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Truist Financial’s (TFC - Free Report) first-quarter 2020 adjusted earnings of 87 cents per share surpassed the Zacks Consensus Estimate of 54 cents. However, the bottom line declined 22.3% from the prior quarter.
The results reflect full quarter impact following the merger between BB&T and SunTrust Banks. It also depicts improvement in revenues, and rise in loan and deposit balances. However, a drastic increase in provision for credit losses was a major offsetting factor. Also, increase in expenses and lower interest rates were headwinds.
The results excluded merger-related and restructuring charges, incremental operating expenses related to the merger, along with charges related to certain discretionary actions taken by management related to coronavirus. After considering these, net income available to common shareholders was $986 million or 73 cents per share compared with $702 million or 75 cents per share in the prior quarter.
Revenues & Expenses Increase
Total revenues were $5.65 billion, up 54.7% sequentially. Also, the figure beat the Zacks Consensus Estimate of $5.50 billion.
Tax-equivalent net interest income surged 63.7% from the prior quarter to $3.69 billion. Net interest margin grew 17 basis points (bps) to 3.58%.
Non-interest income jumped 40.3% sequentially to $1.96 billion.
Non-interest expenses were $3.43 billion, up 33.2% from the prior quarter.
Adjusted efficiency ratio was 53.4%, down from 57.5% in the fourth quarter. A fall in efficiency ratio indicates rise in profitability.
As of Mar 31, 2020, total deposits were $334.6 billion, up 4.6% sequentially. Total loans and leases of $324 billion grew 5.1% from the prior quarter-end.
Credit Quality Worsens
As of Mar 31, 2020, total non-performing assets (NPAs) were $1.18 billion, up 72.1% sequentially. As a percentage of total assets, NPAs came in at 0.23%, increasing 5 bps from the prior quarter.
Also, allowance for loan and lease losses was 1.63% of total loans and leases held for investment increased 111 bps. Further, provision for credit losses surged significantly on a sequential basis to $893 million. The rise was primarily due to the recognition of an economic downturn and significant growth in loans related to coronavirus.
However, net charge-offs were 0.36% of average loans and leases, down 5 bps.
Profitability & Capital Ratios Deteriorate
At the end of the reported quarter, return on average assets was 0.90%, down from 0.95% in the prior quarter. Return on average common equity was 6.58%, down from 7.33% in the fourth quarter.
As of Mar 31, 2020, Tier 1 risk-based capital ratio was 10.5%, down from 10.8% recorded in the prior quarter. Common equity Tier 1 ratio under Basel III was 9.3% as of Mar 31, 2020, down from 9.5% in the fourth quarter 2019.
Our Take
Truist Financial remains well positioned for revenue improvement through continued loan growth. Nevertheless, lower interest rates and economic slowdown are major near-term concerns.
Truist Financial Corporation Price, Consensus and EPS Surprise
U.S. Bancorp (USB - Free Report) reported first-quarter 2020 earnings per share of 72 cents, which surpassed the Zacks Consensus Estimate of 49 cents. However, the bottom line declined 28% from the prior-year quarter.
KeyCorp’s (KEY - Free Report) first-quarter 2020 earnings of 12 cents per share surpassed the Zacks Consensus Estimate of 6 cents. The figure takes into account the Current Expected Credit Losses accounting methodology, the impact of coronavirus and market-related valuation adjustments.
PNC Financial (PNC - Free Report) reported first-quarter 2020 earnings per share of $1.95, surpassing the Zacks Consensus Estimate of $1.38 amid coronavirus concerns. The bottom line, however, reflects a 25.3% decline from the prior-year reported figure.
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Truist Financial's (TFC) Q1 Earnings Beat, Provisions Jump
Truist Financial’s (TFC - Free Report) first-quarter 2020 adjusted earnings of 87 cents per share surpassed the Zacks Consensus Estimate of 54 cents. However, the bottom line declined 22.3% from the prior quarter.
The results reflect full quarter impact following the merger between BB&T and SunTrust Banks. It also depicts improvement in revenues, and rise in loan and deposit balances. However, a drastic increase in provision for credit losses was a major offsetting factor. Also, increase in expenses and lower interest rates were headwinds.
The results excluded merger-related and restructuring charges, incremental operating expenses related to the merger, along with charges related to certain discretionary actions taken by management related to coronavirus. After considering these, net income available to common shareholders was $986 million or 73 cents per share compared with $702 million or 75 cents per share in the prior quarter.
Revenues & Expenses Increase
Total revenues were $5.65 billion, up 54.7% sequentially. Also, the figure beat the Zacks Consensus Estimate of $5.50 billion.
Tax-equivalent net interest income surged 63.7% from the prior quarter to $3.69 billion. Net interest margin grew 17 basis points (bps) to 3.58%.
Non-interest income jumped 40.3% sequentially to $1.96 billion.
Non-interest expenses were $3.43 billion, up 33.2% from the prior quarter.
Adjusted efficiency ratio was 53.4%, down from 57.5% in the fourth quarter. A fall in efficiency ratio indicates rise in profitability.
As of Mar 31, 2020, total deposits were $334.6 billion, up 4.6% sequentially. Total loans and leases of $324 billion grew 5.1% from the prior quarter-end.
Credit Quality Worsens
As of Mar 31, 2020, total non-performing assets (NPAs) were $1.18 billion, up 72.1% sequentially. As a percentage of total assets, NPAs came in at 0.23%, increasing 5 bps from the prior quarter.
Also, allowance for loan and lease losses was 1.63% of total loans and leases held for investment increased 111 bps. Further, provision for credit losses surged significantly on a sequential basis to $893 million. The rise was primarily due to the recognition of an economic downturn and significant growth in loans related to coronavirus.
However, net charge-offs were 0.36% of average loans and leases, down 5 bps.
Profitability & Capital Ratios Deteriorate
At the end of the reported quarter, return on average assets was 0.90%, down from 0.95% in the prior quarter. Return on average common equity was 6.58%, down from 7.33% in the fourth quarter.
As of Mar 31, 2020, Tier 1 risk-based capital ratio was 10.5%, down from 10.8% recorded in the prior quarter. Common equity Tier 1 ratio under Basel III was 9.3% as of Mar 31, 2020, down from 9.5% in the fourth quarter 2019.
Our Take
Truist Financial remains well positioned for revenue improvement through continued loan growth. Nevertheless, lower interest rates and economic slowdown are major near-term 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
U.S. Bancorp (USB - Free Report) reported first-quarter 2020 earnings per share of 72 cents, which surpassed the Zacks Consensus Estimate of 49 cents. However, the bottom line declined 28% from the prior-year quarter.
KeyCorp’s (KEY - Free Report) first-quarter 2020 earnings of 12 cents per share surpassed the Zacks Consensus Estimate of 6 cents. The figure takes into account the Current Expected Credit Losses accounting methodology, the impact of coronavirus and market-related valuation adjustments.
PNC Financial (PNC - Free Report) reported first-quarter 2020 earnings per share of $1.95, surpassing the Zacks Consensus Estimate of $1.38 amid coronavirus concerns. The bottom line, however, reflects a 25.3% decline from the prior-year reported figure.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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