Truist Financial Corporation · NYSE:TFC
Truist Financial — BB&T — Q2 2017 Earnings Presentation
29 slides from Truist Financial's earnings presentation, Jul 20, 2017
Slide 1: Second Quarter 2017 Earnings Conference Call
Kelly S. King Chairman and Chief Executive Officer Second Quarter 2017 Earnings Conference Call July 20, 2017 Daryl N. Bible Chief Financial Officer
Slide 2: Forward-Looking Information
Forward-Looking Information This news release 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 second quarter performance highlights
3 2017 second quarter performance highlights1 ▪ Record net income available to common shareholders totaled $631 million, up 16.6% vs. 2Q16 ▪ Diluted EPS totaled $0.77 ▪ Adjusted diluted EPS totaled $0.78, up 9.9% vs. 2Q16 ▪ ROA, ROCE and ROTCE were 1.22%, 9.30% and 15.60%, respectively Record Earnin
Slide 4: Selected items affecting earnings
4 Selected items affecting earnings Pre -Ta x After Tax Diluted EPS Impac t ($ in millions, except per share impact) Pre-Tax After-Tax Diluted EPS Impact Merger-related and restructuring charges $ (10) $ (6) $ (0.01)
Slide 5: Met or exceeded second quarter guidance in all categories
5 Met or exceeded second quarter guidance in all categories Category 2Q17 outlook Results Actuals Loans n Total up 1% – 3% annualized vs. 1Q17 n Core up 5% – 7% annualized vs. 1Q17 ü ü+ 3.0% 7.5% Credit quality n NCOs expected to be 35 – 45 bps n NPA levels expected to remain in a similar range as 1
Slide 6: Average loans and leases growth by portfolio
6 ▪ Average loans and leases held for investment increased 3.0% annualized in 2Q17 vs. 1Q17 ▪ Experienced loan growth vs. 1Q17 in several portfolios: – Sheffield, up 20.2% annualized – Premium Finance, up 15.0% annualized – CRE, up 7.0% annualized – C&I, up 6.1% annualized ▪ Sales finance loans decr
Slide 7: 2Q17 impact of seasonal / optimizing portfolios
7 2Q17 impact of seasonal / optimizing portfolios ▪ Loan growth strategies – Growing more profitable loans with better risk profile – Continue to price prime auto loans at a level which improves profitability and returns – Continue to sell all conforming residential mortgages while serving our clien
Slide 8: Noninterest-bearing deposits reflect healthy growth
8 Noninterest-bearing deposits reflect healthy growth ▪ Total deposits averaged $160.3 billion, a decrease of $1.1 billion vs. 1Q17 – Personal, 48.8% of total, up 1.9% annualized – Business, 39.1% of total, up 1.9% annualized – Public Funds, 8.5% of total, down 15.9% annualized ▪ Average noninterest
Slide 9: Asset quality continues to improve
9 ▪ Credit quality results reflect improved charge-offs and nonperformers – Net charge-offs totaled $132 million, down 10.8% vs. 1Q17 – Loans 90 days or more past due and still accruing decreased 9.0% vs. 1Q17 – Loans 30-89 days past due increased 8.6% vs. 1Q17, largely due to expected seasonal incr
Slide 10: Allowance coverage ratios remain strong
10 Allowance coverage ratios remain strong ▪ Coverage ratios remain strong at 2.80x and 2.43x for the allowance to net charge-offs and NPLs, respectively ▪ The ALLL to loans ratio was 1.03%, down slightly vs. 1Q17 – Excluding loans acquired in business acquisitions, the ALLL to loans ratio was 1.12%
Slide 11: Industry leading net interest margin
11 Industry leading net interest margin ▪ 2Q17 reported NIM increased 1 bp vs. 1Q17 due to: – Short-term rate increases offset by runoff of purchase accounting and funding rate increases ▪ Core NIM increased 3 bps due to: – Short-term rate increases partially offset by funding rate increases ▪ Margi
Slide 12: Noninterest income
12 ▪ Insurance income increased $23 million vs. 1Q17, primarily due to seasonality in P&C commissions ▪ Bankcard fees and merchant discounts increased $16 million due to a reduction in accrual for rewards and an increase in volumes ▪ Investment banking and brokerage fees and commissions increased $1
Slide 13: Noninterest expense
13 2Q17 2Q17 v. 1Q17 Increase (Decrease) 2Q17 v. 2Q16 Increase (Decrease) Personnel expense $ 1,042 12.3 % 0.3 % Occupancy and equipment expense 198 10.4 2.1 Software expense 57 (6.9) 7.5 Outside IT services 39 (81.9) (11.4) Amortization of intangibles 36 (21.1) (14.3) Regulatory charges 36 (30.9) 1
Slide 14: Capital and liquidity remain strong across the board
14 Capital and liquidity remain strong across the board ▪ 2017 CCAR results confirm total payout ratio in excess of 100% – Dividend increase of 10% to $0.33 – Management expects to repurchase up to $920 million common shares in 3Q17 ▪ The common equity tier 1 ratio was 10.2% fully phased-in ▪ LCR wa
Slide 15: Community Banking
15 Comments5 1 Noninterest income includes intersegment net referral fees 2 Noninterest expense includes amortization of intangibles and allocated corporate expense 3 Linked quarter growth rates annualized except for production 4 Commercial production includes C&I, CRE and Dealer Floor Plan 5 Nation
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) Comments4 1 Noninterest Income includes intersegment net referr
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 Comments4 1 Noninterest Income includes intersegment net referral fee
Slide 19: Insurance Holdings
19 Comments 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 and title insurance Insurance Holdings 5 EBITDA margin is a measurement of operating profitability c
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 1 Noninterest Income includes intersegment net referral fees 2
Slide 21: 3Q17 Outlook
21 3Q17 Outlook Category Guidance Loans n Total up 1% – 3% annualized vs. 2Q17 n Core up 5% – 7% annualized vs. 2Q17 Credit quality n NCOs expected to be 35 – 45 bps n NPAs expected to be in a similar range vs. 2Q17 Net interest margin n GAAP margin down 1 – 3 bps vs. 2Q17 n Core margin stable compa
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Slide 23: Appendix
Appendix
Slide 24: A-1 Purchase accounting marks and accretable yield
A-1 Acc. Yield PA Mark Acquired Loans1 Non-PCI Loans2 Liabilities3 Securities4 Balance, March 31, 2017 $ (350) $ (260) $ (43) $ (408) Net interest income: Normal accretion 30 18 6 12 Cash recoveries / early payoffs 7 7 — 4 Total net interest income 37 25 6 16 Other (58) — — — Balance, June 30, 2017
Slide 25: A-2 Core net interest income and margin reconciliation
A-2 Quarter Ended June 30 March 31 Dec. 31 Sept. 30 June 30 2017 2017 2016 2016 2016 Net interest income - GAAP $ 1,635 $ 1,609 $ 1,565 $ 1,610 $ 1,617 Taxable-equivalent adjustment 40 40 41 40 40 Net interest income - taxable-equivalent 1,675 1,649 1,606 1,650 1,657 Interest income - PCI loans (37)
Slide 26: A-3 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 June 30 March 31 Dec. 31 Sept. 30 June 30 2017 2017 2016 2016 2016 Total shareholders' equity $ 30,349 $ 30,025 $ 29,926 $
Slide 27: A-4 Non-GAAP reconciliations: Efficiency ratio
A-4 Non-GAAP reconciliations Efficiency ratio (Dollars in millions) Quarter Ended June 30 March 31 Dec. 31 Sept. 30 June 30 2017 2017 2016 2016 2016 Efficiency ratio numerator - noninterest expense - GAAP $ 1,742 $ 2,102 $ 1,668 $ 1,711 $ 1,797 Amortization of intangibles (36) (38) (38) (38) (42) Me
Slide 28: A-5 Non-GAAP reconciliations: Operating leverage
A-5 Non-GAAP reconciliations Operating leverage1 (Dollars in millions) Quarter Ended June 30 March 31 Annualized 2017 2017 Growth Revenue2 - GAAP $ 2,855 $ 2,780 10.8% Taxable equivalent adjustment 40 40 Securities (gains) losses, net — — Revenue2 - adjusted $ 2,895 $ 2,820 10.7% Noninterest expense
Slide 29: A-6 Non-GAAP reconciliations: Diluted EPS
A-6 Non-GAAP reconciliations Diluted EPS (Dollars in millions, except per share data, shares in thousands) Quarter Ended June 30 2017 2016 Increase Net income available to common shareholders - GAAP $ 631 $ 541 Merger-related and restructuring charges, net after tax 6 58 Tax benefit related to speci