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Truist (TFC) Q1 Earnings Beat on Provision Benefit, Higher Loans

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Truist Financial’s (TFC - Free Report) first-quarter 2022 adjusted earnings of $1.23 per share handily surpassed the Zacks Consensus Estimate of $1.12. The bottom line grew 4.2% from the prior-year quarter.

Results were aided by modest average loan growth and provision benefits. However, lower revenues, a rise in expenses and relatively lower rates were the major headwinds.

The reported quarter’s results excluded restructuring and BB&T-SunTrust Banks merger-related charges, incremental operating expenses related to the merger, a gain on the redemption of non-controlling equity interest pertaining to the acquisition of certain merchant services relationships and losses on the sales of securities. After considering these, net income available to common shareholders (GAAP basis) was $1.33 billion or 99 cents per share compared with $1.33 billion or 98 cents per share in the prior-year quarter.

Revenues Down, Expenses Up

Total revenues were $5.33 billion, down 2.9% year over year. The top line missed the Zacks Consensus Estimate of $5.52 billion.

Tax-equivalent NII decreased 3.1% from the year-ago quarter to $3.21 billion. The decline was due to a fall in purchase accounting accretion, a decrease in fees on Payroll Protection Program (PPP) loans and a fall in loans. These were partly offset by growth in the securities portfolio and lower funding costs.

Net interest margin contracted 25 basis points (bps) year over year to 2.76%.

Non-interest income decreased 2.1% to $2.14 billion. Excluding certain non-recurring items, non-interest income was down 1.1%.

Non-interest expenses were $3.67 billion, up 1.8% from the prior-year quarter. Adjusted expenses were relatively stable at $3.12 billion.

The adjusted efficiency ratio was 58.3%, up from 56.9% in first-quarter 2021. A rise in efficiency ratio indicates deterioration in profitability.

As of Mar 31, 2022, total average deposits were $415.2 billion, up 1% sequentially. Average total loans and leases of $292.5 billion grew slightly.

Credit Quality Improves

As of Mar 31, 2022, total non-performing assets (NPAs) were $1.14 billion, down 12.6% year over year. As a percentage of total assets, NPAs were 0.21%, decreasing 4 bps.

Allowance for loan and lease losses was 1.44% of total loans and leases held for investment, which decreased 50 bps. Net charge-offs were 0.25% of average loans and leases, down 8 bps from the year-ago quarter.

Provision for credit losses was a benefit of $95 million against a provision of $48 in the prior-year quarter. Reserve releases, owing to improving economic outlook, led to provision benefits.

Profitability & Capital Ratios Robust

At the end of the reported quarter, the return on average assets was 1.07%, down from 1.17% in the prior-year quarter. Return on average common equity was 9%, up from 8.7% in the first quarter of 2021.

As of Mar 31, 2022, Tier 1 risk-based capital ratio was 11% compared with 12% recorded in the prior-year quarter. Common equity Tier 1 ratio was 9.4% as of Mar 31, 2022, down from 10.1% as of Mar 31, 2021.

Our Take

Truist Financial’s efforts to capitalize on the investment banking and insurance businesses bode well and will aid fee income growth going forward. A rise in demand for loans, expectations of higher rates and robust economic growth will support financials. However, mounting expenses and ambiguity over geopolitical and economic risks remain major concerns.
 

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

Lower markets revenues, reserve build and a decline in IB fees affected JPMorgan’s (JPM - Free Report) first-quarter 2022 earnings of $2.63 per share, which missed the Zacks Consensus Estimate of $2.73. The reported quarter’s results included net credit reserve build and losses in Credit Adjustments & Other.

During the first quarter, JPM reported a net credit reserve build of $902 million, given the “higher probabilities of downside risks.”

Wells Fargo’s (WFC - Free Report) first-quarter 2022 earnings per share of 88 cents surpassed the Zacks Consensus Estimate of 81 cents. However, the bottom line declined 14% year over year. Results in the reported quarter included the impact of a $1.1 billion decline in allowance for credit losses.

Results benefited from higher NII, provision benefits, a marginal decline in costs and solid average loan growth. Further, WFC’s credit quality remained robust during the quarter. However, disappointing non-interest income and weakness in the mortgage business were the major headwinds.


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