Truist Financial Corporation — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing; the supplied text does not provide a complete standalone fourth-quarter income statement. Unless noted otherwise, figures below are for the full year or as of year-end. Dollar amounts are U.S. dollars.
Business context
Truist is a U.S. commercial bank and diversified financial-services company headquartered in Charlotte, North Carolina. Its businesses include consumer and commercial banking, corporate and investment banking, insurance, wealth management, payments, and specialized lending. It operated through Consumer Banking and Wealth, Corporate and Commercial Banking, and Insurance Holdings segments during 2023.
Financial performance and position
| Metric | 2023 | Comparison / context |
|---|---|---|
| Total revenue | $23.390 billion | Up 1.5% from $23.035 billion in 2022 |
| Net interest income, taxable-equivalent | $14.820 billion | Up 2.5%; GAAP net interest income was $14.600 billion |
| Net interest margin, taxable-equivalent | 3.00% | Down 1 basis point from 3.01% |
| Noninterest income | $8.790 billion | Up 0.8%; insurance income rose, while investment banking and trading income and deposit service charges fell |
| Net income (loss) available to common shareholders | $(1.452) billion; diluted EPS $(1.09) | Versus $5.927 billion and diluted EPS of $4.43 in 2022 |
| Provision for credit losses | $2.109 billion | Up from $777 million; net charge-off ratio rose to 0.50% from 0.27% |
| Noninterest expense | $21.466 billion | Up 47.1%, including $6.078 billion goodwill impairment and $507 million FDIC special assessment |
| Operating cash flow | $8.631 billion | Down from $11.081 billion in 2022 |
The 2023 net loss included a $6.1 billion non-cash, non-tax-deductible goodwill impairment, a $507 million FDIC special assessment ($387 million after tax), $375 million of merger-related and restructuring charges ($286 million after tax), and a $204 million discrete tax benefit. The impairment related to the Consumer Banking and Wealth and Corporate and Commercial Banking reporting units; management said it did not affect regulatory capital ratios, liquidity, or dividend-paying ability. Adjusted noninterest expense, as defined by Truist, increased 6.9%.
- Balance sheet: Total assets were $535.3 billion, down 3.6% year over year. Loans and leases held for investment were $312.1 billion, down $13.9 billion, including the 2023 sale of the student loan portfolio. Securities totaled $121.5 billion, down from $129.5 billion.
- Funding and debt: Deposits were $395.9 billion, down $17.6 billion; approximately 62% were insured or collateralized. Short-term borrowings were $24.8 billion, up $1.4 billion, while long-term debt was $38.9 billion, down $4.3 billion.
- Credit and reserves: Nonperforming loans and leases held for investment were 0.44% of loans, versus 0.36% a year earlier. The allowance for credit losses was $5.1 billion, including $4.8 billion for loan and lease losses; the allowance-to-loans ratio was 1.54%, versus 1.34%.
- Capital and liquidity: Truist’s CET1 ratio was 10.1%, up 110 basis points year over year; Truist Bank’s CET1 ratio was 11.7%. Average consolidated LCR was 112% for Q4, above the 100% regulatory minimum. Available secured borrowing capacity plus eligible cash at the Federal Reserve was $179.8 billion at year-end.
- Shareholder measures: Total shareholders’ equity was $59.3 billion. Book value per common share was $39.31; tangible book value per common share was $21.83, up 21% year over year. Truist declared $2.08 per common share in dividends and made no common-share repurchases in 2023.
At year-end, the securities portfolio had $11.5 billion of gross unrealized losses on available-for-sale securities; held-to-maturity securities had a fair value of $44.6 billion versus $54.1 billion amortized cost. Truist attributed substantially all portfolio unrealized losses to market interest-rate changes rather than credit quality and reported no securities ACL.
Material changes versus 2022
- Common shareholders’ results swung from $5.927 billion of income to a $1.452 billion loss, principally reflecting the goodwill impairment and higher credit and regulatory costs.
- Higher market rates and average loan balances lifted taxable-equivalent net interest income, but higher funding costs and lower purchase-accounting accretion constrained the benefit. Average deposits declined $17.0 billion, while average short-term borrowings rose $9.5 billion and average long-term debt rose $15.5 billion.
- Credit costs increased: provision expense rose to $2.109 billion and net charge-offs to $1.595 billion. Management described asset quality as normalizing, with modest deterioration in commercial portfolios.
- Truist sold a 20% common-equity interest in Truist Insurance Holdings (TIH) in April 2023 for $1.9 billion. It also reported progress on organizational simplification, headcount reductions, and consolidation of business lines.
Outlook, commentary, risks, and contingencies
- Management priorities: Simplify the organization and improve efficiency, deepen core client relationships, grow market share through existing platforms, digitize and automate operations, and build capital while maintaining risk controls and asset quality. The filing provides no quantified earnings or revenue guidance or specific cost-savings target.
- TIH transaction after year-end: On February 20, 2024, Truist agreed to sell its remaining 80% TIH stake at an implied $15.5 billion enterprise value. It expects approximately $10.1 billion of after-tax cash proceeds and an estimated gain based on proceeds exceeding its approximately $5.4 billion investment. Closing was expected in Q2 2024, subject to customary conditions and regulatory approvals; completion and final proceeds are not assured. The transaction would deconsolidate TIH and change Truist’s revenue mix.
- Principal risks: Deposit retention and funding costs; interest-rate and securities-value exposure; credit deterioration, particularly in commercial real estate and commercial construction; economic weakness; regulatory capital, liquidity, and compliance requirements; cybersecurity, technology and third-party resilience; and execution of restructuring and strategic plans. CRE and commercial construction totaled $29.3 billion, including $4.9 billion of office exposure; Truist said it increased reserves following reviews of its office portfolio.
- Legal matters: Truist estimated reasonably possible legal losses above accruals of up to approximately $350 million at year-end; this is not a maximum exposure, and some matters could not yet be estimated. In the Bickerstaff overdraft-fee class action, the plaintiff seeks up to $452 million plus estimated prejudgment interest of approximately $400 million; motions and mediation were pending, and trial was scheduled for April 2024. The company also reported SEC and CFTC recordkeeping inquiries and a continuing U.S. DOJ investigation regarding certain trusts.
- Other unusual costs: The $507 million FDIC special assessment was recognized in Q4 2023 and is payable in eight quarterly installments beginning in 2024; final FDIC loss calculations could change the expense. The filing also notes proposed U.S. capital-rule and long-term-debt changes that Truist was evaluating.
- Controls and audit: The independent auditor issued an unqualified opinion on the financial statements and internal control over financial reporting. Management concluded internal controls and disclosure controls were effective as of December 31, 2023.
Investor verification checklist
- Review the underlying earnings impact and key valuation assumptions behind the $6.1 billion goodwill impairment, including whether future conditions could trigger further impairment.
- Track deposit balances, mix, pricing and uninsured-deposit trends, and the effect of replacing deposits with higher-cost borrowings on net interest margin.
- Monitor credit migration, charge-offs, reserve adequacy, and office and other CRE maturities and performance.
- Confirm the TIH sale’s closing, actual after-tax proceeds and gain, resulting capital position, and effect on recurring fee revenue and earnings diversification.
- Check the status and potential financial impact of the Bickerstaff litigation, recordkeeping inquiries, FDIC assessment, and proposed regulatory requirements.
- Assess execution of the cost and simplification plan, capital generation, dividend sustainability, and the impact of the remaining CECL capital phase-in.