0.88% 0.95% 1.05% 1.55% 0.00% 0.40% 0.80% 1.20% 1.60% 2.00% USB BBT CMA PNC MTB FITB KEY STI HBAN RF ZION 5 Year Bank Debt Spread to U.S. Treasuries 1 1 As of 9/30/2014 based on Senior Holding Company issuance $20.6 $14.6 $1
Slide 31: Strong Capital Targets
31 31 Strong Capital Targets Basel III Well - Capitalized Minimums Basel III Goal Target Leverage 5.0% 5.0% 7.0% Common Equity Tier 1 6.5% 7.0% 8.5% Tier 1 Risk Based 8.0% 8.5% 10.0% Total Risk Based 10.0% 10.5% 12.0% Tangible Common N/A N/A 6.0% 7.5% 8.5% 9.5% 10.5% 11.5% 3Q13 4Q13 1Q14 2Q14 3Q14 T
Slide 32: Capital Distribution Likely to Increase in 2015
32 32 Capital Distribution Likely to Increase in 2015 15 - 25% 30 - 50% 30 - 50% Organic Dividend Strategic Buy Back Special Dividends 54% 37% 9 % Organic Dividend Strategic Targeted Payout Strategy 1H14 Actual Payout
Slide 33: Cost of Tier 1 Comparative – BB&T vs. Peer Group
33 33 Cost of Tier 1 Comparative – BB&T vs. Peer Group 76% 28% 100% 88% 75% 100% 28% 100% 100% 24% 72% 100% 12% 25% 72% 4.88% 5.36% 5.52% 5.56% 5.82% 6.38% 6.38% 6.60% 7.75% 8.00% 0% 2% 4% 6% 8% 10% USB STI BBT FITB PNC ZION RF MTB KEY HBAN Weighted Average Cost of Additional Tier 1 Floating, Fixed/
Slide 34: Strongest Overall CCAR Results
34 34 Strongest Overall CCAR Results 9.6% 9.1% 8.7% 8.3% 8.3% 8.2% 8.0% 7.8% 7.6% 7.2% 6.3% 0.0% 3.0% 6.0% 9.0% 12.0% BBT RF MTB KEY STI PNC FITB USB CMA HBAN ZION Strongest Minimum Tier 1 Capital ▪ In 2014 CCAR results, BB&T had the highest tier 1 capital under stress ▪ BB&T’s CET1 capital declined
Slide 35: CCAR: Lowest Loan Losses Among Traditional Banks
35 35 7.0% 6.9% 6.6% 5.5% 5.3% 5.2% 5.1% 4.9% 4.7% 4.6% 4.5% 0.0% 2.0% 4.0% 6.0% 8.0% USB RF ZION FITB MTB PNC KEY HBAN CMA STI BBT Loan Loss Rate: Total Portfolio ▪ BB&T had the lowest projected loss rate among peers for the total loan portfolio BB&T had the lowest projected loss rate among peers
Slide 36: BB&T Leads in Dividend Yield
36 36 BB&T Leads in Dividend Yield 2.6% 2.6% 2.3% 2.3% 2.2% 2.1% 2.1% 2.0% 2.0% 1.6% 0.6% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% BBT FITB USB MTB PNC STI HBAN RF KEY CMA ZION Dividend Yield of BBT and Peers 1 1 Source: ThomsonOne As of September 30, 2014
Slide 37: Total Shareholder Returns
37 37 Total Shareholder Returns September 30, 2014 14.5% 13.7% 14.7% 0% 4% 8% 12% 16% BB&T Peer Average 1 S&P Financials Index 4 YEAR 10 YEAR 3.2% - 1.4% 0.2% -2% -1% 1% 3% 4% Peer Average 1 BB&T S&P Financials Index 15 YEAR 4.6% 1.2% 2.5% 0% 1% 2% 3% 4% 5% BB&T Peer Average 1 S&P Financials Index 1
Slide 38: Among Highest Rated Regional Banks
38 38 Among Highest Rated Regional Banks ▪ BB&T has a strong risk profile A track record of foregoing excessive growth in overheated markets BB&T has not been active in the leveraged loan market BB&T performs very well in forward - looking stress tests BB&T’s capital position is resilient un
Slide 39: Culture Matters – Values Are Consistent and Important
39 39 Value System Revenues Superior Shareholder Long - term Returns Value System Attract / Train and Retain the Right People Perfect Client Experience Culture Matters – Values Are Consistent and Important
Slide 40: Slide 40
Slide 41: Appendix
Appendix
Slide 42: Capital Measures
Capital Measures 1 As of / Quarter Ended Sept. 30 2014 June 30 2014 March 31 2014 Dec. 31 2013 Sept. 30 2013 Selected Capital Information Risk - based capital Tier 1 $17,402 $16,984 $16,699 $16,074 $ 15,606 Total 21,281 20,270 20,154 19,514 19,255 Risk - weighted assets 2 140,479 140,829 137,947 136
Slide 43: Basel III Common Equity Tier 1 Ratio
Basel III Common Equity Tier 1 Ratio 1 Sept. 30 2014 Tier 1 common equity under Basel I definition $ 14,799 Adjustments 91 Common equity Tier 1 under Basel III definition $ 14,890 Estimated risk - weighted assets under Basel III definition $ 144,965 Basel III common equity Tier 1 ratio 10.3% 1 Basel
Slide 44: Non-GAAP Reconciliations
Non - GAAP Reconciliations 1 As of / Quarter Ended Sept. 30 2014 June 30 2014 March 31 2014 Dec. 31 2013 Sept. 30 2013 Calculations of tangible common equity, Tier 1 common equity, tangible assets and related measures: Total shareholders’ equity $ 24,314 $ 23,965 $ 23,556 $ 22,809 $ 22,094 Less: Pre
Slide 45: Non-GAAP Reconciliations
Non - GAAP Reconciliations As of / Quarter Ended Sept. 30 2014 June 30 2014 March 31 2014 Dec. 31 2013 Sept. 30 2013 Asset Quality Ratios (including covered assets) Loans 30 - 89 days past due and still accruing as a percentage of loans and leases 1 0.77% 0.85% 0.80% 0.95% 0.95% Loans 90 days or mor
Slide 46: Non-GAAP Reconciliations
Non - GAAP Reconciliations Applicable ratios are annualized. 1 Excludes mortgage loans guaranteed by GNMA that BB&T does not have the obligation to repurchase. 2 These asset quality ratios have been adjusted to remove the impact of covered loans and covered foreclosed property. Appropr i ate adjustm
Slide 47: Non-GAAP Reconciliations
Non - GAAP Reconciliations 1 Quarter Ended Efficiency and Fee Income Ratios Sept. 30 2014 June 30 2014 March 31 2014 Dec. 31 2013 Sept. 30 2013 Efficiency ratio – GAAP 67.1 % 67.1 % 61.2 % 61.1 % 62.4 % Effect of securities gains (losses), net (0.1) - - 0.1 - Effect of merger - related and restructu
Slide 48: Return on Average Tangible Common Shareholders' Equity
Quarter Ended Sept. 30 June 30 March 31 Dec. 31 Sept. 30 Return on Average Tangible Common Shareholders' Equity 2014 2014 2014 2013 2013 Net income available to common shareholders $ 520 $ 425 $ 501 $ 537 $ 268 Plus: Amortization of intangibles, net of tax 14 15 14 16 16 Tangible net income availabl
Slide 49: Non-GAAP Reconciliations
Non - GAAP Reconciliations 1 Quarter Ended Reported net interest margin vs. core net interest margin Sept. 30 2014 June 30 2014 March 31 2014 Dec. 31 2013 Sept. 30 2013 Reported net interest margin - GAAP 3.38% 3.43% 3.52% 3.56% 3.68% Adjustments to interest income for covered assets: Effect of cove
Slide 50: Non-GAAP Reconciliations
Non - GAAP Reconciliations 1 50 1 BB&T management uses this measure to evaluate net interest margin, excluding the impact of covered assets and believes this m ea sure provides a greater understanding of ongoing operations and enhances comparability of results with prior periods. Quarter Ended Sept.
Slide 51: Non-GAAP Reconciliations
Non - GAAP Reconciliations 1 Quarter Ended September 30, 2014 Adjusted Effective Tax Rate GAAP Tax Adj. Adjusted Income before income taxes $ 695 $ 695 Provision for income taxes 134 $ 50 184 Effective tax rate 19.3% 26.5% 51 1 BB&T’s management uses these measures in their analysis of the Corporati