Third quarter 2022 GAAP earnings
of $1.5 billion, or $1.15 per diluted share
Third quarter 2022 Adjusted
earnings of $1.7 billion, or
$1.24 per diluted share
Results reflect strong loan growth and
expanded NIM given higher rates and strong deposit
franchise
Fee revenues tempered by market
conditions
Capital, liquidity, and credit quality remain
strengths
CHARLOTTE, N.C., Oct. 18,
2022 /PRNewswire/ -- Truist Financial Corporation
(NYSE: TFC) today reported earnings for the third quarter of
2022.
Net income available to common shareholders of $1.5 billion was down 5.0% from the third quarter
of 2021. Earnings per diluted common share were $1.15, a decrease of 4.2% compared with the same
period last year. Results for the third quarter produced an
annualized return on average assets (ROA) of 1.19%, an annualized
return on average common shareholders' equity (ROCE) of 10.7%, and
an annualized return on tangible common shareholders' equity
(ROTCE) of 23.5%.
Adjusted net income available to common shareholders was
$1.7 billion, or $1.24 per diluted share, excluding merger-related
and restructuring charges of $62
million ($48 million
after-tax) and incremental operating expenses related to the merger
of $90 million ($69 million after-tax). Adjusted results produced
an annualized ROA of 1.28%, an annualized ROCE of 11.5%, and an
annualized ROTCE of 25.1%.
"Truist's third-quarter performance reflected strong progress in
many areas of the business, as we delivered strong broad-based loan
growth, significant margin expansion and continued exceptional
asset quality. Overall financial results were mixed, however, as
the challenging market environment impacted our capital markets
related revenue," said Chairman and CEO Bill Rogers.
"Our company purpose continues to drive our actions to care for
our teammates, clients and the communities we serve, and this was
even more apparent in the aftermath of Hurricane Ian, when our
teammates acted quickly to support each other and our local
communities through humanitarian aid and volunteer efforts. We were
able to quickly deploy a $1.25
million philanthropic donation from the Truist Foundation to
support the communities most impacted, and we'll continue to care
for these communities as they rebuild and recover from this deadly
and disastrous storm.
"More broadly, I continue to remain highly confident in Truist's
trajectory given the diversity of our business mix, our strong
markets, conservative risk culture, and the substantial
opportunities that lie ahead post integration."
Third Quarter 2022 Performance
Highlights
- Earnings per diluted common share for the third quarter of 2022
were $1.15
-
- Adjusted diluted earnings per share were $1.24, up $0.04 per
share, or 3.3%, compared to second quarter 2022 and down
$0.18 per share, or 13%, compared to
third quarter 2021
-
- Decline compared to third quarter 2021 impacted by a reserve
release in the prior quarter
- ROA was 1.19%; adjusted ROA was 1.28%
- ROCE was 10.7%; adjusted ROCE was 11.5%
- ROTCE was 23.5%; adjusted ROTCE was 25.1%
- Pre-provision net revenue (PPNR) for the third quarter of 2022
was $2.3 billion, up 8.0% compared to
second quarter 2022 and 24% compared to third quarter 2021
-
- Adjusted PPNR was up 4.9% compared to second quarter 2022 and
8.3% compared to third quarter 2021
- GAAP operating leverage was 920 basis points compared to the
third quarter of 2021 and 540 basis points year-to-date 2022
compared to 2021
- Adjusted operating leverage was 260 basis points compared to
the third quarter of 2021 and (50) basis points year-to-date 2022
compared to 2021
- Taxable-equivalent revenue for the third quarter of 2022 was
$5.9 billion, up 3.6% compared to
second quarter 2022 and up 4.6% compared to third quarter 2021
-
- Taxable-equivalent net interest income was up 10% compared to
second quarter 2022 and up 16% compared to third quarter 2021
-
- The increase compared to second quarter 2022 was primarily due
to higher market interest rates coupled with well controlled
deposit costs and loan growth, partially offset by lower purchase
accounting accretion
- Noninterest income was down 6.5% compared to second quarter
2022 and down 11% compared to third quarter 2021
-
- The decline compared to the second quarter of 2022 was
primarily due to seasonally lower insurance revenues and lower
investment banking revenues due to continued challenging capital
markets conditions
- The decline compared to the third quarter of 2021 was primarily
due to lower residential mortgage, investment banking and other
income, partially offset by growth in insurance revenues
- Net interest margin was 3.12%, up 23 basis points from second
quarter 2022
-
- Core net interest margin was 3.02%, up 30 basis points from
second quarter 2022, driven by higher market interest rates coupled
with well controlled deposit costs
- Noninterest expense for the third quarter of 2022 was
$3.6 billion, up 0.9% compared to
second quarter 2022 and down 4.8% compared to third quarter
2021
-
- Adjusted noninterest expense was $3.3
billion, up $83 million, or
2.6%, compared to second quarter 2022 due to higher professional
fees, personnel expenses, and operational losses
- Adjusted noninterest expenses increased $64 million, or 2.0%, compared to third quarter
2021 primarily due to higher operational losses, professional fees
and marketing costs, partially offset by lower equipment,
personnel, and software expenses
- GAAP efficiency ratio was 61.8%, compared to 63.3% for second
quarter 2022
- Adjusted efficiency ratio was 56.4%, compared to 57.0% for
second quarter 2022
- Average loans and leases held for investment for the third
quarter of 2022 were $309.4 billion,
up $12.7 billion, or 4.3%, compared
to the second quarter of 2022
-
- Average commercial loans were up $6.3
billion, or 3.7%, driven by broad based growth within the
commercial and industrial portfolio
- Average consumer loans were up $6.3
billion, or 5.3%, with growth across all portfolios except
student lending
- Asset quality remains excellent, reflecting Truist's prudent
risk culture and diverse portfolio
-
- Net charge-offs were 0.27% of average loans and leases, up five
basis points compared to second quarter 2022
- The ALLL ratio was 1.34% compared to 1.38% for second quarter
2022
-
- The ALLL coverage ratio was 4.98X annualized net charge-offs,
versus 6.54X for second quarter 2022
- Capital and liquidity levels remained strong; deployed capital
through organic loan growth, dividends, and acquisition
-
- Common equity tier 1 to risk-weighted assets was 9.1%
- Increased common dividend of 8% for the third quarter 2022
- Acquired BenefitMall, the nation's largest benefits wholesale
general insurance agency, effective September 1, 2022
- Consolidated average LCR ratio was 111%
EARNINGS
HIGHLIGHTS
|
|
|
|
Change 3Q22
vs.
|
(dollars in millions,
except per share data)
|
3Q22
|
2Q22
|
3Q21
|
2Q22
|
3Q21
|
Net income available to
common shareholders
|
$
1,536
|
$
1,454
|
$
1,616
|
$ 82
|
$ (80)
|
Diluted earnings per
common share
|
1.15
|
1.09
|
1.20
|
0.06
|
(0.05)
|
|
|
|
|
|
|
Net interest income -
taxable equivalent
|
$
3,783
|
$
3,435
|
$
3,261
|
$ 348
|
$ 522
|
Noninterest
income
|
2,102
|
2,248
|
2,365
|
(146)
|
(263)
|
Total
taxable-equivalent revenue
|
$
5,885
|
$
5,683
|
$
5,626
|
$ 202
|
$ 259
|
Less taxable-equivalent
adjustment
|
38
|
28
|
28
|
|
|
Total
revenue
|
$
5,847
|
$
5,655
|
$
5,598
|
|
|
|
|
|
|
|
|
Return on average
assets
|
1.19 %
|
1.14 %
|
1.28 %
|
0.05 %
|
(0.09) %
|
Return on average
risk-weighted assets (current quarter is preliminary)
|
1.55
|
1.52
|
1.77
|
0.03
|
(0.22)
|
Return on average
common shareholders' equity
|
10.7
|
10.3
|
10.2
|
0.4
|
0.5
|
Return on average
tangible common shareholders' equity (1)
|
23.5
|
22.7
|
19.3
|
0.8
|
4.2
|
Net interest margin -
taxable equivalent
|
3.12
|
2.89
|
2.81
|
0.23
|
0.31
|
|
|
(1)
|
Excludes certain items
as detailed in the non-GAAP reconciliations in the Quarterly
Performance Summary.
|
Third Quarter 2022 compared to Second
Quarter 2022
Total taxable-equivalent revenue was $5.9
billion for the third quarter of 2022, an increase of
$202 million, or 3.6%, compared to
the prior quarter.
Taxable-equivalent net interest income for the third quarter of
2022 was up $348 million, or 10%,
compared to the prior quarter due primarily to higher market
interest rates coupled with well controlled deposits costs and loan
growth, partially offset by lower purchase accounting accretion.
Average earning assets increased $6.5
billion, or 1.4%, due to growth in average total loans of
$12.0 billion, or 4.0%, partially
offset by a decrease in average securities of $3.3 billion, or 2.2%. Average deposits decreased
$3.7 billion, or 0.9%, while average
short-term borrowings increased $7.8
billion, or 81%.
The net interest margin was 3.12% for the third quarter, up 23
basis points compared to the prior quarter. The yield on the total
loan portfolio for the third quarter was 4.49%, up 58 basis points
compared to the prior quarter primarily due to higher market
interest rates, partially offset by lower purchase accounting
accretion. The yield on the average securities portfolio for the
third quarter was 1.95%, up 13 basis points compared to the prior
quarter primarily due to the higher rate environment. Core net
interest margin was 3.02% for the third quarter, up 30 basis points
compared to the prior quarter driven primarily by higher market
interest rates coupled with well controlled deposit costs.
The average cost of total deposits was 0.31%, up 22 basis points
compared to the prior quarter. The average cost of short-term
borrowings was 2.34%, up 108 basis points compared to the prior
quarter. The average cost of long-term debt was 2.43%, up 68 basis
points compared to the prior quarter. The increase in rates on
deposits and other funding sources was largely attributable to the
higher rate environment.
The provision for credit losses was $234
million for the third quarter, compared to $171 million for the prior quarter. The increase
in the current quarter provision expense primarily reflects higher
net charge-offs. Net charge-offs for the third quarter of 2022
totaled $213 million compared to
$159 million for the prior quarter.
The net charge-off ratio for the current quarter of 0.27% was up
five basis points compared to second quarter 2022, primarily driven
by normalizing trends and seasonality across certain consumer loan
portfolios.
Noninterest income was $2.1
billion, a decrease of $146
million, or 6.5%, compared to the prior quarter. Insurance
income decreased $100 million, or
12%, primarily due to seasonally lower property and casualty
commissions. Investment banking and trading income decreased
$33 million, or 13%, primarily due to
lower structured real estate, bond originations and loan
syndication fees, partially offset by higher merger and
acquisitions fees. Lending related fees decreased $20 million, or 20%, primarily due to gains in
the prior quarter. Commercial mortgage banking income increased
$24 million, or 92%, primarily due to
higher production income and higher valuations. Other income
decreased primarily due to valuation related marks.
Noninterest expense was $3.6
billion for the third quarter, up $33
million, or 0.9%, compared to the prior quarter.
Merger-related and restructuring charges and incremental operating
expenses related to the merger decreased $59
million and $27 million,
respectively, compared to second quarter 2022, given diminishing
integration-related activities. The prior quarter included a
$39 million gain on the redemption of
FHLB advances. Excluding the aforementioned items and the
amortization of intangibles, adjusted noninterest expense increased
$83 million, or 2.6%, compared to the
prior quarter. Personnel expense increased $14 million ($23
million, or 1.1%, on an adjusted basis) compared to second
quarter 2022 due to investments in revenue producing businesses and
enterprise technology along with additional personnel expenses from
the BenefitMall acquisition. Professional services and outside
processing was stable, but was up $34
million, or 14%, on an adjusted basis primarily due to
increased project spend for enterprise technology investments.
Other expense increased primarily due to higher operational
losses.
The provision for income taxes was $363
million for the third quarter of 2022, compared to
$372 million for the prior quarter.
The effective tax rate for the third quarter of 2022 was 18.2%,
compared to 19.5% for the prior quarter. The decrease in the
effective tax rate was primarily driven by discrete tax benefits
recognized in the current quarter and changes in the full year
forecasted effective tax rate.
Third Quarter 2022 compared to Third
Quarter 2021
Total taxable-equivalent revenues were $5.9 billion for the third quarter of 2022, an
increase of $259 million, or 4.6%,
compared to the earlier quarter.
Taxable equivalent net interest income for the third quarter of
2022 was up $522 million, or 16%,
compared to the earlier quarter primarily due to strong loan
growth, higher market interest rates coupled with well controlled
deposit costs and solid deposit growth. These increases were
partially offset by lower purchase accounting accretion and lower
PPP revenue. Average earning assets increased $20.6 billion, or 4.5%, compared to the earlier
quarter primarily due to growth in average total loans of
$21.5 billion, or 7.4%. Average
deposits increased $17.4 billion, or
4.3%, and average short-term borrowings increased $12.0 billion compared to the earlier quarter,
while average long-term debt decreased $5.9
billion, or 16%.
Net interest margin was 3.12%, up 31 basis points compared to
the earlier quarter. The yield on the total loan portfolio for the
third quarter of 2022 was 4.49%, up 59 basis points compared to the
earlier quarter, primarily reflecting higher market interest rates,
partially offset by lower purchase accounting accretion and lower
PPP revenue. The yield on the average securities portfolio was
1.95%, up 45 basis points compared to the earlier quarter primarily
due to the higher rate environment. Core net interest margin was
3.02% for the third quarter, up 44 basis points compared to the
earlier quarter driven by higher market interest rates coupled with
well controlled deposit costs.
The average cost of total deposits was 0.31%, up 28 basis points
compared to the earlier quarter. The average cost of short-term
borrowings was 2.34%, up 166 basis points compared to the earlier
quarter. The average cost of long-term debt was 2.43%, up 82 basis
points compared to the earlier quarter. The increase in rates on
deposits and other funding sources was largely attributable to the
higher rate environment.
The provision for credit losses was $234
million, compared to a benefit of $324 million for the earlier quarter. The earlier
quarter included a reserve release due to the improving credit
environment during that period. Net charge-offs for the third
quarter of 2022 totaled $213 million
compared to $135 million in the
earlier quarter. The net charge-off ratio for the current quarter
of 0.27% was up eight basis points compared to the earlier quarter
primarily driven by normalizing trends across certain consumer
portfolios.
Noninterest income for the third quarter of 2022 decreased
$263 million, or 11%, compared to the
earlier quarter. Other income decreased $139
million due to valuation changes from assets held for
certain post-retirement benefits, which is primarily offset by
lower personnel expense, and lower investment income and valuation
marks from the Company's SBIC and other strategic investments.
Residential mortgage income decreased $107
million, or 60%, as lower production income (due to lower
margins and refinance volumes resulting from the higher rate
environment) was partially offset by higher servicing income (due
to lower prepayments and servicing portfolio purchases). Investment
banking and trading income decreased $94
million, or 30%, due to lower bond and equity originations
and merger and acquisition fees, partially offset by higher trading
income. These decreases were partially offset by an increase of
$80 million, or 12%, in insurance
income due to organic growth and acquisitions.
Noninterest expense for the third quarter of 2022 was down
$182 million, or 4.8%, compared to
the earlier quarter. Merger-related and restructuring charges
decreased $110 million and
incremental operating expenses related to the merger decreased
$101 million due to diminishing
integration-related activities. The earlier quarter included a
$30 million professional fee to
develop an ongoing program to identify, prioritize, and roadmap
teammate generated revenue growth and expense savings opportunities
beyond the merger. Excluding the aforementioned items and the
amortization of intangibles, adjusted noninterest expense increased
$64 million, or 2.0%, compared to the
earlier quarter. Other expense increased $81 million ($87
million, or 104%, on an adjusted basis) primarily due to
increased operational losses and teammate travel expenses.
Professional fees and outside processing expenses decreased
$20 million, but was up $70 million, or 33%, on an adjusted basis due to
increased project spend for enterprise technology investments and
increased call center staffing. Equipment expense decreased
$32 million ($38 million, or 25%, on an adjusted basis)
primarily due to laptop purchases in the prior period. Software
expense decreased $26 million
($24 million, or 9.6%, on an adjusted
basis) primarily due to lower maintenance expense and
decommissioned software. Personnel expense decreased $71 million ($32
million, or 1.5%, on an adjusted basis) due to lower other
employee benefits as a result of the decrease in noninterest income
for post-retirement benefits and lower incentives, partially offset
by higher salaries due to annual merit increases, investments in
revenue producing businesses and enterprise technology, as well as
additional personnel costs for acquisitions.
The provision for income taxes was $363
million for the third quarter of 2022, compared to
$423 million for the earlier quarter.
The effective tax rate for the third quarter of 2022 was 18.2%,
compared to 19.9% for the earlier quarter. The decrease in the
effective tax rate was primarily driven by an increase in discrete
tax benefits and changes in the full year forecasted effective tax
rate.
LOANS AND
LEASES
|
|
|
|
|
(dollars in
millions)
Average
balances
|
3Q22
|
2Q22
|
Change
|
% Change
|
Commercial:
|
|
|
|
|
Commercial and
industrial
|
$ 152,123
|
$ 145,558
|
$
6,565
|
4.5 %
|
CRE
|
22,245
|
22,508
|
(263)
|
(1.2)
|
Commercial
construction
|
5,284
|
5,256
|
28
|
0.5
|
Total
commercial
|
179,652
|
173,322
|
6,330
|
3.7
|
Consumer:
|
|
|
|
|
Residential
mortgage
|
53,271
|
49,237
|
4,034
|
8.2
|
Residential home
equity and direct
|
25,394
|
25,124
|
270
|
1.1
|
Indirect
auto
|
28,057
|
26,496
|
1,561
|
5.9
|
Indirect
other
|
12,300
|
11,471
|
829
|
7.2
|
Student
|
5,958
|
6,331
|
(373)
|
(5.9)
|
Total
consumer
|
124,980
|
118,659
|
6,321
|
5.3
|
Credit card
|
4,755
|
4,728
|
27
|
0.6
|
Total loans and leases
held for investment
|
$ 309,387
|
$ 296,709
|
$
12,678
|
4.3
|
Average loans and leases held for investment for the third
quarter of 2022 were $309.4 billion,
up $12.7 billion, or 4.3%, compared
to the second quarter of 2022.
Average commercial loans increased $6.3
billion, or 3.7%, due to broad-based growth of $6.6 billion, or 4.5%, within the commercial and
industrial portfolio.
Average consumer loans increased $6.3
billion, or 5.3%, due to a $4.0
billion increase in residential mortgages due to
correspondent channel production and lower prepayments. In
addition, indirect auto increased $1.6
billion primarily in the prime segment of the portfolio and
indirect other increased $829 million primarily due to growth
from the Service Finance, recreational lending and Sheffield
portfolios, partially offset by runoff in other partnership lending
programs. Residential home equity and direct increased $270 million, primarily due to growth from the
LightStream portfolio. These increases were partially offset by
$373 million of runoff in student loans.
DEPOSITS
|
|
|
|
|
(dollars in
millions)
Average
balances
|
3Q22
|
2Q22
|
Change
|
% Change
|
Noninterest-bearing
deposits
|
$ 146,041
|
$ 148,610
|
$
(2,569)
|
(1.7) %
|
Interest
checking
|
111,645
|
112,375
|
(730)
|
(0.6)
|
Money market and
savings
|
147,659
|
148,632
|
(973)
|
(0.7)
|
Time
deposits
|
14,751
|
14,133
|
618
|
4.4
|
Total
deposits
|
$ 420,096
|
$ 423,750
|
$
(3,654)
|
(0.9)
|
Average deposits for the third quarter of 2022 were $420.1 billion, a decrease of $3.7 billion, or 0.9%, compared to the prior
quarter. The decrease in deposits was primarily driven by the
impacts of monetary tightening, as well as higher consumer spending
and seasonal patterns. Average noninterest bearing deposits
decreased 1.7% compared to the prior quarter and represented 34.8%
of total deposits for the third quarter of 2022. Average money
market and savings and interest checking declined 0.7% and 0.6%,
respectively, compared to the prior quarter. Average time deposits
increased 4.4% primarily due to an increase in negotiable
certificates of deposit.
CAPITAL
RATIOS
|
3Q22
|
2Q22
|
1Q22
|
4Q21
|
3Q21
|
Risk-based:
|
(preliminary)
|
|
|
|
|
Common equity Tier
1
|
9.1 %
|
9.2 %
|
9.4 %
|
9.6 %
|
10.1 %
|
Tier 1
|
10.7
|
10.8
|
11.0
|
11.3
|
11.9
|
Total
|
12.6
|
12.6
|
13.0
|
13.2
|
13.9
|
Leverage
|
8.5
|
8.6
|
8.6
|
8.7
|
9.0
|
Supplementary
leverage
|
7.3
|
7.3
|
7.3
|
7.4
|
7.8
|
Capital ratios remained strong compared to the regulatory
requirements for well capitalized banks. Truist declared common
dividends of $0.52 per share during
the third quarter of 2022, an increase of 8% compared to the prior
quarter. The dividend payout ratio for the third quarter of 2022
was 45%. Truist did not repurchase any shares in the third quarter
of 2022.
Truist CET1 ratio was 9.1% as of September 30, 2022. The
decline compared to the June 30, 2022
CET1 ratio primarily reflects the BenefitMall acquisition and
strong loan growth.
Truist's average LCR was 111% for the three months ended
September 30, 2022, compared to the regulatory minimum of
100%. Truist continues to maintain a strong liquidity position and
is well prepared to meet the funding needs of its clients.
ASSET
QUALITY
|
|
|
|
|
|
(dollars in
millions)
|
3Q22
|
2Q22
|
1Q22
|
4Q21
|
3Q21
|
Total nonperforming
assets
|
$
1,240
|
$
1,173
|
$
1,135
|
$
1,163
|
$
1,204
|
Total performing
TDRs
|
1,873
|
1,693
|
1,515
|
1,390
|
1,475
|
Total loans 90 days
past due and still accruing
|
1,709
|
1,787
|
1,914
|
1,930
|
1,872
|
Total loans 30-89 days
past due
|
1,957
|
2,091
|
2,101
|
2,044
|
1,823
|
Nonperforming loans and
leases as a percentage of loans and leases held
for investment
|
0.35 %
|
0.36 %
|
0.36 %
|
0.38 %
|
0.38 %
|
Nonperforming loans and
leases as a percentage of loans and leases,
including loans held for sale
|
0.37
|
0.37
|
0.37
|
0.38
|
0.40
|
Nonperforming assets as
a percentage of total assets
|
0.23
|
0.22
|
0.21
|
0.21
|
0.23
|
Loans 30-89 days past
due and still accruing as a percentage of loans and
leases
|
0.62
|
0.69
|
0.72
|
0.71
|
0.64
|
Loans 90 days or more
past due and still accruing as a percentage of loans
and leases
|
0.54
|
0.59
|
0.66
|
0.67
|
0.66
|
Loans 90 days or more
past due and still accruing as a percentage of loans
and leases, excluding PPP and other government
guaranteed
|
0.04
|
0.04
|
0.04
|
0.03
|
0.03
|
Allowance for loan and
lease losses as a percentage of loans and leases
held for investment
|
1.34
|
1.38
|
1.44
|
1.53
|
1.65
|
Net charge-offs as a
percentage of average loans and leases, annualized
|
0.27
|
0.22
|
0.25
|
0.25
|
0.19
|
Ratio of allowance for
loan and lease losses to net charge-offs, annualized
|
4.98x
|
6.54x
|
5.78x
|
6.14x
|
8.79x
|
Ratio of allowance for
loan and lease losses to nonperforming loans and leases
held for investment
|
3.80x
|
3.84x
|
3.99x
|
4.07x
|
4.35x
|
Nonperforming assets totaled $1.2
billion at September 30, 2022, up $67 million compared to June 30, 2022 due to
an increase in the commercial and industrial portfolio and
nonperforming loans held for sale. Nonperforming loans and leases
held for investment were 0.35% of loans and leases held for
investment at September 30, 2022, down one basis point
compared to June 30, 2022.
Performing TDRs were up $180
million compared to the prior quarter primarily due to
increases in the government guaranteed residential mortgage and the
commercial and industrial portfolios.
Loans 90 days or more past due and still accruing totaled
$1.7 billion at September 30,
2022, down $78 million, or five basis
points, as a percentage of loans and leases compared with the prior
quarter primarily due to a decline in government guaranteed
residential mortgages. Excluding government guaranteed loans, the
ratio of loans 90 days or more past due and still accruing as a
percentage of loans and leases was 0.04% at September 30,
2022, flat from June 30, 2022.
Loans 30-89 days past due and still accruing of $2.0 billion at September 30, 2022 were down
$134 million, or seven basis points
as a percentage of loans and leases, compared to the prior quarter
primarily due to declines in the commercial and industrial and
student loan portfolios.
Net charge-offs during the third quarter totaled $213 million, or 0.27% as a percentage of average
loans, and were up five basis points compared to the prior quarter,
primarily driven by normalizing trends and seasonality across
certain consumer loan portfolios.
The allowance for credit losses was $4.5
billion and includes $4.2
billion for the allowance for loan and lease losses and
$250 million for the reserve for
unfunded commitments. The ALLL ratio was 1.34% compared to 1.38% at
June 30, 2022. The decline in the ALLL ratio was due to strong
portfolio performance and growth in higher quality loans, partially
offset by a moderately slower economic outlook. The ALLL covered
nonperforming loans and leases held for investment 3.80X compared
to 3.84X at June 30, 2022. At September 30, 2022, the
ALLL was 4.98X annualized net charge-offs, compared to 6.54X at
June 30, 2022.
SEGMENT
RESULTS
|
|
|
|
Change 3Q22
vs.
|
(dollars in
millions)
|
|
|
|
Segment Net
Income
|
3Q22
|
2Q22
|
3Q21
|
2Q22
|
3Q21
|
Consumer Banking and
Wealth
|
$
986
|
$
776
|
$
933
|
$
210
|
$
53
|
Corporate and
Commercial Banking
|
1,164
|
962
|
1,181
|
202
|
(17)
|
Insurance
Holdings
|
95
|
179
|
111
|
(84)
|
(16)
|
Other, Treasury &
Corporate
|
(608)
|
(385)
|
(521)
|
(223)
|
(87)
|
Total net
income
|
$
1,637
|
$
1,532
|
$
1,704
|
$
105
|
$
(67)
|
Truist operates and measures business activity across three
segments: Consumer Banking and Wealth, Corporate and Commercial
Banking, and Insurance Holdings, with functional activities
included in Other, Treasury and Corporate. The Company's business
segment structure is based on the manner in which financial
information is evaluated by management as well as the products and
services provided or the type of client served. For additional
information, see "Note 21. Operating Segments" of the Annual Report
on Form 10-K for the year ended December 31, 2021.
Third Quarter 2022 compared to Second
Quarter 2022
Consumer Banking and Wealth ("CB&W")
CB&W net income was $986
million for the third quarter of 2022, an increase of
$210 million compared to the prior
quarter. Segment net interest income increased $368 million primarily driven by favorable
funding credits on deposits attributable to a higher rate
environment and higher average loan balances, partially offset by a
decrease in loan spreads and lower purchase accounting accretion.
The allocated provision for credit losses increased $84 million due to an increase in net charge-offs
and higher loan growth. Noninterest income was relatively stable
with higher service charges on deposits offsetting lower card and
payment related fees and wealth income. Noninterest expense was
stable with lower merger-related and restructuring charges
offsetting higher operational losses, marketing and customer
development, and salaries.
Average loans held for investment increased $6.0 billion, or 4.5%, compared to the prior
quarter primarily due to an increase in residential mortgages due
to correspondent channel production and slower prepayments, an
increase in the indirect auto prime portfolio, an increase in other
consumer loans primarily due to growth from the Service Finance,
LightStream, recreational lending and Sheffield portfolios,
partially offset by runoff in other partnership lending programs
and student loans. Average total deposits decreased $5.6 billion, or 2.2%, compared to the prior
quarter primarily due to declines in interest bearing checking and
money market and savings deposits as well as time deposits and
noninterest bearing deposits.
Corporate and Commercial Banking ("C&CB")
C&CB net income was $1.2
billion for the third quarter of 2022, an increase of
$202 million compared to the prior
quarter. Segment net interest income increased $278 million due to higher funding credit on
deposits, higher average loan balances, partially offset by lower
deposit balances, reduced purchase accounting accretion and PPP
fees. The allocated provision for credit losses decreased
$22 million which reflects a higher
reserve release compared to the prior quarter, partially offset by
a decrease in net recoveries. Noninterest income decreased
$32 million primarily due to lower
investment banking income. Noninterest expense increased
$14 million primarily driven by
increased personnel expenses due to strategic hiring in the current
quarter.
Average loans held for investment increased $6.1 billion, or 3.8%, compared to the prior
quarter primarily due to increases in core commercial and
industrial loans partially offset by decreases in average PPP loans
(commercial and industrial) and average commercial real estate
loans. Average total deposits decreased $1.2
billion, or 0.8%, compared to the prior quarter primarily
due to declines in noninterest bearing deposits, partially offset
by increases in money market and savings deposits and interest
bearing checking.
Insurance Holdings ("IH")
IH net income was $95 million for
the third quarter of 2022, a decrease of $84
million compared to the prior quarter. Noninterest income
decreased $99 million primarily due
to seasonally lower property and casualty commissions, partially
offset by higher employee benefit plan commissions due to the
BenefitMall acquisition. Noninterest expense increased $17 million primarily due to higher
merger-related and restructuring charges and salaries driven by the
BenefitMall acquisition.
Other, Treasury & Corporate ("OT&C")
OT&C generated a net loss of $608
million for the third quarter of 2022, compared to a net
loss of $385 million for the prior
quarter. Net interest income decreased $313
million primarily due to higher funding credit on deposits
to other segments largely due to the higher rate environment.
Noninterest income and noninterest expense were both flat compared
to prior quarter.
Third Quarter 2022 compared to Third
Quarter 2021
Consumer Banking and Wealth
CB&W net income was $986
million for the third quarter of 2022, an increase of
$53 million compared to the earlier
quarter. Segment net interest income increased $495 million primarily driven by favorable
funding credit on deposits attributable to the higher rate
environment and higher average loan balances, partially offset by
decreased loan spreads and lower purchase accounting accretion. The
allocated provision for credit losses increased $288 million reflecting a reserve release in the
earlier quarter and higher loan growth and increased charge-offs in
the current quarter. Noninterest income decreased $146 million compared to earlier quarter
primarily due to a decrease in residential mortgage income as well
as a decline in wealth income attributed to market declines. These
decreases were partially offset by higher card and payment fees
driven by higher consumer spend. Noninterest expense decreased
$33 million compared to the earlier
quarter primarily due to lower merger-related and restructuring
charges, net occupancy, and incentive expense, partially offset by
increased operational losses.
Corporate and Commercial Banking
C&CB net income was $1.2
billion for the third quarter of 2022, a decrease of
$17 million compared to the earlier
quarter. Segment net interest income increased $339 million primarily due to higher funding
credit on deposits and higher average loan balances, partially
offset by lower purchase accounting accretion and lower PPP
revenue. The allocated provision for credit losses increased
$214 million primarily reflecting an
allowance release in the earlier quarter and higher loan growth in
the current quarter. Noninterest income decreased $148 million compared to the earlier quarter
primarily due to lower investment banking revenue as well as lower
income from the Company's SBIC and other strategic investments,
partially offset by higher trading income. Noninterest expense was
stable compared to the earlier quarter.
Insurance Holdings
IH net income was $95 million for
the third quarter of 2022, a decrease of $16
million compared to the earlier quarter. Noninterest income
increased $82 million primarily due
to continued organic growth and acquisitions. Noninterest expense
increased $103 million primarily due
to higher performance-based incentives, in addition to the impact
of acquisitions.
Other, Treasury & Corporate
OT&C generated a net loss of $608
million in the third quarter of 2022, compared to a net loss
of $521 million in the earlier
quarter. Net interest income decreased $327
million primarily due to higher funding credit on deposits
to other segments, partially offset by higher earnings in the
securities portfolio from the higher rate environment. Noninterest
income decreased $51 million
primarily due to valuation changes from assets held for certain
post-retirement benefits, which is primarily offset by lower
personnel expense. Noninterest expense decreased $243 million compared to the earlier quarter
primarily due to lower merger-related and restructuring charges and
incremental operating expenses related to the merger as well as
lower personnel expense due to lower other employee benefits as a
result of the decrease in noninterest income for post-retirement
benefits and lower incentives, partially offset by an increase in
professional fees and outside processing due to increased project
spend for enterprise technology investments.
Earnings Presentation and Quarterly Performance
Summary
To listen to Truist's live third quarter 2022 earnings
conference call at 8 a.m. ET today,
please call 855-303-0072 and enter the participant code 100038. A
presentation will be used during the earnings conference call and
is available on our website at
https://ir.truist.com/events-and-presentation. Replays of the
conference call will be available for 30 days by dialing
888-203-1112 (access code 100038).
The presentation, including an appendix reconciling non-GAAP
disclosures, and Truist's Third Quarter 2022 Quarterly Performance
Summary, which contains detailed financial schedules, are available
at https://ir.truist.com/earnings.
About Truist
Truist Financial Corporation is a purpose-driven financial
services company committed to inspiring and building better lives
and communities. Truist has leading market share in many
high-growth markets in the country, and offers a wide range of
products and services through our retail and small business
banking, commercial banking, corporate and investment banking,
insurance, wealth management, and specialized lending businesses.
Headquartered in Charlotte, North
Carolina, Truist is a top 10 U.S. commercial bank with total
assets of $548 billion as of
September 30, 2022. Truist Bank, Member FDIC. Learn more at
Truist.com.
Capital ratios and return on risk-weighted assets are
preliminary.
This news release contains financial information and
performance measures determined by methods other than in accordance
with accounting principles generally accepted in the United States of America ("GAAP").
Truist's management uses these "non-GAAP" measures in their
analysis of the Corporation's performance and the efficiency of its
operations. Management believes these non-GAAP measures provide a
greater understanding of ongoing operations, enhance comparability
of results with prior periods and demonstrate the effects of
significant items in the current period. The Corporation believes a
meaningful analysis of its financial performance requires an
understanding of the factors underlying that performance. Truist's
management believes investors may find these non-GAAP financial
measures useful. These disclosures should not be viewed as a
substitute for financial measures determined in accordance with
GAAP, nor are they necessarily comparable to non-GAAP performance
measures that may be presented by other companies. Below is a
listing of the types of non-GAAP measures used in this news
release:
- Adjusted Efficiency Ratio - The adjusted efficiency ratio is
non-GAAP in that it excludes securities gains (losses),
amortization of intangible assets, merger-related and restructuring
charges, and other selected items. Truist's management uses this
measure in their analysis of the Corporation's performance.
Truist's management believes this measure provides a greater
understanding of ongoing operations and enhances comparability of
results with prior periods, as well as demonstrates the effects of
significant gains and charges.
- Adjusted Operating Leverage - The adjusted operating
leverage ratio is non-GAAP in that it excludes securities gains
(losses), amortization of intangible assets, merger-related and
restructuring charges, and other selected items. Truist's
management uses this measure in their analysis of the Corporation's
performance. Truist's management believes this measure provides a
greater understanding of ongoing operations and enhances
comparability of results with prior periods, as well as
demonstrates the effects of significant gains and charges.
- Pre-Provision Net Revenue (PPNR) - Pre-provision net revenue
is a non-GAAP measure that adjusts net income determined in
accordance with GAAP to exclude the impact of the provision for
credit losses and provision for income taxes. Adjusted
pre-provision net revenue is a non-GAAP measure that additionally
excludes securities gains (losses), merger-related and
restructuring charges, amortization of intangible assets, and other
selected items. Truist's management believes these measures provide
a greater understanding of ongoing operations and enhances
comparability of results with prior periods.
- Tangible Common Equity and Related Measures - Tangible
common equity and related measures are non-GAAP measures that
exclude the impact of intangible assets, net of deferred taxes, and
their related amortization. These measures are useful for
evaluating the performance of a business consistently, whether
acquired or developed internally. Truist's management uses these
measures to assess the quality of capital and returns relative to
balance sheet risk.
- Core NIM - Core net interest margin is a non-GAAP measure
that adjusts net interest margin to exclude the impact of purchase
accounting. The purchase accounting marks and related amortization
for loans, deposits, and long-term debt from SunTrust and other
acquisitions are excluded to approximate the yields paid by
clients. Truist's management believes the adjustments to the
calculation of net interest margin for certain assets and
liabilities acquired provide investors with useful information
related to the performance of Truist's earning assets.
- Adjusted Diluted EPS - The adjusted diluted earnings per
share is non-GAAP in that it excludes merger-related and
restructuring charges and other selected items, net of tax.
Truist's management uses this measure in their analysis of the
Corporation's performance. Truist's management believes this
measure provides a greater understanding of ongoing operations and
enhances comparability of results with prior periods, as well as
demonstrates the effects of significant gains and charges.
- Performance Ratios - The adjusted performance ratios,
including adjusted return on average assets, adjusted return on
average common shareholders' equity, and adjusted return on average
tangible common shareholders' equity, are non-GAAP in that they
exclude merger-related and restructuring charges, selected items,
and, in the case of return on average tangible common shareholders'
equity, amortization of intangible assets. Truist's management uses
these measures in their analysis of the Corporation's performance.
Truist's management believes these measures provide a greater
understanding of ongoing operations and enhance comparability of
results with prior periods, as well as demonstrate the effects of
significant gains and charges.
- Insurance Holdings Adjusted EBITDA - EBITDA is a non-GAAP
measurement of operating profitability that is calculated by adding
back interest, taxes, depreciation, and amortization to net income.
Truist's management also adds back merger-related and restructuring
charges, incremental operating expenses related to the merger, and
other selected items. Truist's management uses this measure in its
analysis of the Corporation's Insurance Holdings segment. Truist's
management believes this measure provides a greater understanding
of ongoing operations and enhances comparability of results with
prior periods, as well as demonstrates the effects of significant
gains and charges.
- Allowance for Loan and Lease Losses and Unamortized Fair
Value Mark as a Percentage of Gross Loans and Leases - Allowance
for loan and lease losses and unamortized fair value mark as a
percentage of gross loans and leases is a non-GAAP measurement of
credit reserves that is calculated by adjusting the ALLL and loans
and leases held for investment by the unamortized fair value mark.
Truist's management uses these measures to assess loss absorption
capacity.
A reconciliation of each of these non-GAAP measures to the
most directly comparable GAAP measure is included in the appendix
to Truist's Third Quarter 2022 Earnings Presentation, which is
available at https://ir.truist.com/earnings.
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 Truist. Words such as
"anticipates," "believes," "estimates," "expects," "forecasts,"
"intends," "plans," "projects," "may," "will," "should," "would,"
"could" and other similar expressions are intended to identify
these forward-looking statements.
Forward-looking statements are not based on historical facts
but instead represent management's expectations and assumptions
regarding Truist's business, the economy, and other future
conditions. Such statements involve inherent uncertainties, risks,
and changes in circumstances that are difficult to predict. As
such, Truist's actual results may differ materially from those
contemplated by forward-looking statements. While there can be no
assurance that any list of risks and uncertainties or risk factors
is complete, important factors that could cause actual results to
differ materially from those contemplated by forward-looking
statements include the following, without limitation, as well as
the risks and uncertainties more fully discussed under Part I, Item
1A-Risk Factors in our Annual Report on Form 10-K for the year
ended December 31, 2021 and in Truist's subsequent filings
with the Securities and Exchange Commission:
- residual risks and uncertainties relating to the Merger of
heritage BB&T and heritage SunTrust, including the ability to
realize the anticipated benefits of the Merger;
- expenses relating to the Merger and application and data
center decommissioning;
- deposit attrition, client loss or revenue loss following
completed mergers or acquisitions may be greater than
anticipated;
- the COVID-19 pandemic disrupted the global economy and
adversely impacted Truist's financial condition and results of
operations, including through increased expenses, reduced fee
income and net interest margin, decreased demand for certain types
of loans, and increases in the allowance for credit losses; a
resurgence of the pandemic, whether due to new variants of the
coronavirus or other factors, could reintroduce or prolong these
negative impacts and also adversely affect Truist's capital and
liquidity position or cost of capital, impair the ability of
borrowers to repay outstanding loans, cause an outflow of deposits,
and impair goodwill or other assets;
- Truist is subject to credit risk by lending or committing to
lend money, and may have more credit risk and higher credit losses
to the extent that loans are concentrated by loan type, industry
segment, borrower type or location of the borrower or
collateral;
- changes in the interest rate environment, including the
replacement of LIBOR as an interest rate benchmark, which could
adversely affect Truist's revenue and expenses, the value of assets
and obligations, and the availability and cost of capital, cash
flows, and liquidity;
- inability to access short-term funding or liquidity, loss of
client deposits or changes in Truist's credit ratings, which could
increase the cost of funding or limit access to capital
markets;
- risk management oversight functions may not identify or
address risks adequately, and management may not be able to
effectively manage credit risk;
- risks resulting from the extensive use of models in Truist's
business, which may impact decisions made by management and
regulators;
- failure to execute on strategic or operational plans,
including the ability to successfully complete or integrate mergers
and acquisitions;
- increased competition, including from (i) new or existing
competitors that could have greater financial resources or be
subject to different regulatory standards, and (ii) products and
services offered by non-bank financial technology companies, may
reduce Truist's client base, cause Truist to lower prices for its
products and services in order to maintain market share or
otherwise adversely impact Truist's businesses or results of
operations;
- failure to maintain or enhance Truist's competitive position
with respect to new products, services and technology, whether it
fails to anticipate client expectations or because its
technological developments fail to perform as desired or do not
achieve market acceptance or regulatory approval or for other
reasons, may cause Truist to lose market share or incur additional
expense;
- negative public opinion, which could damage Truist's
reputation;
- increased scrutiny regarding Truist's consumer sales
practices, training practices, incentive compensation design, and
governance;
- regulatory matters, litigation or other legal actions, which
may result in, among other things, costs, fines, penalties,
restrictions on Truist's business activities, reputational harm,
negative publicity, or other adverse consequences;
- evolving legislative, accounting and regulatory standards,
including with respect to climate, capital, and liquidity
requirements, and results of regulatory examinations may adversely
affect Truist's financial condition and results of
operations;
- the monetary and fiscal policies of the federal government
and its agencies, including in response to rising inflation, could
have a material adverse effect on the economy and Truist's
profitability;
- accounting policies and processes require management to make
estimates about matters that are uncertain, including the potential
write down to goodwill if there is an elongated period of decline
in market value for Truist's stock and adverse economic conditions
are sustained over a period of time;
- general economic or business conditions, either globally,
nationally or regionally, may be less favorable than expected,
including as a result of supply chain disruptions, inflationary
pressures and labor shortages, and instability in global
geopolitical matters or volatility in financial markets could
result in, among other things, slower deposit or asset growth, a
deterioration in credit quality, or a reduced demand for credit,
insurance, or other services;
- risks related to originating and selling mortgages,
including repurchase and indemnity demands from purchasers related
to representations and warranties on loans sold, which could result
in an increase in the amount of losses for loan
repurchases;
- risks relating to Truist's role as a loan servicer,
including an increase in the scope or costs of the services Truist
is required to perform, without any corresponding increase in
servicing fees or a breach of Truist's obligations as
servicer;
- Truist's success depends on hiring and retaining key
teammates, and if these individuals leave or change roles without
effective replacements, Truist's operations and integration
activities could be adversely impacted, which could be exacerbated
in the increased work-from-home environment caused by the COVID-19
pandemic as job markets may be less constrained by physical
geography;
- fraud or misconduct by internal or external parties, which
Truist may not be able to prevent, detect, or mitigate;
- security risks, including denial of service attacks,
hacking, social engineering attacks targeting Truist's teammates
and clients, malware intrusion, data corruption attempts, system
breaches, cyber-attacks, which have increased in frequency with
current geopolitical tensions, identity theft, ransomware attacks,
and physical security risks, such as natural disasters,
environmental conditions, and intentional acts of destruction,
could result in the disclosure of confidential information,
adversely affect Truist's business or reputation or create
significant legal or financial exposure; and
- widespread outages of operational, communication, or other
systems, whether internal or provided by third parties, natural or
other disasters (including acts of terrorism and pandemics), and
the effects of climate change, including physical risks, such as
more frequent and intense weather events, and risks related to the
transition to a lower carbon economy, such as regulatory or
technological changes or shifts in market dynamics or consumer
preferences, could have an adverse effect on Truist's financial
condition and results of operations, lead to material disruption of
Truist's operations or the ability or willingness of clients to
access Truist's products and services.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date they
are made. Except to the extent required by applicable law or
regulation, Truist undertakes no obligation to revise or update any
forward-looking statements.
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SOURCE Truist Financial Corporation