Truist Financial Corporation · NYSE:TFC
Truist Financial — BB&T — Q2 2019 Earnings Presentation
31 slides from Truist Financial's earnings presentation, Jul 18, 2019
Slide 1: Second Quarter 2019 Earnings Conference Call
Second Quarter 2019 Earnings Conference Call July 18, 2019 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: Additional Statements
Additional Statements Additional Information about the Merger and Where to Find It In connection with the proposed merger with SunTrust, BB&T has filed with the SEC a registration statement on Form S-4 to register the shares of BB&T’s capital stock to be issued in connection with the merger, as amen
Slide 4: 2019 second quarter performance highlights
2019 second quarter performance highlights1 ▪ Net income2 was a record $842 million, up 8.6% vs. 2Q18; net income2 excluding merger- related and restructuring charges and incremental operating expenses related to the merger Record was a record $868 million, up 9.7% vs 2Q18 ▪ Diluted EPS was a record
Slide 5: Selected items affecting earnings
Selected items affecting earnings Diluted EPS ($ in millions, except per share impact) Pre-Tax After-TaxDiluted EPSImpact Pre -Tax After Tax Impact Merger-related and restructuring charges $ (23) $ (19) $ (0.02) Incremental operating expenses related to the merger1 $ (9) $ (7) $ (0.01) 1 Includes co
Slide 6: Strong Commercial and Retail loan growth
Strong Commercial and Retail loan growth Average Loans Held for Investment Average Loans Held for Investment ($ in billions) ($ in millions) 2Q19 v. 1Q19 $150.5 2Q19 Annualized $150.0 $147.5 $148.1 $146.2 Average Increase $144.1 Balance (Decrease) $140.0 Commercial: C&I $ 62,563 7.8% $130.0 CRE 20,7
Slide 7: Checking, money market and savings growth offset by other
Checking, money market and savings growth offset by other Average Total Deposits Average Deposits ($ in billions) ($ in millions) $160.0 1.20% $160.0 $159.9 2Q19 v. 1Q19 $157.7 $157.3 $157.8 2Q19 Annualized 1.00% 1.02% Average Increase 0.95% Balance (Decrease) 0.80% $140.0 0.78% Noninterest-bearing
Slide 8: Asset quality remains excellent
Asset quality remains excellent Annualized Net Charge-offs / Average Loans ▪ Net charge-offs totaled $142 million, down 2 0.60% bps as a percent of average loans vs. 1Q19 and up 8 bps vs. 2Q18 0.38% 0.40% 0.38% 0.40% 0.35% ▪ Loans 90 days or more past due and still 0.30% accruing as a percent of loa
Slide 9: Allowance coverage ratios remain strong
Allowance coverage ratios remain strong ALLL Coverage Ratios ▪ Coverage ratios improved and remain strong at 2.80x and 3.46x for the allowance 3.49x 3.46x 3.50x to net charge-offs and NPLs, respectively ▪ The ALLL to loans ratio remained at 1.05% 3.05x 2.99x 2.97x – Excluding loans acquired in busin
Slide 10: Net interest margin decrease reflects yield curve flattening
Net interest margin decrease reflects yield curve flattening Net Interest Margin 3.55% 3.49% 3.51% ▪ 2Q19 reported NIM decreased 5 bps and 3.45% 3.47% 3.42% 3.45% core NIM decreased 6 bps vs. 1Q19 after 3.44% adjusting for dividends received on NQDCP 3.35% 3.40% 3.37% 3.34% 3.34% assets in 1Q19 3.25
Slide 11: Record fee income reflects widespread strong growth
Record fee income reflects widespread strong growth Fee Income Ratio Noninterest Income ($ in millions)1 45.0% 44.4% 2Q19 v. 1Q19 2Q19 v. 2Q18 44.0% Increase Increase 2Q19 (Decrease) (Decrease) 43.0% 42.5% 42.3% Insurance income $ 566 44.0% 17.7% 42.0% 42.0% 41.5% Service charges on deposits 181 23.
Slide 12: Significant improvement in efficiency ratio
Significant improvement in efficiency ratio Efficiency Ratio Noninterest Expense ($ in millions) 2 70.0% 2Q19 v. 2Q19 v. 1Q19 2Q18 60.7% 61.0% Increase Increase 59.7% 59.5% 2Q19 (Decrease) (Decrease) 60.0% 57.6% Personnel expense $ 1,120 12.2 % 4.3% 57.4% 57.3% 56.5% 56.6% 55.1% Occupancy and equipm
Slide 13: Capital, liquidity and payout ratio remain strong
Capital, liquidity and payout ratio remain strong Common Equity Tier 1 ▪ 2Q19 dividend payout and total payout ratios 10.5% were 36.8% 10.3% 10.3% ▪ Recommending dividend increase later in July 10.2% 10.2% 10.2% – Proposal to increase the dividend 11.1% to $0.45 to be considered by the Board ▪ Suspe
Slide 14: Community Banking Retail and Consumer Finance
Community Banking Retail and Consumer Finance Revenue ($ in millions) Average Loans5 ($ in billions) $1,363 $68.0 $1,277 $1,303 $1,320 $1,274 $63.5 $65.4 $66.0 $65.9 $92 $2.9 $3.1 $3.1 $3.2 $56 $58 $49 $2.8 $5.8 $68 $135 $142 $5.6 $5.9 $5.9 $5.7 $134 $135 $131 $118 $113 $13.7 $112 $115 $105 $12.8 $1
Slide 15: Community Banking Commercial
Community Banking Commercial Revenue ($ in millions) Average Loans1 ($ in billions) $52.6 $52.6 $52.6 $52.6 $52.3 $703 $689 $702 $655 $681 $2.0 $2.1 $2.4 $2.4 $2.3 $50 $49 $51 $48 $48 $62 $62 $60 $63 $62 $19.7 $19.6 $19.4 $19.1 $19.0 $545 $571 $591 $580 $588 $30.9 $30.9 $30.8 $31.1 $31.0 2Q18 3Q18 4
Slide 16: Financial Services and Commercial Finance
Financial Services and Commercial Finance Revenue ($ in millions) Average Loans2 ($ in billions) $534 $539 $505 $29.6 $491 $494 $28.1 $29.0 $81 $102 $27.2 $27.3 $2.1 $87 $2.0 $2.0 $87 $28 $85 $1.9 $1.9 $1.7 $1.8 $20 $1.5 $1.6 $1.6 $1.8 $1.8 $31 $28 $15 $1.9 $1.9 $1.9 $139 $111 $131 $108 $116 $75 $73
Slide 17: Insurance Holdings
Insurance Holdings Adjusted EBITDA1 ($ in millions) Revenue ($ in millions) 28.8% 26.1% 23.7% 24.5% $595 18.3% $22 $171 $538 $518 $140 $506 $21 $120 $127 $19 $87 $19 $475 $19 $252 2Q18 3Q18 4Q18 1Q19 2Q19 n 1 $215 $273 Adjusted EBITDA — Adjusted EBITDA Margin $258 $232 Other Segment Highlights ($ in
Slide 18: Strong Fee Income Performance – Insurance Holdings Revenue
Strong Fee Income Performance – Insurance Holdings Revenue ($ in millions) ▪ Strong results across all lines of 17.6% $595 business $506 ▪ July 2018 acquisition of Regions Insurance Group (RIG) added $32M in revenue and continues to meet expectations ▪ YoY new business up 9% with ongoing 2Q18 2Q19 >
Slide 19: Strong Fee Income Performance – Insurance Holdings Adjusted EBITDA
Strong Fee Income Performance – Insurance Holdings Adjusted EBITDA1 ($ in millions) ▪ Continued focus on enhancing margin 42.5% $171 profile with improved performance across all lines of business $120 ▪ Exceeding RIG synergies cost savings ▪ Organic growth and strong expense control driving margin e
Slide 20: 3Q19 and full-year 2019 outlook
3Q19 and full-year 2019 outlook Category 3Q19 Average total loans held for investment Down 4% - 6% annualized vs. 2Q19 (ex mortgage sale: Up 4% - 6% annualized vs. 2Q19) Credit quality NCOs expected to be 35 - 45 bps Net interest margin GAAP and Core NIM down 4 - 8 bps vs. 2Q19 (ex mortgage sale: GA
Slide 21: Merger of Equals Update
Merger of Equals Update Highly Synergistic; Financially Compelling; Transformative Continued Momentum Next Steps • EM continues to meet weekly to guide organizational • Continue foundational work for new, integrated culture design and oversee integration process • Continue brand development process
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Slide 23: Appendix
Appendix
Slide 24: 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, 2019 $ (287) $ (90) $ (12) $ (361) Net interest income: Normal accretion/amortization 17 7 1 1 Cash recoveries/early payoffs 7 6 —
Slide 25: 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 2019 2019 2018 2018 2018 2019 2018 Efficiency ratio numerator - noninterest expense - GAAP $ 1,751 $ 1,768 $ 1,784 $ 1,742 $ 1,720 $ 3,519 $ 3,406 Amor
Slide 26: 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 2019 2019 2018 2018 2018 Common shareholders' equity $ 28,650 $ 27,770 $ 27,069 $ 26,
Slide 27: 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 2019 2019 2018 2018 2018 Net interest income - GAAP $ 1,690 $ 1,696 $ 1,705 $ 1,687 $ 1,657 Taxable-equivalent adjustment 24 24 24 27 22 Net interest income - taxable-equivalent 1,714 1,72
Slide 28: 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 2019 2019 2018 2018 2018 2019 2018 Net income available to common shareholders - GAAP $ 842 $ 749 $ 754 $ 789 $ 775 $ 1,591 $ 1,5
Slide 29: Non-GAAP reconciliations: Operating leverage
Non-GAAP reconciliations Operating leverage1 (Dollars in millions) Quarter Ended June 30 March 31 June 30 % Growth 2Q19 vs. 2019 2019 2018 1Q19 2Q18 (annualized) Revenue2 - GAAP $ 3,042 $ 2,898 $ 2,879 19.9% 5.7% Taxable equivalent adjustment 24 24 22 Securities (gains) losses, net — — (1) Revenue2
Slide 30: Non-GAAP reconciliations: Performance ratios
Non-GAAP reconciliations Performance ratios (Dollars in millions, except per share data, shares in thousands) Quarter Ended June 30, 2019 Common Tangible Assets Equity Common Equity2 Net income - GAAP $ 885 Net income available to common shareholders - GAAP $ 842 $ 842 Merger-related and restructuri
Slide 31: Non-GAAP reconciliations: Insurance Holdings Adjusted EBITDA
Non-GAAP reconciliations Insurance Holdings Adjusted EBITDA (Dollars in millions) Quarter Ended June 30 March 31 Dec. 31 Sept. 30 June 30 2019 2019 2018 2018 2018 Segment net interest income $ 25 $ 23 $ 22 $ 23 $ 22 Noninterest income 570 515 496 452 484 Total revenue $ 595 $ 538 $ 518 $ 475 $ 506 S