Truist Financial Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. The filing was signed May 9, 2024. Unless noted, financial results compare with Q1 2023; balance-sheet figures compare with December 31, 2023. TIH is presented as discontinued operations.
Business context and results
Truist operates its continuing business through Consumer and Small Business Banking (CSBB), Wholesale Banking (WB), and Other, Treasury & Corporate (OT&C). Management said expense discipline and investment-banking performance supported results, while loan demand was muted and deposit costs remained under pressure.
| Metric | Q1 2024 | Prior comparable period / change |
|---|---|---|
| Net interest income (GAAP) | $3.37 billion | $3.87 billion; down 12.8% |
| Net interest margin (taxable-equivalent) | 2.89% | 3.17%; down 28 basis points |
| Noninterest income | $1.45 billion | $1.42 billion; up 1.8% |
| Noninterest expense | $2.95 billion | $3.02 billion; down 2.1% |
| Provision for credit losses | $500 million | $502 million |
| Net income from continuing operations | $1.13 billion | $1.41 billion |
| Net income available to common shareholders | $1.09 billion | $1.41 billion; down 23% |
| Diluted EPS | $0.81 | $1.05; down 23% |
| Return on average assets / common equity | 0.91% / 8.4% | 1.10% / 10.3% |
Higher funding costs and lower average earning assets drove the decline in net interest income. The average loan yield rose to 6.38%, but the average cost of deposits increased to 2.03%, up 91 basis points year over year. Investment banking and trading income increased 23.8%; mortgage banking income fell 31.7% and deposit service charges fell 10.0%.
Financial position, liquidity and credit
- Balance sheet: Total assets were $535.0 billion. Loans and leases were $307.2 billion, down from $312.1 billion at year-end; deposits were $394.3 billion. Cash and interest-bearing deposits with banks totaled $34.6 billion.
- Funding and debt: Short-term borrowings were $26.3 billion and long-term debt was $39.1 billion. Average deposits were $389.1 billion, down 1.6% from Q4 2023 and 4.7% year over year.
- Capital and liquidity: CET1 was 10.1%, unchanged from year-end. Average consolidated LCR was 115%, above the 100% regulatory minimum. Available secured borrowing capacity plus eligible FRB cash was $181.5 billion.
- Credit: The allowance for credit losses was $5.1 billion, including $4.8 billion for loan and lease losses and $297 million for unfunded commitments. The ALLL ratio was 1.56%. Nonperforming loans were 0.45% of loans held for investment; the quarterly net charge-off ratio was 0.64%, up from 0.37% in Q1 2023.
- Concentrations: CRE and commercial construction loans totaled $29.6 billion. Office loans were $4.1 billion, with $244 million nonperforming; management identified CRE and construction as potentially higher-risk portfolios.
- Cash flow: Operating activities used $990 million, investing activities provided $5.90 billion, and financing activities used $572 million. Cash and cash equivalents increased $4.34 billion to $35.0 billion, including discontinued operations.
- Securities and AOCI: AFS securities were $66.1 billion and HTM securities were $53.4 billion at carrying value. AFS unrealized losses were $12.2 billion and HTM fair value was $10.3 billion below carrying value. AOCI declined to negative $13.2 billion, including a $576 million after-tax quarterly decline from AFS securities.
Material changes, unusual items and outlook
- Q1 continuing-operations results included a $75 million FDIC special assessment and $51 million of restructuring charges. Management reported adjusted noninterest expense, excluding the FDIC assessment, restructuring and intangible amortization, down 4.2% year over year.
- On May 6, 2024, Truist completed the sale of its remaining TIH interest, receiving approximately $10.1 billion in after-tax cash proceeds and recognizing an approximately $4.7 billion after-tax gain. The sale occurred after quarter-end; TIH’s Q1 discontinued-operations income was $67 million.
- After the TIH sale, Truist sold $27.7 billion of lower-yielding securities, recording a $5.1 billion after-tax loss in Q2. It reinvested approximately $18.7 billion in shorter-duration securities yielding 5.27% and planned to hold $20.7 billion in cash. The stated blended reinvestment rate was 5.22% for the remainder of 2024, based on the Federal Funds futures curve and including hedge effects.
- Management said the TIH transaction strengthened capital and could support share buybacks later in 2024, depending on market conditions and other factors. Capital distributions became subject to prior Federal Reserve approval after the required capital-plan resubmission; June dividends were approved. No share repurchases were made in Q1 under a public plan.
- Net interest income is described as liability-sensitive. Under the filing’s modeled scenarios, a gradual 200-basis-point rate increase would reduce 12-month NII by 2.35% versus baseline. Results depend on assumptions, including deposit mix and customer behavior.
- Other notable matters include reasonably possible legal losses of up to approximately $375 million beyond accruals, with actual outcomes potentially differing materially; an overdraft-fee class action with substantial claimed damages; and ongoing SEC/CFTC recordkeeping discussions. The filing says no material changes were made to the previously disclosed risk factors.
- Goodwill allocated to WB was identified as potentially at risk: its estimated fair value exceeded carrying value by less than 10% at January 1, 2024, and an increase in the discount rate of less than 50 basis points could have resulted in impairment. Truist concluded impairment was not more-likely-than-not at March 31.
- Moody’s downgraded Truist’s and Truist Bank’s long-term ratings on May 8, 2024 and assigned stable outlooks. The filing provides no specific earnings or full-year financial guidance.
Investor verification priorities
- Track deposit levels, deposit pricing, and NIM: funding costs rose sharply while average deposits and earning assets declined.
- Assess credit migration and loss trends, especially CRE/office, indirect auto, other consumer, and credit-card portfolios; compare charge-offs with allowance coverage.
- Review the completed securities repositioning’s Q2 loss, reinvestment yields, and effect on future NII, capital, and book value.
- Confirm the post-TIH-sale capital position, regulatory approval status for distributions, and whether any buyback is authorized or executed.
- Monitor the Moody’s downgrade, the WB goodwill impairment sensitivity, legal and regulatory matters, and any additional FDIC assessment expense.