Truist Financial Corporation — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Comparisons are with Q1 2021 unless otherwise stated; balance-sheet comparisons are with December 31, 2021. Amounts are in U.S. dollars.
Business context and results
Truist is a diversified bank holding company with Consumer Banking and Wealth, Corporate and Commercial Banking, and Insurance Holdings segments. Management said it completed its final major core-bank conversion during the quarter, moving nearly seven million clients to the Truist platform, and described the quarter’s results as solid but mixed amid market volatility and geopolitical uncertainty.
Key financial metrics
| Metric | Q1 2022 | Comparable / change |
|---|---|---|
| Revenue, taxable-equivalent basis | $5.4 billion | Down $159 million, or 2.9%, year over year |
| Net interest income, GAAP | $3.183 billion | Down 3.1% |
| Net interest margin | 2.76% | Down 25 basis points year over year |
| Net income | $1.416 billion | Down 3.9% |
| Net income available to common shareholders | $1.327 billion | Compared with $1.334 billion |
| Diluted EPS | $0.99 | Compared with $0.98 |
| Return on average assets / common equity | 1.07% / 9.0% | 1.17% / 8.7% in Q1 2021 |
| Provision for credit losses | $95 million benefit | $48 million expense in Q1 2021 |
| Net charge-offs / annualized ratio | $178 million / 0.25% | $238 million / 0.33% in Q1 2021 |
| Noninterest income / expense | $2.142 billion / $3.674 billion | Income down 2.5%; expense up 1.8% |
| Operating cash flow | $(188) million | $(33) million in Q1 2021 |
At March 31, total assets were $544.0 billion, loans and leases were $290.1 billion, and deposits were $428.3 billion. Deposits increased $11.8 billion, or 2.8%, from year-end. Total shareholders’ equity was $65.0 billion, down $4.2 billion, chiefly reflecting a $4.9 billion decline in accumulated other comprehensive income (AOCI), primarily from securities valuation losses.
Liquidity and capital remained strong, according to management. The CET1 ratio was 9.4%, down from 9.6% at year-end; the average liquidity coverage ratio was 111%, with average eligible high-quality liquid assets of $83.9 billion. Available secured borrowing capacity and eligible FRB cash totaled $231.2 billion. Long-term debt was $33.8 billion, down $2.1 billion, and short-term borrowings were $5.1 billion. The company declared a $0.48-per-share common dividend; the reported dividend and total payout ratios were 48%.
Material changes and unusual items
- Net interest income and margin declined year over year as lower loan yields, purchase-accounting accretion, and PPP fees outweighed growth in securities and lower funding costs. Average earning assets rose 5.9%, while average loans and leases fell 2.4% and average deposits rose 8.4%.
- Noninterest income was affected by $69 million of net securities losses and a $74 million gain from redeeming a noncontrolling equity interest. Insurance income increased 16%; investment banking and trading income fell 25%, and residential mortgage income fell 11%.
- Noninterest expense included $216 million of merger-related and restructuring charges. Management said adjusted expense, excluding specified merger items and intangible amortization, was relatively stable year over year. The quarter included $202 million of incremental merger-related operating expenses after tax effects are excluded from that figure.
- Truist transferred $59.4 billion of available-for-sale securities to held-to-maturity. The transfer created no recognized gain or loss; the securities’ unrealized losses remain reflected through AOCI and will be amortized over time. Gross unrealized losses on AFS securities were $4.8 billion at quarter-end, which management attributed substantially to interest-rate movements rather than credit deterioration.
- Truist acquired Kensington Vanguard National Land Services on March 1, recording approximately $187 million of goodwill and $148 million of identifiable intangible assets.
- After quarter-end, Truist redeemed $800 million of FHLB advances, recognizing a $39 million gain on early extinguishment of debt, and redeemed senior notes due in May 2022.
Outlook, risks, and contingencies
No quantitative earnings or financial guidance is provided in the supplied filing text. Management expressed confidence in the outlook, citing expected higher interest rates, business diversification, and expense discipline, while noting increasing economic and geopolitical uncertainty. The company’s interest-rate sensitivity analysis projected a 4.27% increase in next-12-month net interest income under a gradual 100-basis-point rate increase, and a 3.29% increase under a gradual 50-basis-point increase; these are modeled scenarios, not guidance.
Management cited inflation, supply-chain disruption, rising rates, and geopolitical events as uncertainties in its credit outlook. Other disclosed risks include deposit attrition, funding and liquidity access, credit deterioration, interest-rate and LIBOR-transition exposure, merger integration, competition, cyber and operational threats, regulatory changes, and litigation. Truist estimated reasonably possible legal losses in excess of accrued amounts of up to approximately $200 million; this is not a maximum exposure, and actual losses could vary or be unestimable for certain matters. A Georgia class action concerning overdraft fees remains in discovery; the company says it believes the claims are without merit.
Facts investors should verify
- Whether higher rates translate into sustained net interest income growth, given deposit-beta assumptions, deposit mix, and the securities portfolio’s duration.
- Credit quality trends, reserve coverage, and loan performance as inflation, rates, and economic conditions evolve; the Q1 reserve benefit reflects a favorable-credit assessment.
- The impact of the $59.4 billion AFS-to-HTM transfer, including AOCI, future interest income, and the portfolio’s ability to respond to changing liquidity needs.
- Progress on post-conversion integration, expense discipline, and realization of merger benefits after the final major core conversion.
- Capital and liquidity trends, including CET1, LCR, deposit levels, and debt repayments, as well as the company’s stated repurchase authorization and actual capital deployment.
- Developments in legal and regulatory matters, LIBOR contract remediation, and other contingencies that may materially affect results or reputation.