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Truist Financial's (TFC) Q4 Earnings Beat as Provisions Fall
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Truist Financial’s (TFC - Free Report) fourth-quarter 2020 adjusted earnings of $1.18 per share easily outpaced the Zacks Consensus Estimate of 99 cents. Results excluded restructuring and BB&T-SunTrust Banks merger-related charges, and incremental operating expenses related to the merger. Compared with the previous quarter, the bottom line improved 21.6%.
Results benefited from stable net interest income, rise in fee income and lower provision for credit losses. Also, improvement in deposit balance was a tailwind. However, rise in operating expenses, fall in loan balance and lower rates were the undermining factors.
After considering non-recurring items, net income available to common shareholders (GAAP basis) was $1.23 billion or 90 cents per share, up from $1.07 billion or 79 cents per share in the prior quarter.
In 2020, adjusted earnings per share of $3.80 beat the consensus estimate of $3.63 but was down 29.5% year over year. Net income available to common shareholders (GAAP basis) was $4.18 billion or $3.08 per share compared with $3.03 billion or $3.71 per share in 2019.
Revenues & Expenses Rise
Total revenues in the reported quarter (on a tax-equivalent basis) were $5.68 billion, up 1.4% sequentially. Also, the top line beat the Zacks Consensus Estimate of $5.42 billion.
In 2020, total revenues (on a tax-equivalent basis) grew 80.3% year over year to $22.83 billion. Also, the top line surpassed the consensus estimate of $22.45 billion.
Tax-equivalent net interest income was relatively stable on a sequential basis at $3.39 billion.
Net interest margin decreased 2 basis points (bps) sequentially to 3.08%. The decline was due to lower purchase-accounting accretion and lower yield on securities due to the impact of new investments at lower rates.
Non-interest income grew 3.8% from the third quarter to $2.29 billion. The prior quarter included securities gains of $104 million. Excluding this, adjusted non-interest income rose 8.5%.
Non-interest expenses were $3.83 billion, up 2.1% from the prior quarter. Adjusted expenses declined nearly 1% to $3.17 billion.
Adjusted efficiency ratio was 55.9%, down from 57.3% in the third quarter. A fall in efficiency ratio indicates improvement in profitability.
As of Dec 31, 2020, total average deposits were $375.3 billion, up almost 1% from the previous quarter end. Average total loans and leases of $308.2 billion declined 2.4%.
Credit Quality: Mixed Bag
As of Dec 31, 2020, total non-performing assets (NPAs) were $1.39 billion, up 5.6% sequentially. As a percentage of total assets, NPAs were 0.27%, increasing 1 bp from the prior quarter.
Also, allowance for loan and lease losses was 1.95% of total loans and leases held for investment, which increased 4 bps.
However, net charge-offs were 0.27% of average loans and leases, down 15 bps, sequentially. Further, provision for credit losses declined 58% to $177 million.
Robust Profitability & Capital Ratios
At the end of the reported quarter, return on average assets was 1.05%, up from 0.91% in the prior quarter. Return on average common equity was 7.88%, up from 6.87% in the third quarter of 2020.
As of Dec 31, 2020, Tier 1 risk-based capital ratio was 12.1% compared with 12.2% recorded in the prior quarter. Common equity Tier 1 ratio was 10% as of Dec 31, 2020, on par with the third-quarter 2020 level.
Our View
Truist Financial remains well positioned for revenue improvement through continued decent growth in loan demand and efforts to improve fee income sources. However, pressure on margins due to the low interest rate environment poses a major near-term concern.
Truist Financial Corporation Price, Consensus and EPS Surprise
Unexpected large reserve releases, along with solid capital markets performance, drove JPMorgan’s (JPM - Free Report) fourth-quarter 2020 earnings of $3.79 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $2.72.
Bank of America’s (BAC - Free Report) fourth-quarter 2020 earnings of 59 cents per share beat the Zacks Consensus Estimate of 56 cents. However, the bottom line was 21% below the prior-year quarter level.
Citigroup (C - Free Report) delivered an earnings surprise of 53.3% in fourth-quarter 2020 on reserve releases. Income from continuing operations of $2.07 per share handily outpaced the Zacks Consensus Estimate of $1.35. Results were, however, down 3.7% from the prior-year quarter.
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A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
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Truist Financial's (TFC) Q4 Earnings Beat as Provisions Fall
Truist Financial’s (TFC - Free Report) fourth-quarter 2020 adjusted earnings of $1.18 per share easily outpaced the Zacks Consensus Estimate of 99 cents. Results excluded restructuring and BB&T-SunTrust Banks merger-related charges, and incremental operating expenses related to the merger. Compared with the previous quarter, the bottom line improved 21.6%.
Results benefited from stable net interest income, rise in fee income and lower provision for credit losses. Also, improvement in deposit balance was a tailwind. However, rise in operating expenses, fall in loan balance and lower rates were the undermining factors.
After considering non-recurring items, net income available to common shareholders (GAAP basis) was $1.23 billion or 90 cents per share, up from $1.07 billion or 79 cents per share in the prior quarter.
In 2020, adjusted earnings per share of $3.80 beat the consensus estimate of $3.63 but was down 29.5% year over year. Net income available to common shareholders (GAAP basis) was $4.18 billion or $3.08 per share compared with $3.03 billion or $3.71 per share in 2019.
Revenues & Expenses Rise
Total revenues in the reported quarter (on a tax-equivalent basis) were $5.68 billion, up 1.4% sequentially. Also, the top line beat the Zacks Consensus Estimate of $5.42 billion.
In 2020, total revenues (on a tax-equivalent basis) grew 80.3% year over year to $22.83 billion. Also, the top line surpassed the consensus estimate of $22.45 billion.
Tax-equivalent net interest income was relatively stable on a sequential basis at $3.39 billion.
Net interest margin decreased 2 basis points (bps) sequentially to 3.08%. The decline was due to lower purchase-accounting accretion and lower yield on securities due to the impact of new investments at lower rates.
Non-interest income grew 3.8% from the third quarter to $2.29 billion. The prior quarter included securities gains of $104 million. Excluding this, adjusted non-interest income rose 8.5%.
Non-interest expenses were $3.83 billion, up 2.1% from the prior quarter. Adjusted expenses declined nearly 1% to $3.17 billion.
Adjusted efficiency ratio was 55.9%, down from 57.3% in the third quarter. A fall in efficiency ratio indicates improvement in profitability.
As of Dec 31, 2020, total average deposits were $375.3 billion, up almost 1% from the previous quarter end. Average total loans and leases of $308.2 billion declined 2.4%.
Credit Quality: Mixed Bag
As of Dec 31, 2020, total non-performing assets (NPAs) were $1.39 billion, up 5.6% sequentially. As a percentage of total assets, NPAs were 0.27%, increasing 1 bp from the prior quarter.
Also, allowance for loan and lease losses was 1.95% of total loans and leases held for investment, which increased 4 bps.
However, net charge-offs were 0.27% of average loans and leases, down 15 bps, sequentially. Further, provision for credit losses declined 58% to $177 million.
Robust Profitability & Capital Ratios
At the end of the reported quarter, return on average assets was 1.05%, up from 0.91% in the prior quarter. Return on average common equity was 7.88%, up from 6.87% in the third quarter of 2020.
As of Dec 31, 2020, Tier 1 risk-based capital ratio was 12.1% compared with 12.2% recorded in the prior quarter. Common equity Tier 1 ratio was 10% as of Dec 31, 2020, on par with the third-quarter 2020 level.
Our View
Truist Financial remains well positioned for revenue improvement through continued decent growth in loan demand and efforts to improve fee income sources. However, pressure on margins due to the low interest rate environment poses a major near-term concern.
Truist Financial Corporation Price, Consensus and EPS Surprise
Truist Financial Corporation price-consensus-eps-surprise-chart | Truist Financial Corporation Quote
Truist Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Major Banks
Unexpected large reserve releases, along with solid capital markets performance, drove JPMorgan’s (JPM - Free Report) fourth-quarter 2020 earnings of $3.79 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $2.72.
Bank of America’s (BAC - Free Report) fourth-quarter 2020 earnings of 59 cents per share beat the Zacks Consensus Estimate of 56 cents. However, the bottom line was 21% below the prior-year quarter level.
Citigroup (C - Free Report) delivered an earnings surprise of 53.3% in fourth-quarter 2020 on reserve releases. Income from continuing operations of $2.07 per share handily outpaced the Zacks Consensus Estimate of $1.35. Results were, however, down 3.7% from the prior-year quarter.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>