Truist Financial Corporation · NYSE:TFC
Truist Financial — BB&T — Q3 2017 Earnings Presentation
30 slides from Truist Financial's earnings presentation, Oct 19, 2017
Slide 1: Third Quarter 2017 Earnings Conference Call
Third Quarter 2017 Earnings Conference Call October 19, 2017 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: 2017 third quarter performance highlights
3 ▪ NPAs declined 1.4% vs. 2Q17 ▪ NCOs declined to 35 bps 1 Includes non-GAAP measures; refer to non-GAAP reconciliation in the attached Appendix for adjusted measures ▪ Increased quarterly dividend 10% to $0.33 per share ▪ Completed $920 million in share repurchases ▪ Common equity tier 1 ratio rem
Slide 4: Selected items affecting earnings
4 Pre -Ta x After Tax Diluted EPS Impac t ($ in millions, except per share impact) Pre-Tax After-Tax Diluted EPS Impact Merger-related and restructuring charges $ (47) $ (29) $ (0.04) Selected items affecting earnings
Slide 5: Review of original 3Q17 guidance
5 Category 3Q17 outlook Results Loans n Total up 1% – 3% annualized vs. 2Q17 x (1.1)% n Core up 5% – 7% annualized vs. 2Q17 x 3.2% Credit quality n NCOs expected to be 35 – 45 bps ü 35 bps n NPA levels expected to remain in a similar range as 2Q17 ü 0.31% Net interest margin n GAAP margin down 1 – 3
Slide 6: Average Loans Held for Investment
6 1 Other lending subsidiaries consists primarily of AFCO/CAFO/Prime Rate, BB&T Equipment Finance, Grandbridge Real Estate Capital, Sheffield Financial and Regional Acceptance 3Q17 v. 2Q17 3Q17 Annualized Average Increase Balance (Decrease) C&I $ 51,605 (2.3)% CRE – IPP 15,099 6.3 CRE – C&D 4,181 28
Slide 7: Average loans: core and optimizing portfolios
7 3Q17 v. 2Q17 3Q17 Annualized Average Increase Balance (Decrease) Core - nonseasonal C&I, excluding MWL $ 50,007 CRE – IPP 15,099 CRE – C&D 4,181 Dealer floor plan 1,574 Direct retail lending 11,960 Revolving credit 2,668 Other lending subsidiaries1 9,019 Subtotal 94,508 1.0% Core - seasonal Mortga
Slide 8: Average deposits
8 ▪ Total deposits averaged $157.4 billion, a decrease of $2.8 billion vs. 2Q17 primarily due to management of rate-sensitive deposits – Personal, 50.7% of total – Business, 39.7% of total – Public Funds, 8.1% of total ▪ Average noninterest-bearing deposits increased $916 million vs. 2Q17 due to an
Slide 9: Credit quality
9 ▪ Credit quality results reflect improved charge-offs and nonperformers – Net charge-offs totaled $127 million, down 3.8% vs. 2Q17 – Loans 90 days or more past due and still accruing increased 2.4% vs. 2Q17, primarily due to increased delinquencies in government guaranteed residential mortgage loa
Slide 10: Allowance coverage ratios remain strong
10 ▪ Coverage ratios remain strong at 2.93x and 2.44x for the allowance to net charge-offs and NPLs, respectively ▪ The ALLL to loans ratio was 1.04%, up slightly vs. 2Q17 – Excluding loans acquired in business acquisitions, the ALLL to loans ratio was 1.12%, unchanged vs. 2Q17 ▪ The total provision
Slide 11: Net interest margin
11 ▪ 3Q17 reported and core NIM increased 1 bp vs. 2Q17 due to: – Short-term rate increases partially offset by funding rate increases ▪ Margin continues to outperform due to low deposit beta and strong asset mix – Managed run-off of large balance rate-sensitive deposits led to better deposit beta p
Slide 12: Noninterest Income
12 3Q17 3Q17 v. 2Q17 Increase (Decrease) 3Q17 v. 3Q16 Increase (Decrease) Insurance income $ 397 (69.3)% (3.2)% Service charges on deposits 179 6.8 4.1 Mortgage banking income 114 84.4 (26.0) Investment banking and brokerage fees and commissions 103 (7.6) 2.0 Trust and investment advisory revenues 6
Slide 13: Noninterest Expense and efficiency ratio
13 3Q17 3Q17 v. 2Q17 Increase (Decrease) 3Q17 v. 3Q16 Increase (Decrease) Personnel expense $ 1,024 (6.9)% 1.8% Occupancy and equipment expense 198 — (2.5) Software expense 62 34.8 (1.6) Outside IT services 34 (50.9) (33.3) Amortization of intangibles 34 (22.0) (10.5) Regulatory charges 40 44.1 (2.4
Slide 14: Capital and liquidity remain strong
14 ▪ 3Q17 dividend payout ratio was 43.8% ▪ 3Q17 total payout ratio was 198.0% ▪ Completed $920 million in share repurchases; $960 million in share repurchase authority remains through 2Q18 under CCAR 2017 ▪ Liquidity ratios remain strong – LCR was 128% – Liquid asset buffer was 14.3% Current quarte
Slide 15: Community Banking
15 Comments 1 Linked quarter growth rates annualized 2 Balances reported and related growth metrics are based on average loans and deposits 3 Operating margin is calculated as net income before taxes and provision for credit losses divided by total revenues 4 Commercial production includes C&I, CRE
Slide 16: Residential Mortgage Banking
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 3 Credit quality metrics are based on loans held for investment. NCO ratio is annualized Residential Mortgage Banking ▪ Nonintere
Slide 17: Dealer Financial Services
17 Comments 1 Retail loan production includes portfolio acquisitions 2 Operating margin is calculated as net income before taxes and provision for credit losses divided by total revenues 3 Linked quarter growth rates annualized 4 Risk-adjusted yield is calculated as loan yield less charge-off rate D
Slide 18: Specialized Lending
18 Provides specialty lending including: commercial finance, tax-exempt governmental finance, equipment leasing, commercial mortgage banking, insurance premium finance, dealer-based equipment financing, and direct consumer finance Comments 1 Operating margin is calculated as net income before taxes
Slide 19: Insurance Holdings
19 Comments Insurance Holdings 1 U.S. Locations; count includes shared locations 2 EBITDA margin is a measurement of operating profitability calculated by dividing pre-tax net income adjusted to add back interest, depreciation, intangible amortization and merger-related charges by total revenue 3 Or
Slide 20: Financial Services
20 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 ▪ Strong loan growth1 in Corporate Banking and Wealth: Summarized Results Inc (Dec) vs.
Slide 21: 4Q17 Outlook
21 4Q17 Outlook Category Guidance Loans n Total down slightly vs. 3Q17 n Core up 2% – 4% annualized vs. 3Q17 Credit quality n NCOs expected to be 40 – 50 bps Net interest margin n GAAP margin down 3 – 5 bps vs. 3Q17 n Core margin down 3 – 5 bps vs. 3Q17 Net interest income1 n Stable compared with 3Q
Slide 22: Slide 22
Slide 23: Appendix
Appendix
Slide 24: Purchase accounting marks and accretion
A-1 Acc. Yield PA Mark Acquired Loans1 Non-PCI Loans2 Liabilities3 Securities4 Balance, June 30, 2017 $ (371) $ (235) $ (37) $ (392) Net interest income: Normal accretion 24 20 5 14 Cash recoveries / early payoffs 8 12 — (4) Total net interest income 32 32 5 10 Other 13 — — — Balance, September 30,
Slide 25: Non-GAAP reconciliations: Efficiency ratio
A-2 Non-GAAP reconciliations Efficiency ratio (Dollars in millions) Quarter Ended Sept. 30 June 30 March 31 Dec. 31 Sept. 30 2017 2017 2017 2016 2016 Efficiency ratio numerator - noninterest expense - GAAP $ 1,745 $ 1,742 $ 2,102 $ 1,668 $ 1,711 Amortization of intangibles (34) (36) (38) (38) (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 Sept. 30 June 30 March 31 Dec. 31 Sept. 30 2017 2017 2017 2016 2016 Common shareholders' equity $ 26,757 $ 27,254 $ 26,928
Slide 27: Non-GAAP reconciliations: Core net interest margin
A-4 Quarter Ended Sept. 30 June 30 March 31 Dec. 31 Sept. 30 2017 2017 2017 2016 2016 Net interest income - GAAP $ 1,647 $ 1,635 $ 1,609 $ 1,565 $ 1,610 Taxable-equivalent adjustment 41 40 40 41 40 Net interest income - taxable-equivalent 1,688 1,675 1,649 1,606 1,650 Interest income - PCI loans (32
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 Sept. 30 June 30 March 31 Dec. 31 Sept. 30 2017 2017 2017 2016 2016 Net income available to common shareholders - GAAP $ 597 $ 631 $ 378 $ 592 $ 599 Merger-related and restructuri
Slide 29: Non-GAAP reconciliations: Operating leverage
A-6 Non-GAAP reconciliations Operating leverage1 (Dollars in millions) Quarter Ended Sept. 30 June 30 Annualized 2017 2017 Growth Revenue2 - GAAP $ 2,813 $ 2,855 (5.8)% Taxable equivalent adjustment 41 40 Revenue2 - adjusted $ 2,854 $ 2,895 (5.6)% Noninterest expense - GAAP $ 1,745 $ 1,742 0.7% Amor
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 Common Tangible Assets Equity Common Equity Net income - GAAP $ 648 Net income available to common shareholders - GAAP $ 597 $ 597 Merger-related and restructuring charges,