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Truist Financial (TFC) Q1 Earnings Top, Revenues Lag Estimates

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Truist Financial’s (TFC - Free Report) first-quarter 2021 adjusted earnings of $1.18 per share outpaced the Zacks Consensus Estimate of $1.12. 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 42%.

Results were aided by record performance from its insurance business and investment banking as well as a decline in provision for credit losses. Also, improvement in deposit balance was a tailwind. However, lower rates on earning assets hindered net interest income growth.

After considering non-recurring items, net income available to common shareholders (GAAP basis) was $1.33 billion or 98 cents per share, up from $986 million or 73 cents per share in the prior quarter.

Revenues & Expenses Decline

Total revenues in the reported quarter were $5.48 billion, declinng around 3% sequentially. Also, the top line marginally missed the Zacks Consensus Estimate of $5.49 billion.

Tax-equivalent net interest income sequentially decreased 2.4% to $3.13 billion.

Net interest margin decreased 7 basis points (bps) sequentially to 3.01%.

Non-interest income declined 3.9% from fourth-quarter 2020 to $2.2 billion.

Non-interest expenses were $3.6 billion, down 6.2% from the prior quarter. Adjusted expenses reduced by $57 million.

Adjusted efficiency ratio was 56.9%, up from 55.9% in fourth-quarter 2020. A rise in efficiency ratio indicates deterioration in profitability.

As of Mar 31, 2021, total average deposits were $383.2 billion, up 2.1% from the previous quarter end. Average total loans and leases of $294.7 billion sequentially declined 2.7%.

Credit Quality: Mixed Bag

As of Mar 31, 2021, total non-performing assets (NPAs) were $1.3 billion, down 6.34% sequentially. As a percentage of total assets, NPAs were 0.25%, decreasing 2 bps from the prior quarter.

Also, allowance for loan and lease losses was 1.94% of total loans and leases held for investment, which decreased 1 bp.

Nonetheless, net charge-offs were 0.33% of average loans and leases, up 6 bps, sequentially. Provision for credit losses declined 72.9% to $48 million.

Profitability Ratio Up

At the end of the reported quarter, return on average assets was 1.17%, up from 1.05% in the prior quarter. Return on average common equity was 8.69%, up from 7.88% in the fourth quarter of 2020.

Strong Capital Ratios

As of Mar 31, 2021, Tier 1 risk-based capital ratio was 12% compared with 12.1% recorded in the prior quarter. Common equity Tier 1 ratio was 10.1% as of Mar 31, 2021, compared with 10% in fourth-quarter 2020.

Share Repurchase Update

In the quarter, Truist Financial repurchased common shares amounting to $506 million.

Our View

In the quarter, the company completed the wealth brokerage transition. Moreover, its emphasis to enhance its investment banking and insurance businesses bodes well. However, pressure on margins due to the low interest rate environment and soft loan demand are near-term hurdles.

Truist Financial Corporation Price, Consensus and EPS Surprise


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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Earnings Dates of Other Banks

While Morgan Stanley (MS - Free Report) and State Street (STT - Free Report) will report Q1 results on Apr 16, KeyCorp (KEY - Free Report) is scheduled to come out with quarterly numbers on Apr 20.

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