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Loan Growth, Higher Fee Income to Support Truist's Q4 Earnings

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Key Takeaways

  • TFC's Q4 NII will likely rise 3.2% on solid loan demand and lower deposit costs despite Fed rate cuts.
  • Non-interest income for TFC is estimated to climb 6.5% on stronger fee income across multiple segments.
  • TFC's adjusted Q4 revenues are projected to rise 1-2% sequentially, with stable expense guidance.

Truist Financial (TFC - Free Report) is slated to report fourth-quarter and full-year 2025 results on Jan. 21 before the opening bell. The overall impressive lending scenario in the quarter is likely to have supported the company’s net interest income (NII).

Per the Fed’s latest data, the demand for commercial and industrial (C&I) loans (accounting for almost 50% of TFC’s total loans and leases held for investment) was decent in the to-be-reported quarter. The demand for consumer loans (almost 40% of total loans) was solid.

The Zacks Consensus Estimate for TFC’s average earning assets for the quarter is pegged at $490.4 billion, indicating a 3.7% rise from the prior-year quarter. 

In the fourth quarter, the Federal Reserve lowered interest rates twice to 3.5-3.75%. This is likely to have had some adverse impact on Truist’s NII. Robust loan demand, decent economic growth and stabilizing funding/deposit costs are expected to have offered support. Hence, NII is likely to have witnessed a modest improvement. The consensus estimate for NII is pegged at $3.71 billion, implying a 3.2% increase. 

Management anticipates NII to rise 2% sequentially, primarily driven by continued loan growth, higher client deposits and lower deposit costs amid rate cut expectations.  Also, net interest margin is expected to expand sequentially.

TFC’s Other Major Factors & Estimates to Consider for Q4

Non-Interest Income: The Zacks Consensus Estimate for service charges on deposits of $240.9 million suggests a 1.7% rise from the prior-year quarter. The Zacks Consensus Estimate for card and payment-related fees of $231.1 million implies marginal growth. 

Mortgage rates declined substantially in the fourth quarter, from the levels observed at the beginning of the year. The quarter saw rates fluctuate, but they remained within a range. Hence, refinancing activities and origination volume were decent. Thus, Truist’s mortgage banking income is expected to have risen. The consensus estimate for the metric of $117.4 million indicates a slight increase from the prior-year quarter. 

Higher client activity and volatility in the capital markets, along with industry-wide robust deal-making activities, in the to-be-reported quarter are expected to have supported TFC’s corresponding fee income. The consensus estimate for investment banking and trading income of $323.8 million indicates a year-over-year jump of 23.6%.

The robust lending scenario is likely to have supported TFC’s lending-related fees. The Zacks Consensus Estimate for the same stands at $103.8 million, indicating a rise of 11.6%. The Zacks Consensus Estimate for wealth management income of $383.9 million suggests a rise of 11.3%. 

Overall, the Zacks Consensus Estimate for total non-interest income is pegged at $1.57 billion, which indicates 6.5% rise from the prior-year quarter. Management expects non-interest income to be relatively stable sequentially.

Expenses: Truist has been witnessing a continued rise in overall non-interest expenses over the past several quarters because of investments in technology, inflationary pressure and expansion efforts. A similar trend is expected to have continued in the fourth quarter.

Management expects adjusted expenses, including core deposit intangible (CDI) and amortization expenses, to remain stable sequentially.

Asset Quality: Truist is less likely to have set aside a massive amount of money for potential delinquent loans, amid lower interest rates and decent economic growth.

The Zacks Consensus Estimate for total non-accrual loans and leases of $1.87 billion suggests a 30.6% year-over-year increase. Further, the consensus estimate for total non-performing assets is $1.87 billion, indicating a 26.6% jump.

What the Zacks Model Unveils for TFC

According to our quantitative model, the chances of Truist beating the Zacks Consensus Estimate for earnings this time are high. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.

You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Truist is +0.88%.

Zacks Rank: The company currently carries a Zacks Rank #3.

Truist’s Q4 Earnings & Sales Expectations

The Zacks Consensus Estimate for TFC’s earnings of $1.09 per share has remained unchanged over the past seven days. This indicates growth of 19.8% from the year-ago reported number.
 

The consensus estimate for sales is pegged at $5.27 billion, suggesting a 4.1% rise.

Management expects fourth-quarter 2025 adjusted revenues to rise 1-2% sequentially.

TFC’s 2025 Outlook

Management expects revenues to grow around the mid-point of the range of 1.5-2.5% from adjusted revenues of $20.1 billion in 2024.

Management anticipates adjusted expenses (including CDI amortization expenses) to increase about 1%.

The net-charge-off ratio is expected to be roughly 55 basis points.

TFC’s Peers Worth Considering

Here are a couple of other bank stocks that you may want to consider, as our model shows that these, too, have the right combination of elements to post an earnings beat this time:

KeyCorp (KEY - Free Report) is scheduled to announce fourth-quarter and full-year 2025 results on Jan. 20. The company carries a Zacks Rank #2 (Buy) and has an Earnings ESP of +0.50% at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Quarterly earnings estimates for KeyCorp have remained unchanged at 38 cents over the past week.

The Earnings ESP for U.S. Bancorp (USB - Free Report) is +0.78%, and it carries a Zacks Rank #3. The company is also slated to report fourth-quarter and full-year 2025 numbers on Jan. 20. 

Over the past seven days, the Zacks Consensus Estimate for U.S. Bancorp’s quarterly earnings has been unchanged at $1.19.


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