Truist Financial Corporation · NYSE:TFC
Truist Financial — BB&T — Q1 2017 Earnings Presentation
30 slides from Truist Financial's earnings presentation, Apr 20, 2017
Slide 1: First Quarter 2017 Earnings Conference Call
Kelly S. King Chairman and Chief Executive Officer First Quarter 2017 Earnings Conference Call April 20, 2017 Daryl N. Bible Chief Financial Officer
Slide 2: Forward-looking statements
• general economic or business conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit, insurance or other services; • disruptions to the national or global financial mark
Slide 3: 2017 first quarter performance highlights
3 2017 first quarter performance highlights1 Net income available to common shareholders totaled $378 million, down 28.3% vs. 1Q16 Adjusted net income was $611 million, up 15.1% vs. 1Q16 Diluted EPS totaled $0.46 Adjusted EPS totaled $0.74, up 10.4% vs. 1Q16 ROA, ROCE and ROTCE were 0.79%,
Slide 4: Selected items affecting earnings
4 Selected items affecting earnings ($ in millions, except per share impact) Pre - Tax After Tax Diluted EPS Impact Loss on early extinguishment of debt $ (392) $ (246) $ ( 0.30) Merger - related and restructuring charges ( 36) ( 22) (0.02) Excess tax benefit on equity-based awards N/A 35 0.04
Slide 5: First quarter 2017 guidance update
5 First quarter 2017 guidance update Category 1Q17 outlook Results Actuals ($ in millions) Loans Average loans are expected to be flat to up slightly vs. 4Q16 due largely to seasonality (-) (0.9)% Credit quality 1Q17 net charge-offs to be in the range of 35 to 45 bps NPA levels expected to rem
Slide 6: Average loans and leases held for investment
6 Average loans and leases held for investment decreased 0.9% annualized in 1Q17 vs. 4Q16 Experienced loan growth vs. 4Q16 in several portfolios: Equipment Finance, up 21.8% annualized Grandbridge, up 16.4% annualized Commercial Equipment Capital, up 10.0% annualized Sales finance loans
Slide 7: Impact of seasonal / optimizing portfolios and loan growth strategies
7 1Q17 impact of seasonal / optimizing portfolios Loan growth strategies Growing more profitable loans with better risk profile Reducing exposure to prime auto loans given low profitability and uncertain market outlook Continuing strategy to reduce exposure to residential mortgage due to low
Slide 8: Deposit growth remains solid
8 Deposit growth remains solid $149.9 $160.3 $159.5 $160.1 $161.4 0.25% 0.23% 0.23% 0.22% 0.26% 0.20% 0.25% 0.30% 0.35% 0.40% $120.0 $140.0 $160.0 $180.0 1Q16 2Q16 3Q16 4Q16 1Q17 Total Interest-Bearing Deposit Cost Total deposits averaged $161.4 billion, an increase of $1.3 billion vs. 4Q16 Pers
Slide 9: Credit quality improves across the board
9 Credit quality results reflect expected seasonal decrease in consumer-related portfolios Net charge-offs totaled $148 million, down slightly vs. 4Q16 Loans 90 days or more past due and still accruing decreased 14.8% vs. 4Q16 Loans 30-89 days past due decreased 25.3% vs. 4Q16 NPAs decreas
Slide 10: Allowance coverage ratios remain strong
10 Allowance coverage ratios remain strong 2.40x 3.88x 2.91x 2.47x 2.49x 1.89x 1.90x 2.00x 2.03x 2.05x 1.50 2.50 3.50 4.50 1Q16 2Q16 3Q16 4Q16 1Q17 ALLL to Annualized NCOs ALLL to NPLs HFI Coverage ratios remain strong at 2.49x and 2.05x for the allowance to net charge-offs and NPLs, respectively
Slide 11: Net interest margin improves
11 Net interest margin improves 14 bps 3.43% 3.41% 3.39% 3.32% 3.46% 3.19% 3.17% 3.18% 3.18% 3.28% 2.50% 3.00% 3.50% 4.00% 1Q16 2Q16 3Q16 4Q16 1Q17 Reported NIM Core NIM 1Q17 NIM increased 14 bps vs. 4Q16 due to: Increased earning asset yields (7 bps) 4Q16 securities duration adjustment (5 bps
Slide 12: Noninterest income
12 Insurance income increased $39 million vs. 4Q16, primarily due to seasonality in employee benefits commissions Investment banking and brokerage fees and commissions decreased $17 million as a result of several large deals closed in the prior quarter 2Q17 management expectations Total noni
Slide 13: Noninterest expense
13 1Q17 1Q17 v. 4Q162 Increase (Decrease) 1Q17 v. 1Q16 Increase (Decrease) Personnel expense $ 1,011 2.8 % 10.5 % Occupancy and equipment expense 193 (10.2) 1.0 Software expense 58 7.1 13.7 Outside IT services 49 (8.1) 19.5 Amortization of intangibles 38 - 18.8 Regulatory charges 39 (29.0) 30.0 Prof
Slide 14: Capital and liquidity remain strong
14 Capital and liquidity remain strong 10.4% 10.0% 10.1% 10.2% 10.3% 9.0% 9.5% 10.0% 10.5% 11.0% 1Q16 2Q16 3Q16 4Q16 1Q17 The common equity tier 1 ratio was 10.1% fully phased-in LCR was 124% Liquid asset buffer was 12.7% 1Q17 dividend payout ratio was 64.0% 1Q17 total payout ratio was 106
Slide 15: Community Banking
15 ($ in millions) Inc/(Dec) vs 4Q16 Inc/(Dec) vs 1Q16 1Q17 Comments5 Net Interest Income Noninterest Income1 Provision for Credit Losses Noninterest Expense2 Income Tax Expense Segment Net Income Highlighted Metrics5,6 $ 991 351 25 797 186 $ 334 $ 7 (9) (1) 2 (4) $ 1 ($ in billions) 1 Noninterest I
Slide 16: Residential Mortgage Banking
16 Retains and services mortgage loans originated by the Residential Mortgage Lending Division and through its referral relationship with the Community Bank and referral partners as well as those purchased from various correspondent originators. Also includes Mortgage Warehouse Lending which provide
Slide 17: Dealer Financial Services
17 Primarily originates indirect loans to consumers on a prime and nonprime basis for the purchase of automobiles and other vehicles through approved dealers both in BB&T’s market and nationally (through Regional Acceptance Corporation) Comments ($ in millions) Inc/(Dec) vs 1Q16 1Q17 Inc/(Dec) vs 4Q
Slide 18: Specialized Lending
18 Provides specialty lending including: commercial finance, mortgage warehouse lending, tax-exempt governmental finance, equipment leasing, commercial mortgage banking, insurance premium finance, dealer-based equipment financing, and direct consumer finance Comments4 ($ in millions) Inc/(Dec) vs 1Q
Slide 19: Insurance Holdings
19 Comments ($ in millions) Inc/(Dec) 1Q16 1Q17 Inc/(Dec) vs 4Q16 Net Interest Income Noninterest Income1 Provision for Credit Losses Noninterest Expense2 Income Tax Expense Segment Net Income Highlighted Metrics Noninterest Income Total Agencies3 EBITDA Margin5 1Q17 Like Provides property and casua
Slide 20: Financial Services
20 Provides trust services, wealth management, investment counseling, asset management, estate planning, employee benefits, corporate banking, and capital market services to individuals, corporations, governments, and other organizations Comments4 ($ in millions) Inc/(Dec) vs 1Q165 1Q17 Inc/(Dec) vs
Slide 21: 2Q17 Outlook
21 2Q17 Outlook 1 Excludes merger-related and restructuring charges Category Guidance Loans Up 1% – 3% annualized vs. 1Q17 Credit quality NCOs expected to be 35 – 45 bps vs. 1Q17 NPAs expected to be in a similar range vs. 1Q17 Net interest margin GAAP margin flat vs. 1Q17 Core margin up 2
Slide 22: 22
22
Slide 23: 23
23
Slide 24: Purchase accounting footnotes
1 Accretable yield represents the difference between total expected cash flows and the carrying value of the related loan pools. It is recognized using level-yield method over the remaining expected life of the pools (subject to future cash-flow reassessments). 2 Purchase accounting loan marks on Su
Slide 25: Core net interest income and margin reconciliation
March 31 Dec. 31 Sept. 30 June 30 March 31 2017 2016 2016 2016 2016 Net interest income - GAAP $ 1,609 $ 1,565 $ 1,610 $ 1,617 $ 1,529 Taxable-equivalent adjustment 40 41 40 40 39 Net interest income - taxable-equivalent $ 1,649 $ 1,606 $ 1,650 $ 1,657 $ 1,568 Interest income - PCI loans (42) (49) (
Slide 26: Non-GAAP reconciliations: tangible common equity
Non-GAAP reconciliations 26 (Dollars in millions, except per share data) 1 Tangible common equity and related measures are non-GAAP measures. BB&T's management uses these measures to assess the quality of capital and believes that investors may find them useful in their analysis of the Corporation.
Slide 27: Non-GAAP reconciliations: return on tangible common equity
27 1 BB&T’s management uses this measure to evaluate the return on average common shareholders’ equity without the impact of intangible assets and their related amortization and believes that investors may find the information useful in their analysis of the company. Non-GAAP reconciliations1 (Dolla
Slide 28: Non-GAAP reconciliations: return on average assets and equity
Non-GAAP reconciliations1 28 (Dollars in millions) Quarter Ended March 31, 2017 Return on average assets Net income $ 426 Loss on debt extinguishment, net of tax 246 Excess tax benefit of equity-based compensation (35) Merger-related and restructuring charges, net 22 Adjusted net income $ 659 Report
Slide 29: Non-GAAP reconciliations: operating leverage
29 Non-GAAP reconciliations Operating leverage1 1Q17 4Q16 Annualized Growth Reported revenue $ 2,780 $ 2,727 7.9 % Taxable equivalent adjustment 40 41 Adjusted revenue $ 2,820 $ 2,768 7.6 % Reported noninterest expense $ 2,102 $ 1,668 105.5 % Merger related and restructuring charges, net (36) (13) L
Slide 30: Non-GAAP reconciliations: efficiency ratio
Non-GAAP reconciliations1 30 1 BB&T’s management uses these measures in their analysis of the Corporation’s performance and believes these measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods, as well as demonstrating the effects of s