Truist Financial Corporation · NYSE:TFC
Truist Financial — BB&T — Q2 2018 Earnings Presentation
31 slides from Truist Financial's earnings presentation, Jul 19, 2018
Slide 1: Second Quarter 2018 Earnings Conference Call
Second Quarter 2018 Earnings Conference Call July 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 second quarter performance highlights
2018 second quarter performance highlights1 ▪ Net income2 was a record $775 million, up 22.8% vs. 2Q17; net income2 excluding merger- related and restructuring charges was a record $792 million ▪ Diluted EPS was a record $0.99, up 28.6% vs. 2Q17; adjusted diluted EPS was also a record Record Earning
Slide 4: Selected item affecting earnings
Selected item affecting earnings Diluted EPS ($ in millions, except per share impact) Pre-Tax After-TaxDiluted EPSImpact Pre -Tax After Tax Impact Merger-related and restructuring charges $ (24) $ (17) $ (0.02) 4
Slide 5: Improved loan growth
Improved loan growth Average Loans Held for Investment Average Loans Held for Investment ($ in billions) ($ in millions) $150.0 2Q18 v. 1Q18 2Q18 Annualized $143.1 $144.1 $142.7 $142.7 $142.9 Average Increase Balance (Decrease) $140.0 Commercial: C&I $ 59,548 6.3% $130.0 CRE 21,546 2.8 2Q17 3Q17 4Q1
Slide 6: Total deposits reflect healthy core growth
Total deposits reflect healthy core growth Average Total Deposits Average Deposits ($ in billions) ($ in millions) $180.0 1.0% 2Q18 v. 1Q18 2Q18 Annualized $160.3 $165.0 $157.4 $158.0 $157.1 $157.7 0.8% Average Increase Balance (Decrease) 0.57% $150.0 0.6% Noninterest-bearing deposits $ 53,963 4.3%
Slide 7: Asset quality remains excellent
Asset quality remains excellent Annualized Net Charge-offs / Average Loans ▪ Credit quality results reflect lower charge-offs 0.60% and nonperformers – Net charge-offs totaled $109 million, down 11 bps 0.41% 0.37% as a percent of average loans vs. 1Q18 and down 7 0.40% 0.35% 0.36% 0.30% bps vs. 2Q17
Slide 8: Allowance coverage ratios remain strong
Allowance coverage ratios remain strong ALLL Coverage Ratios ▪ Coverage ratios remain strong at 3.49x and 4.00x 2.74x for the allowance to net charge-offs and NPLs, respectively 3.49x 3.50x ▪ The ALLL to loans ratio remained at 1.05% – Excluding loans acquired in business 2.93x acquisitions, the ALL
Slide 9: Net interest margin improvement
Net interest margin improvement Net Interest Margin ▪ 2Q18 reported and core NIM increased 1 bp 4.00% and 2 bps, respectively, vs. 1Q18 3.48% 3.47% 3.43% 3.44% 3.45% – Core margin increased due to asset-sensitivity to 3.50% the March rate hike and higher LIBOR rates 3.32% 3.32% 3.34% 3.00% 3.31% 3.2
Slide 10: Fee income seasonally stronger
Fee income seasonally stronger Fee Income Ratio Noninterest Income ($ in millions)1 45.0% 2Q18 v. 2Q18 v. 1Q18 2Q17 44.0% Increase Increase 2Q18 (Decrease) (Decrease) 42.7% 42.7% 43.0% 42.5% Insurance income $ 481 41.4% —% 41.9% 42.0% 41.4% Service charges on deposits 179 34.0 1.7 41.0% Mortgage ban
Slide 11: Strong expense management
Strong expense management Efficiency Ratio Noninterest Expense ($ in millions) 2 70.0% 2Q18 v. 2Q18 v. 64.7% 1Q18 2Q17 Increase Increase 61.0% 62.0% 60.0% 59.7% 2Q18 (Decrease) (Decrease) 60.0% Personnel expense $ 1,074 13.5% 0.6 % 58.6% 58.3% 57.2% 57.3% 57.4% Occupancy and equipment expense 187 (1
Slide 12: Capital, liquidity and payout ratio remain strong
Capital, liquidity and payout ratio remain strong Common Equity Tier 1 ▪ 2Q18 dividend payout ratio was 37.5% 10.5% ▪ 2Q18 total payout ratio was 77.5% 10.3% 10.2% 10.2% 10.2% 10.2% ▪ Completed $310 million in share repurchases in 2Q18 10.0% ▪ Liquidity ratios remain strong – Modified LCR was 131% –
Slide 13: Community Banking Retail and Consumer Finance
Community Banking Retail and Consumer Finance Serves individual and business clients by offering a variety of loan and deposit products and other financial services. Also, originates and sells mortgage loans and retains mortgage servicing rights. Comments Summarized Results Inc (Dec) Inc (Dec) ($ in
Slide 14: Community Banking Retail and Consumer Finance-continued
Community Banking Retail and Consumer Finance-continued Average Loans1,2 Average Deposits2 ($ in billions) 2Q18 1Q18 2Q17 ($ in billions) 2Q18 1Q18 2Q17 Bank Card Noninterest-bearing deposits $5.3 $15.7 Sheffield & CEC $5.6 $5.3 $17.0 $16.3 $11.6 $11.7 $11.9 $16.5 Direct Retail Lending Interest chec
Slide 15: Community Banking Commercial
Community Banking Commercial Serves large, medium and small business clients by offering a variety of loan and deposit products and connecting the client with the combined organization’s broad array of financial services. Summarized Results Inc (Dec) Inc (Dec) Comments ($ in millions) 2Q18 vs. 1Q18
Slide 16: Community Banking Commercial-continued
Community Banking Commercial-continued Average Loans1,2 Average Deposits2 ($ in billions) 2Q18 1Q18 2Q17 ($ in billions) 2Q18 1Q18 2Q17 Other Noninterest-bearing deposits $19.7 CRE $19.7 $18.8 $34.5 $34.5 $33.9 $1.7 $1.7 $1.5 Interest checking Dealer floor plan $8.5 $9.1 $9.3 $30.9 $30.6 $30.9 Money
Slide 17: Financial Services and Commercial Finance
Financial Services and Commercial Finance Provides trust services, wealth management, investment counseling, asset management, estate planning, corporate retirement services, specialty finance, corporate banking, and capital market services to individuals, corporations, governments, and other organi
Slide 18: Financial Services and Commercial Finance-continued
Financial Services and Commercial Finance-continued Average Loans1,2 Average Deposits2 ($ in billions) 2Q18 1Q18 2Q17 ($ in billions) 2Q18 1Q18 2Q17 Other $1.9 $1.9 Noninterest-bearing deposits $2.8 $1.5 $1.5 $1.7 $2.5 $2.6 $6.1 $1.9 $1.3 Retail $1.7 $5.3 $5.2 $1.6 Interest checking Comm Lease $20.9
Slide 19: Insurance Holdings and Premium Finance
Insurance Holdings and Premium Finance 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. Summarized Results Inc (Dec) Inc (D
Slide 20: 3Q18 and full-year 2018 outlook
3Q18 and full-year 2018 outlook Category 3Q18 Average total loans Up 2% - 4% annualized vs. 2Q18 Credit quality NCOs expected to be 35 - 45 bps Net interest margin GAAP and core margins up slightly vs. 2Q18 Noninterest income3 Up 3% - 5% vs. 3Q17 Expenses1,3 Up 1% - 3% vs. 3Q17 Effective tax rate 20
Slide 21: Disrupt or Die
Disrupt or Die Increased branch closures Rationalize / improve (148 in 2017 and 160-170 2018) risk management Optimize systems branch Voice of the Client Consistent network Substantially Small Business focus FTE reductions positive increase digital operating client services Enhance “U” No new major
Slide 22: A-22
A-22
Slide 23: Slide 23
Slide 24: Appendix
Appendix
Slide 25: 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, March 31, 2018 $ (331) $ (152) $ (22) $ (377) Net interest income: Normal accretion/amortization 21 13 4 7 Cash recoveries / early payoffs /
Slide 26: Non-GAAP reconciliations: Efficiency ratio
Non-GAAP reconciliations Efficiency ratio (Dollars in millions) Quarter Ended Year-to-Date June 30 March 31 Dec. 31 Sept. 30 June 30 June 30 June 30 2018 2018 2017 2017 2017 2018 2017 Efficiency ratio numerator - noninterest expense - GAAP $ 1,720 $ 1,686 $ 1,855 $ 1,745 $ 1,742 $ 3,406 $ 3,844 Amor
Slide 27: Non-GAAP reconciliations: Tangible common equity and related measures
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 June 30 March 31 Dec. 31 Sept. 30 June 30 2018 2018 2017 2017 2017 Common shareholders' equity $ 26,727 $ 26,559 $ 26,595 $ 26,
Slide 28: Non-GAAP reconciliations: Core NIM
Non-GAAP reconciliations Core NIM (Dollars in millions) Quarter Ended June 30 March 31 Dec. 31 Sept. 30 June 30 2018 2018 2017 2017 2017 Net interest income - GAAP $ 1,657 $ 1,633 $ 1,644 $ 1,647 $ 1,635 Taxable-equivalent adjustment 22 23 38 41 40 Net interest income - taxable-equivalent 1,679 1,65
Slide 29: Non-GAAP reconciliations: Diluted EPS
Non-GAAP reconciliations Diluted EPS (Dollars in millions, except per share data, shares in thousands) Quarter Ended June 30 March 31 Dec. 31 Sept. 30 June 30 YTD June 30 2018 2018 2017 2017 2017 2018 2017 Net income available to common shareholders - GAAP $ 775 $ 745 $ 614 $ 597 $ 631 $ 1,520 $ 1,0
Slide 30: Non-GAAP reconciliations: Operating leverage
Non-GAAP reconciliations Operating leverage1 (Dollars in millions) Quarter Ended June 30 March 31 June 30 % Growth 2Q18 vs. 2018 2018 2017 1Q18 2Q17 (annualized) Revenue2 - GAAP $ 2,879 $ 2,813 $ 2,855 9.4% 0.8% Taxable equivalent adjustment 22 23 40 Securities (gains) losses, net (1) — — Revenue2 -
Slide 31: Non-GAAP reconciliations: Performance ratios
Non-GAAP reconciliations Performance ratios (Dollars in millions, except per share data, shares in thousands) Quarter Ended June 30, 2018 Common Tangible Assets Equity Common Equity2 Net income - GAAP $ 822 Net income available to common shareholders - GAAP $ 775 $ 775 Merger-related and restructuri