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Truist Financial’s (TFC - Free Report) fourth-quarter 2022 adjusted earnings of $1.30 per share surpassed the Zacks Consensus Estimate of $1.28. The bottom line declined 5.8% from the prior-year quarter. Our estimate for earnings was $1.27.
Results have been primarily aided by an increase in net income interest (NII). Also, higher interest rates drove margins. However, a decline in non-interest income, higher provisions and marginally higher expenses were the undermining factors.
After considering non-recurring items, net income available to common shareholders was $1.61 billion or $1.20 per share, up from $1.52 billion or $1.13 per share in the prior-year quarter. Our estimate for the same was $1.63 billion.
Adjusted earnings of $4.96 per share for 2022 marginally surpassed the Zacks Consensus Estimate of $4.95. The bottom line declined 10.3% from the previous year. Our estimate for earnings was $4.94. Net income available to common shareholders (GAAP basis) was $5.93 billion or $4.43 per share, down from $6.03 billion or $4.47 per share in 2021. Our estimate for net income was $5.95 billion.
Revenues Improve, Expenses Rise Marginally
Total quarterly revenues were $6.21 billion, up 11.5% year over year. The top line beat the Zacks Consensus Estimate of $6.13 billion. Our estimate for revenues was $6.08 billion.
Revenues for 2022 were $23.04 billion, up 3.3% year over year. The top line surpassed the Zacks Consensus Estimate of $22.98 billion. Our estimate for revenues was $22.91 billion.
Tax-equivalent NII for the quarter increased 23.4% year over year to $4.03 billion. The rise was driven by strong loan growth and higher market interest rates, coupled with well-controlled deposit costs, partially offset by lower purchase accounting accretion and lower PPP revenues. Our estimate for NII was $3.93 billion.
Net interest margin expanded 49 basis points (bp) year over year to 3.25%. Our estimate for the same was 3.28%.
Non-interest income decreased 4.1% to $2.23 billion. This was due to a decline in investment banking and trading income, mortgage banking income, wealth management income, service charges on deposits, and operating lease income. Our estimate for non-interest income was $2.18 billion.
Non-interest expenses were $3.72 billion, up marginally year over year. Our estimate for the same was $3.66 billion.
The adjusted efficiency ratio was 54.2%, down from 56% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.
As of Dec 31, 2022, total average deposits were $413.28 billion, down 1.6% sequentially. Average total loans and leases of $320.67 billion grew 3.6% sequentially.
Credit Quality: Mixed Bag
As of Dec 31, 2022, total non-performing assets (NPAs) were $1.25 billion, up 7.5% year over year. Our estimate for the metric was $1.49 billion. As a percentage of total assets, NPAs were 0.23%, up from 0.21% a year ago.
Provision for credit losses was $467 million against a benefit of $103 in the prior-year quarter. Our estimate for provisions was $294.9 million. Net charge-offs were 0.34% of average loans and leases, up 9 bps from the year-ago quarter.
However, the allowance for loan and lease losses was 1.34% of total loans and leases held for investment, which decreased 19 bps.
Profitability Ratios Improve, Capital Ratios Weaken
At the end of the reported quarter, return on average assets was 1.21%, up from 1.19% in the prior-year quarter. Return on average common equity was 11.7%, up from 9.8% in the fourth quarter of 2021.
As of Dec 31, 2022, the Tier 1 risk-based capital ratio was 10.5% compared with 11.3% recorded in the prior-year quarter. The common equity Tier 1 ratio was 9% as of Dec 31, 2022, down from 9.6% as of Dec 31, 2021.
Share Repurchases
In the reported quarter, Truist Financial did not repurchase any shares.
Our Take
Truist Financial’s efforts to capitalize on the insurance businesses bode well. In November 2022, it acquired BankDirect Capital Finance for $3.4 billion. BankDirect is an insurance premium finance subsidiary of Texas Capital Bancshares, Inc. The deal added $3.2 billion in loans to Truist Insurance’s premium finance business.
A rise in loan demand, higher rates and decent economic growth are expected to continue to support the company’s top line. However, elevated expenses, and ambiguity over geopolitical and economic risks are major concerns.
Truist Financial Corporation Price, Consensus and EPS Surprise
Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2022 adjusted earnings of $1.30 per share surpassed the Zacks Consensus Estimate of $1.22. The bottom line reflects a rise of 25% from the prior-year quarter. Our estimate for earnings was $1.09.
BK’s results were aided by a rise in net interest revenues. However, asset balances witnessed a decline, which was a negative. Higher expenses and lower fee revenues hurt BK’s results to some extent.
Higher loan balance, rising rates and robust trading performance drove JPMorgan’s (JPM - Free Report) fourth-quarter 2022 adjusted earnings of $3.56 per share, which surpassed the Zacks Consensus Estimate of $3.11. Results excluded gains from the sale of Visa B shares and net investment securities losses in the Corporate segment. Our estimate for earnings was $2.98 per share.
As expected, the performance of JPM’s investment banking business was hugely disappointing. Further, mortgage fees and related income declined 69% as mortgage rates remained above the 6% mark in the fourth quarter. Then again, higher interest rates and a solid rise in loan balance aided JPMorgan’s net interest income.
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Truist Financial (TFC) Q4 Earnings Beat, Revenues Rise Y/Y
Truist Financial’s (TFC - Free Report) fourth-quarter 2022 adjusted earnings of $1.30 per share surpassed the Zacks Consensus Estimate of $1.28. The bottom line declined 5.8% from the prior-year quarter. Our estimate for earnings was $1.27.
Results have been primarily aided by an increase in net income interest (NII). Also, higher interest rates drove margins. However, a decline in non-interest income, higher provisions and marginally higher expenses were the undermining factors.
After considering non-recurring items, net income available to common shareholders was $1.61 billion or $1.20 per share, up from $1.52 billion or $1.13 per share in the prior-year quarter. Our estimate for the same was $1.63 billion.
Adjusted earnings of $4.96 per share for 2022 marginally surpassed the Zacks Consensus Estimate of $4.95. The bottom line declined 10.3% from the previous year. Our estimate for earnings was $4.94. Net income available to common shareholders (GAAP basis) was $5.93 billion or $4.43 per share, down from $6.03 billion or $4.47 per share in 2021. Our estimate for net income was $5.95 billion.
Revenues Improve, Expenses Rise Marginally
Total quarterly revenues were $6.21 billion, up 11.5% year over year. The top line beat the Zacks Consensus Estimate of $6.13 billion. Our estimate for revenues was $6.08 billion.
Revenues for 2022 were $23.04 billion, up 3.3% year over year. The top line surpassed the Zacks Consensus Estimate of $22.98 billion. Our estimate for revenues was $22.91 billion.
Tax-equivalent NII for the quarter increased 23.4% year over year to $4.03 billion. The rise was driven by strong loan growth and higher market interest rates, coupled with well-controlled deposit costs, partially offset by lower purchase accounting accretion and lower PPP revenues. Our estimate for NII was $3.93 billion.
Net interest margin expanded 49 basis points (bp) year over year to 3.25%. Our estimate for the same was 3.28%.
Non-interest income decreased 4.1% to $2.23 billion. This was due to a decline in investment banking and trading income, mortgage banking income, wealth management income, service charges on deposits, and operating lease income. Our estimate for non-interest income was $2.18 billion.
Non-interest expenses were $3.72 billion, up marginally year over year. Our estimate for the same was $3.66 billion.
The adjusted efficiency ratio was 54.2%, down from 56% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.
As of Dec 31, 2022, total average deposits were $413.28 billion, down 1.6% sequentially. Average total loans and leases of $320.67 billion grew 3.6% sequentially.
Credit Quality: Mixed Bag
As of Dec 31, 2022, total non-performing assets (NPAs) were $1.25 billion, up 7.5% year over year. Our estimate for the metric was $1.49 billion. As a percentage of total assets, NPAs were 0.23%, up from 0.21% a year ago.
Provision for credit losses was $467 million against a benefit of $103 in the prior-year quarter. Our estimate for provisions was $294.9 million. Net charge-offs were 0.34% of average loans and leases, up 9 bps from the year-ago quarter.
However, the allowance for loan and lease losses was 1.34% of total loans and leases held for investment, which decreased 19 bps.
Profitability Ratios Improve, Capital Ratios Weaken
At the end of the reported quarter, return on average assets was 1.21%, up from 1.19% in the prior-year quarter. Return on average common equity was 11.7%, up from 9.8% in the fourth quarter of 2021.
As of Dec 31, 2022, the Tier 1 risk-based capital ratio was 10.5% compared with 11.3% recorded in the prior-year quarter. The common equity Tier 1 ratio was 9% as of Dec 31, 2022, down from 9.6% as of Dec 31, 2021.
Share Repurchases
In the reported quarter, Truist Financial did not repurchase any shares.
Our Take
Truist Financial’s efforts to capitalize on the insurance businesses bode well. In November 2022, it acquired BankDirect Capital Finance for $3.4 billion. BankDirect is an insurance premium finance subsidiary of Texas Capital Bancshares, Inc. The deal added $3.2 billion in loans to Truist Insurance’s premium finance business.
A rise in loan demand, higher rates and decent economic growth are expected to continue to support the company’s top line. However, elevated expenses, and ambiguity over geopolitical and economic risks are major concerns.
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
Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2022 adjusted earnings of $1.30 per share surpassed the Zacks Consensus Estimate of $1.22. The bottom line reflects a rise of 25% from the prior-year quarter. Our estimate for earnings was $1.09.
BK’s results were aided by a rise in net interest revenues. However, asset balances witnessed a decline, which was a negative. Higher expenses and lower fee revenues hurt BK’s results to some extent.
Higher loan balance, rising rates and robust trading performance drove JPMorgan’s (JPM - Free Report) fourth-quarter 2022 adjusted earnings of $3.56 per share, which surpassed the Zacks Consensus Estimate of $3.11. Results excluded gains from the sale of Visa B shares and net investment securities losses in the Corporate segment. Our estimate for earnings was $2.98 per share.
As expected, the performance of JPM’s investment banking business was hugely disappointing. Further, mortgage fees and related income declined 69% as mortgage rates remained above the 6% mark in the fourth quarter. Then again, higher interest rates and a solid rise in loan balance aided JPMorgan’s net interest income.