Truist Financial Corporation · NYSE:TFC
Truist Financial — BB&T — Q1 2018 Earnings Presentation
31 slides from Truist Financial's earnings presentation, Apr 19, 2018
Slide 1: First Quarter 2018 Earnings Conference Call
First Quarter 2018 Earnings Conference Call April 19, 2018 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: 2018 first quarter performance highlights
3 ▪ NPAs increased 2 bps vs. 4Q17 and decreased 6 bps vs. 1Q17 ▪ NCOs were 41 bps vs. 36 bps in 4Q17 and 42 bps vs. 1Q17 1 Includes non-GAAP measures; refer to non-GAAP reconciliation in the attached Appendix for adjusted measures 2 Adjusted noninterest expense excludes merger-related and restructur
Slide 4: Selected items affecting earnings
4 Pre -Ta x After Tax Diluted EPS Impac t ($ in millions, except per share impact) Pre-Tax After-Tax Diluted EPS Impact Merger-related and restructuring charges $ (28) $ (22) $ (0.03) Selected items affecting earnings
Slide 5: Review of 1Q18 guidance
5 Category 1Q18 outlook Results Average total loans1,2 n Up 1% - 3% annualized vs. 4Q17 x 0.6% Credit quality n NCOs expected to be 35 – 45 bps ü 41 bps Net interest margin n GAAP margin down 1 – 3 bps vs. 4Q17 ü+ 1 bps n Core margin stable vs. 4Q17 ü+ 4 bps Noninterest income3 n Up 1% - 3% vs. 1Q17
Slide 6: Strong core commercial loan growth
6 1Q18 v. 4Q17 1Q18 Annualized Average Increase Balance (Decrease) Commercial: C&I $ 58,627 1.0% CRE 21,398 7.7 Leasing 1,872 4.6 Subtotal-commercial 81,897 2.8 Retail: Residential mortgage 28,824 3.8 Direct 11,791 (3.7) Indirect 16,914 (11.9) Subtotal-retail 57,529 (2.5) Revolving credit 2,798 5.7
Slide 7: Average deposits
7 ▪ Total deposits averaged $157.1 billion, a decrease of 2.1% vs. 4Q17 – Personal, 49.2% of total – Business, 38.2% of total – Public Funds, 8.4% of total – Other, 4.2% of total ▪ Average noninterest-bearing deposits decreased $892 million vs. 4Q17 primarily due to seasonal decreases in commercial,
Slide 8: Asset quality remains excellent
8 ▪ Credit quality reflects expected seasonal trends – Net charge-offs totaled $145 million, up 5 bps as a percent of average loans vs. 4Q17 and down 1 bp vs. 1Q17 – Loans 90 days or more past due and still accruing as a percent of loans and leases decreased 4 bps vs. both 4Q17 and 1Q17 – Loans 30-8
Slide 9: Allowance coverage ratios remain strong
9 ▪ Coverage ratios remain strong at 2.55x and 2.49x for the allowance to net charge-offs and NPLs, respectively ▪ The ALLL to loans ratio was 1.05%, up slightly vs. 4Q17 – Excluding loans acquired in business acquisitions, the ALLL to loans ratio was 1.12%, up 1 bp vs. 4Q17 ▪ The total provision fo
Slide 10: Net interest margin
10 ▪ 1Q18 reported and core NIM increased 1 bp and 4 bps, respectively, vs. 4Q17: – Core margin increased due to asset-sensitivity to the December rate hike and higher LIBOR rates – Tax reform negatively impacted NIM 2 bps – Deposit betas outperformed expectations – Reported margin also reflects the
Slide 11: Fee income fundamentals remain strong
11 1Q18 1Q18 v. 4Q17 Increase (Decrease) 1Q18 v. 1Q17 Increase (Decrease) Insurance income $ 436 17.5 % (4.8)% Service charges on deposits 165 (39.9) (1.8) Mortgage banking income 99 (19.5) (3.9) Investment banking and brokerage fees and commissions 113 7.3 24.2 Trust and investment advisory revenue
Slide 12: Noninterest expense
12 1Q18 1Q18 v. 4Q17 Increase (Decrease) 1Q18 v. 1Q17 Increase (Decrease) Personnel expense $ 1,039 (12.5)% 0.4 % Occupancy and equipment expense 194 (2.1) 0.5 Software expense 65 — 12.1 Outside IT services 32 (64.0) (34.7) Regulatory charges 40 21.3 2.6 Amortization of intangibles 33 (11.9) (13.2)
Slide 13: Capital, liquidity and payout ratio remain strong
13 ▪ 1Q18 dividend payout ratio was 39.2% ▪ 1Q18 total payout ratio was 82.1% ▪ Completed $320 million in share repurchases, leaving $320 million in share repurchase authority in 2Q18 under CCAR 2017 ▪ Liquidity ratios remain strong – LCR was 144% – Liquid asset buffer was 15.1% ▪ CCAR 2018 – Manage
Slide 14: Community Banking Retail and Consumer Finance
14 Comments 1 Linked quarter growth rates annualized, except for originations and purchases 2 Production/origination amounts exclude portfolio acquisitions, unfunded commitments, and revolving credit 3 Purchases include portfolio acquisitions and mortgages acquired through correspondent channels 4 O
Slide 15: Community Banking Retail and Consumer Finance-continued
15 Community Banking Retail and Consumer Finance-continued ▪ Mortgage has stabilized and end of period balances increased $66 million vs. 4Q17 ▪ Auto portfolio balances are expected to stabilize in mid-2018 ▪ Asset quality remains strong ▪ Deposit interest costs have increased 2 bps due to market pr
Slide 16: Community Banking Commercial
16 Comments 1 Linked quarter growth rates annualized 2 Operating margin is calculated as net income before taxes and provision for credit losses divided by total revenues Community Banking Commercial ▪ Total commercial pipeline improved vs. 4Q17 ▪ Decrease in linked quarter loan production reflects
Slide 17: Community Banking Commercial-continued
17 Community Banking Commercial-continued ▪ Improving loan yields on linked and like quarters due to the rise in short-term rates and the CRE portfolio growth ▪ Dealer Floor Plan portfolio grew 4.3% annualized and 18.1% vs. 4Q17 and 1Q17 with continued focus on expanding dealer relationships through
Slide 18: Financial Services and Commercial Finance
18 Comments 1 Linked quarter growth rates annualized, except for production and sales 2 Operating margin is calculated as net income before taxes and provision for credit losses divided by total revenues Financial Services and Commercial Finance Summarized Results Inc (Dec) vs. 4Q17 Inc (Dec) vs. 1Q
Slide 19: Financial Services and Commercial Finance-continued
19 Financial Services and Commercial Finance-continued ▪ Average loan balances of $26.9 billion were 7.6% higher than 4Q17 and 9.5% higher than 1Q17 ▪ Average deposit balances of $28.1 billion were 1.3% lower than 4Q17 and 11.5% lower than 1Q17 due to an initiative to reduce non-core deposits that w
Slide 20: Insurance Holdings and Premium Finance
20 Provides property and casualty, life, and health insurance to business and individual clients. It also provides workers compensation and professional liability, as well as surety coverage, title insurance and premium finance. Comments 1 U.S. locations; count includes shared locations 2 EBITDA mar
Slide 21: 2Q18 and full-year 2018 outlook
21 2Q18 and full-year 2018 outlook Category 2Q18 Average total loans Up 1% - 3% annualized vs. 1Q18 Credit quality NCOs expected to be 35 - 45 bps Net interest margin GAAP margin stable vs. 1Q18 Core margin up slightly vs. 1Q18 Noninterest income Up 2% - 4% vs. 2Q17 Expenses1 Down 1% - 3% vs. 2Q17 E
Slide 22: Slide 22
Slide 23: Appendix
Appendix
Slide 24: Purchase accounting marks
A-1 Acc. Yield PA Mark Acquired Loans1 Non-PCI Loans2 Liabilities3 Securities4 Balance, December 31, 2017 $ (337) $ (174) $ (27) $ (377) Net interest income: Normal accretion/amortization 22 14 5 14 Cash recoveries / early payoffs / duration adjustments 8 8 — (14) Total net interest income 30 22 5 —
Slide 25: Non-GAAP reconciliations: Efficiency ratio
A-2 Non-GAAP reconciliations Efficiency ratio (Dollars in millions) Quarter Ended March 31 Dec. 31 Sept. 30 June 30 March 31 2018 2017 2017 2017 2017 Efficiency ratio numerator - noninterest expense - GAAP $ 1,686 $ 1,855 $ 1,745 $ 1,742 $ 2,102 Amortization of intangibles (33) (34) (34) (36) (38) M
Slide 26: Non-GAAP reconciliations: Tangible common equity
A-3 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 March 31 Dec. 31 Sept. 30 June 30 March 31 2018 2017 2017 2017 2017 Common shareholders' equity $ 26,559 $ 26,595 $ 26,757
Slide 27: Non-GAAP reconciliations: Core net interest margin
A-4 Quarter Ended March 31 Dec. 31 Sept. 30 June 30 March 31 2018 2017 2017 2017 2017 Net interest income - GAAP $ 1,633 $ 1,644 $ 1,647 $ 1,635 $ 1,609 Taxable-equivalent adjustment 23 38 41 40 40 Net interest income - taxable-equivalent 1,656 1,682 1,688 1,675 1,649 Interest income - PCI loans (30
Slide 28: Non-GAAP reconciliations: Diluted EPS
A-5 Non-GAAP reconciliations Diluted EPS (Dollars in millions, except per share data, shares in thousands) Quarter Ended March 31 Dec. 31 Sept. 30 June 30 March 31 2018 2017 2017 2017 2017 Net income available to common shareholders - GAAP $ 745 $ 614 $ 597 $ 631 $ 378 Merger-related and restructuri
Slide 29: Non-GAAP reconciliations: Operating leverage
A-6 Non-GAAP reconciliations Operating leverage1 (Dollars in millions) Quarter Ended March 31 Dec. 31 March 31 % Growth 1Q18 vs. 2018 2017 2017 4Q17 1Q17 (annualized) Revenue2 - GAAP $ 2,813 $ 2,869 $ 2,780 (7.9)% 1.2% Taxable equivalent adjustment 23 38 40 Securities (gains) losses, net — 1 — Reven
Slide 30: Non-GAAP reconciliations: Performance ratios
A-7 Non-GAAP reconciliations Performance ratios (Dollars in millions, except per share data, shares in thousands) Quarter Ended March 31, 2018 Common Tangible Assets Equity Common Equity2 Net income - GAAP $ 791 Net income available to common shareholders - GAAP $ 745 $ 745 Merger-related and restru
Slide 31: Non-GAAP reconciliations: Adjusted net interest margin
A-8 Non-GAAP reconciliations Adjusted net interest margin (Dollars in millions, except per share data, shares in thousands) (1) The adjusted net interest margin is a non-GAAP measure in that it estimates the impact on taxable-equivalent net interest income as if the tax reform legislation had not be