Truist Financial Corporation · NYSE:TFC
Truist Financial — BB&T — Q4 2016 Earnings Presentation
27 slides from Truist Financial's earnings presentation, Jan 19, 2017
Slide 1: Fourth Quarter 2016 Earnings Conference Call
BB&T Fourth Quarter 2016 Earnings Conference Call January 19, 2017 Kelly S. King Chairman and Chief Executive Officer 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: 2016 Fourth Quarter Performance Highlights
3 2016 Fourth Quarter Performance Highlights1 Record annual net income totaled $2.3 billion2, up 16.7% vs. 2015 4Q16 net income totaled $592 million2, up 17.9% vs. 4Q15 Diluted EPS totaled $0.72, up 12.5% vs. 4Q15 Adjusted EPS totaled $0.73 excluding merger-related and restructuring charges
Slide 4: Selected Items Affecting Earnings
4 Pre-Tax After Tax1 Diluted EPS Impact Merger-related and restructuring charges $ (13) $ (8) $ (0.01) Securities duration adjustments and hedge ineffectiveness (34) (21) (0.03) Mortgage reserve adjustment 31 19 0.02 Selected Items Affecting Earnings ($ in millions, except per share impact) 1 Income
Slide 5: Loans Reflect Portfolio Purchases, Consumer Growth and Targeted Runoff
5 Loans Reflect Portfolio Purchases, Consumer Growth and Targeted Runoff Average loans and leases held for investment increased 3.0% annualized in 4Q16 vs. 3Q16 Experienced loan growth vs. 3Q16 in several portfolios: Grandbridge, up 28.4% annualized Equipment Finance, up 15.2% annualized R
Slide 6: Noninterest-Bearing Deposits Reflect Strong Growth
6 Noninterest-Bearing Deposits Reflect Strong Growth $148.5 $149.9 $160.3 $159.5 $160.1 0.24% 0.25% 0.23% 0.23% 0.22% 0.20% 0.25% 0.30% 0.35% 0.40% $120.0 $130.0 $140.0 $150.0 $160.0 $170.0 4Q15 1Q16 2Q16 3Q16 4Q16 Total Interest-Bearing Deposit Cost Total deposits averaged $160.1 billion, an incr
Slide 7: Credit Quality Reflects Seasonal Increase in Charge-offs; Lower NPAs
7 Credit Quality Reflects Seasonal Increase in Charge-offs; Lower NPAs1 Credit quality results reflect expected seasonal increase in consumer-related portfolios and impact of loan sales Net charge-offs totaled $151 million, up 5 bps vs. 3Q16 - Includes $15 million related to PCI loans - Includes
Slide 8: Energy Portfolio – Stabilized in 4Q16
8 Energy Portfolio – Stabilized in 4Q16 Outstanding balances declined 7.6% compared with last quarter Total commitments and nonaccruals decreased vs. 3Q16 35% Utilization rate 37% of portfolio is Criticized & Classified Allocated reserves = 11.7% All nonperforming borrowers are paying as
Slide 9: Allowance Coverage Ratios Remain Strong
9 Allowance Coverage Ratios Remain Strong 2.83x 2.40x 3.88x 2.91x 2.47x 2.53x 1.89x 1.90x 2.00x 2.03x 1.00 2.00 3.00 4.00 4Q15 1Q16 2Q16 3Q16 4Q16 ALLL to Net Charge-offs ALLL to NPLs HFI Coverage ratios remain strong at 2.47x and 2.03x for the allowance to net charge-offs and NPLs, respectively
Slide 10: Net Interest Margin Decreases to 3.32%
10 Net Interest Margin Decreases to 3.32% 3.35% 3.43% 3.41% 3.39% 3.32% 3.13% 3.19% 3.17% 3.18% 3.18% 2.50% 3.00% 3.50% 4.00% 4Q15 1Q16 2Q16 3Q16 4Q16 Reported NIM Core NIM 4Q16 NIM decreased 7 bps vs. 3Q16 due to: Securities duration adjustments, primarily acquired securities (5 bps) Decline
Slide 11: Fee Income Reflects Stronger Insurance and Investment Banking Income
11 Fee Income Reflects Stronger Insurance and Investment Banking Income Insurance income increased $9 million, primarily due to seasonally higher commissions Mortgage banking income decreased $47 million due to net mortgage servicing rights valuation adjustments and lower production volumes Ot
Slide 12: Noninterest Expense Reflects Lower Loan-Related Expenses and Merger-Related Charges
12 Noninterest Expense Reflects Lower Loan-Related Expenses and Merger-Related Charges 4Q16 4Q16 v. 3Q162 Increase (Decrease) 4Q16 v. 4Q15 Increase (Decrease) Personnel expense $ 1,004 (0.8) % 12.4 % Occupancy and equipment expense 198 (9.8) 3.1 Software expense 57 (37.9) 9.6 Loan-related expense (6
Slide 13: Capital and Liquidity Remain Strong
13 Capital and Liquidity Remain Strong 10.3% 10.4% 10.0% 10.1% 10.2% 9.0% 9.5% 10.0% 10.5% 11.0% 4Q15 1Q16 2Q16 3Q16 4Q16 The common equity tier 1 ratio was 10.0% fully phased-in BB&T’s 12/31/16 LCR was 121% BB&T’s 4Q16 liquid asset buffer was 12.6% Option exercises added 0.1% to the Common
Slide 14: Community Banking Segment
14 ($ in millions) Inc/(Dec) vs 3Q16 Inc/(Dec) vs 4Q15 4Q16 Comments5 Net Interest Income Noninterest Income1 Provision for Credit Losses Noninterest Expense2 Income Tax Expense Segment Net Income Highlighted Metrics5,6 $ 984 359 26 792 191 $ 334 $ 12 1 29 (8) (4) $ (4) ($ in billions) 1 Noninterest
Slide 15: Residential Mortgage Banking Segment
15 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 ($ in millions) Inc/(Dec) vs 3Q16 Inc/(Dec) vs 4Q15 4Q1
Slide 16: Dealer Financial Services Segment
16 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 3Q16 Inc/(Dec) vs 4Q15 4Q
Slide 17: Specialized Lending Segment
17 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 Comments ($ in millions) Inc/(Dec) vs 3Q1
Slide 18: Insurance Holdings Segment
18 Comments ($ in millions) Inc/(Dec) vs 3Q16 Inc/(Dec) 4Q15 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 4Q16 Like Provides property and casua
Slide 19: Financial Services Segment
19 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 3Q16 Inc/(Dec) vs 4Q15
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Slide 22: Purchase Accounting Summary
Purchase Accounting Summary Acc. Yield1 PCI Loans PA Mark2 Non-PCI Loans PA Mark3 Liabilities PA Mark4 Securities Balance, Sept. 30, 2016 $ (421) $ (318) $ (54) $ (404) Interest income: Normal accretion 33 18 6 9 Cash recoveries/early payoffs/ duration adjustments 16 15 - (23) Total interest income
Slide 23: Capital Measures
Capital Measures1 (Dollars in millions, except per share data) 1 Current quarter regulatory capital is preliminary 23 As of / Quarter Ended Dec. 31 Sept. 30 June 30 March 31 Dec. 31 2016 2016 2016 2016 2015 Selected Capital Information Risk-based capital: Common equity tier 1 $ 18,050 $ 17,824 $ 17,
Slide 24: Non-GAAP Reconciliations
Non-GAAP Reconciliations 24 (Dollars in millions, except per share data) 1 Tangible common equity is a non-GAAP measure. 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. These capital measure
Slide 25: Non-GAAP Reconciliations
Non-GAAP Reconciliations1 25 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
Slide 26: Non-GAAP Reconciliations
26 1 BB&T’s management believes investors use this measure to evaluate the return on average common shareholders’ equity without the impact of intangible assets and their related amortization. Non-GAAP Reconciliations1 (Dollars in millions) Quarter Ended Dec. 31 Sept. 30 June 30 March 31 Dec. 31 Ret
Slide 27: Core Net Interest Margin Reconciliation
Dec. 31 Sept. 31 June 30 March 31 Dec. 31 2016 2016 2016 2016 2015 Net interest income - GAAP $ 1,565 $ 1,610 $ 1,617 $ 1,529 $ 1,504 Taxable-equivalent adjustment 41 40 40 39 38 Net interest income - taxable-equivalent $ 1,606 $ 1,650 $ 1,657 $ 1,568 $ 1,542 Interest income - PCI loans (49) (52) (4