Truist Financial Corporation (TFC) — Q4 2025 Earnings Call Transcript

Thank you, and good morning, everyone. Welcome to Truist Fourth Quarter 2025 Earnings Call. With us today are our Chairman and CEO, William Rogers Jr., our CFO, Mike Maguire, our Chief Risk Officer, Brad Bender, as well as other members of Truist's senior management team. During this morning's call, they will discuss Truist's fourth quarter and 2025 results, share their perspectives on current business conditions, and provide an updated outlook for 2026. The accompanying presentation as well as our earnings release and supplemental financial information are available on the Truist Investor Relations website. Our presentation today will include forward-looking statements and certain non-GAAP financial measures. Please review the disclosures regarding these statements and measures as well as the appendix for appropriate reconciliations to GAAP. With that, I'll turn it over to Bill. Good morning, and thank you for joining our call today. Before we discuss our fourth quarter and 2025 results, let's begin with purpose. At Truist, our purpose to inspire and build better lives and communities remains at the heart of everything we do.

It drives our strategy and fuels our commitment to our clients and the communities we serve. Despite market volatility early in 2025, we stayed focused on supporting our clients and executing our growth and profitability agenda. This discipline drove higher earnings, stronger client relationships, and attracted new business. A key to delivering on our purpose and performance is the investment in our business, markets, and teammates. Some of these significant investments include enhancing our tech and digital capabilities in areas like AI, improving the client experience, recruiting and developing talented teammates to advise and serve clients with more complex and industry-specific financial needs, announcing plans to open 100 new insight-driven branches in high-growth markets, as well as enhancements to more than 300 branch locations in all markets. These investments underscore our commitment to the communities we serve and position us to deliver more personalized advice and create opportunities for outsized growth. As we enter 2026, our purpose continues to guide our focus on growth, profitability, and deeper client relationships. We're expanding our presence and delivering more differentiated advice-driven experiences. I look forward to sharing more of these priorities during today's call. We closed 2025 with strong results and clear momentum heading into 2026. We delivered net income available to common shareholders of $1.3 billion or $1 per diluted share for the fourth quarter and $5 billion or $3.82 per diluted share for the full year 2025. These results include certain charges such as severance and an accrual related to a specific legal matter that was settled in 2026. At the start of last year, we outlined five strategic priorities aimed at accelerating our performance and improving our profitability in 2025 and beyond. While there's more to accomplish, I'm proud of the progress we made as a company in 2025 and excited about the momentum we have entering this year. First, we continue to generate strong broad-based loan growth in both wholesale banking and consumer and small business banking driven by new loan production and increased client acquisition. Second, strong loan growth, better second-half results in investment banking, trading, and wealth, along with continued expense discipline, drove 100 basis points of positive adjusted operating leverage in 2025. Third, we made significant investments across our business in talent and technology, laying the foundation for future growth, which we expect to accelerate in 2026. Fourth, we maintain strong asset quality metrics as net charge-offs declined versus 2024, and nonperforming loans remained relatively stable. Finally, we returned $5.2 billion of capital to shareholders through our common stock dividend and the repurchase of $2.5 billion of our common stock. Looking ahead, our strategic priorities remain unchanged, and our focus is clear: accelerate revenue growth, drive greater positive operating leverage, continue to invest while maintaining our expense and risk discipline, and return capital to shareholders at an accelerated rate. Executing on these strategic priorities is central to improving profitability and achieving our long-term goals, including our commitment to deliver a 15% return on tangible common equity in 2027. So in summary, we closed 2025 on a strong note and entered 2026 with significant momentum and confidence in our ability to deliver revenue growth at least twice the pace of 2025, greater positive operating leverage, higher levels of capital return, and improved profitability. Before I hand the call over to Mike to discuss our quarterly results, I want to spend some time discussing the positive momentum we're seeing within our business segments with our digital strategy. First, let me start with consumer and small business banking. CSBB delivered consistent strong performance throughout 2025. We generated 5% growth in average consumer and small business loans and 1% growth in average deposits. This momentum was fueled by our market-leading consumer lending businesses, another year of net new checking account growth, and deeper relationships with our premier banking clients. Loan growth was broad-based across the portfolio with especially strong contributions from indirect auto and our specialty niche lending platforms. These businesses continue to produce market-leading growth with attractive risk-adjusted returns. As part of advancing our consumer lending strategy, we've fully integrated our digital end-to-end lending platform into our Truist mobile app experience and our branch banking account opening experience. This expanded scale is improving efficiency, broadening distribution, accelerating growth, and meaningfully enhancing the client lending experience. Beyond our national consumer lending platforms, Premier Banking also delivered strong results. With 2025 production up 22% in deposits, 32% in lending, and 12% in financial plans. This performance was driven by higher adviser productivity and strong branded mortgage and branch-led lending. We continue to see strong outcomes from our strategic investments in digital, delivering year-over-year growth across all core metrics. In 2025, we added 77,000 digital new-to-bank clients, up 10% from the prior year quarter. We also took meaningful steps to deepen self-service adoption, expanding capabilities within our AI-powered Truist Assist mobile experience. The launch of Ask Truist Assist universal search capability now delivers client quick intuitive access from any screen. This drove a 97% increase in digital chat engagement in 2025 and is helping us improve efficiency and strengthen client connectivity as more activity shifts to digital. In wholesale, we delivered a strong finish to 2025 driven by meaningful improvement in the second half of the year in both loan and deposit growth, investment banking and trading revenue, and continued progress in strategic focus areas. We onboarded twice as many new corporate and commercial clients versus last year, spanning a diverse range of industries and markets. Building on these new client relationships and our focus on deepening existing ones, we saw our loan and deposit momentum strengthen as the year progressed. Average wholesale loans increased 3% in '25 with momentum accelerating in the second half. Fourth quarter average loans were up 8% compared to the fourth quarter of 2024, fueled by new client acquisition and supported by focused talent investments as our strategy continues to gain traction. End-of-period wholesale deposit balances rose 6% linked quarter.

Thank you, Bill, and good morning, everyone. Before I start with our performance highlights, I do want to briefly mention certain changes to the presentation of our earnings materials today and on a going-forward basis. We believe these changes more accurately reflect how we're managing our business and will give investors more insights into how we're progressing with important fee income-generating initiatives. In terms of expenses, we will no longer disclose adjusted expense in our earnings materials. Instead, we will provide context on material items impacting results. For today's discussion, I'll provide you with adjusted expense for comparison purposes. But going forward, our expense commentary and guidance will be based on GAAP expense. Our fourth quarter 2025 results included a charge of $130 million or $0.08 per share after tax due to an incremental accrual related to Truist executing a settlement agreement on January 20, 2026. In addition, our fourth quarter results included charges primarily related to severance. Revenue increased 1.1% linked quarter, due to 1.9% growth in net interest income partially offset by a modest decrease in noninterest income. During the quarter, we repurchased $750 million of common stock and announced a new share repurchase authorization of up to $10 billion with no expiration date.

As we close, I want to emphasize the confidence I have in Truist's direction. We're seeing tangible results across key businesses with strong momentum, client engagement, and revenue growth. Our expectation is that our revenue growth will double in 2026 and when combined with our expense discipline, should lead to even greater operating leverage and profitability improvement this year. Like 2025, we enter 2026 in a strong capital position enabling us to support client growth and accelerate capital return through increased share repurchases. In summary, I am confident in our future. I'm encouraged by the results and momentum we're seeing across our company and remain focused on executing with discipline, delivering for our clients, and creating value for our shareholders. Thank you to our teammates for their incredible focus, productivity, and purpose-driven commitment to moving Truist forward.

Thank you, Bill. Betsy, at this time, will you please explain how our listeners can participate in the Q&A session? As you do that, I'd like to ask the participants to please limit yourself to one primary question and one follow-up in order to accommodate as many of you as possible today.

Good morning, Bill. Good morning, Mike.

Morning.

Bill, can you maybe talk a little bit more about loan growth where you ended the year at up eight year over year and you're guiding to three to four? It seems like if you think about the exit run rate, you're already running at about 3% average growth. So it implies, you know, as you said, low single-digit growth. So maybe just unpack the loan growth a little bit further between commercial and consumer, you know, and how are you thinking about growth across each of those areas? Thank you.

Yeah. Thanks, Ryan. Great to hear from you. You know, as you noted, we're entering with some good momentum. If you think about the mix, we're really focused on places where we have great client demand. The consumer businesses like Sheffield and LightStream and Service Finance continue to see great opportunities. Probably in areas like indirect auto, probably a little less. In terms of exposure, margins being a little bit tighter. But I think the result of that is going to be a little more wholesale. The consumer businesses continue to see attractive risk-adjusted returns. All of that, though, contributing to three to four percent growth I would consider sort of high-quality consistent growth. And again, building on momentum that we already have.

Yeah. Sure. Good morning, Ryan. It was nice to see the uptick obviously in the fourth quarter, which was largely driven by some of the seasonal deposit mix. You know, that'll go the other way on seasonality in the first quarter. So while we sort of enter the year at 3.07, we would expect to back up just a touch throughout the course of the rest of the year. We would expect to see margin expansion, especially in the second half where we see the benefit of the cuts. We expect to be in the low fifties neighborhood by year-end. So you've got lower cost of deposits. You've also got the fixed asset. The fixed-rate asset repricing happening in the background as well. I think those factors are going to really help us make significant progress on the margin. We see ourselves exiting '26 in kind of that three-teens area, which I think is a nice setup for 2027.

Morning. Good morning. On your 2027 ROTCE target of 15%, I appreciate you reiterated your confidence and the attainability there. And could you possibly help kind of unpack the components that give you that confidence? You mentioned the three-teens in NIM, and you might be able to hit that by the end of '26. Just curious on maybe your efficiency expectations underneath that. Balance sheet growth, how we could think about the pace there as you approach that in 2027. And then also I think common equity tier one, you've alluded to the 10%. But how are you thinking about capital underneath that 15% ROTCE? Thanks.

Yeah. Sure, John. So think about it maybe in its simplest term is the concept of holding the denominator of capital and dollars steady. Then improving momentum and return from the numerator. This is going to be a straight line. So in addition to 15, we're locked in on 14 for this year. Think about that denominating in dollars holding steady. Payments growth is really significant. So think about the growth in payments. We're seeing growth that we expect in double digits. Middle market expansion, two times the number of clients we're seeing in that business.

Let's see. I think you've touched or at least alluded to briefly a couple of times. But just on the capital markets, I think there's plenty of optimism about the industry's potential this year. That's, of course, an area where you all have invested heavily. Maybe you could just sort of expand on your thoughts about momentum and potential there for the coming year.

Scott, I think as you pointed out, this is a business we've been investing in for decades. And I think we're in a good position. We have really good momentum coming out of the second half of the year. Debt capital markets, leverage finance, M&A, all of our derivatives, FX, are all hitting on good cylinders. So we come into it with a good pipeline, especially from our middle market and commercial client base. Organic activity is building. We've put talent on the field that knows how to leverage our industry specialties. This is a business I feel really confident in. I think we have a full capability and long-term high growth potential.

Good morning, Scott. The way we're thinking about this is we believe that the 10% operating target is appropriate. If loans or the balance sheet grow a little faster, that gets you to approximately a billion a quarter this year. That's how we're thinking about truing it back to 10% over the next eight quarters.

Hey. Good morning. Two questions. One, I think just on deposits. Talk about like, do you expect both as you move towards this wholesale mix on the lending side, what does that mean for deposits?

We're building that momentum. We feel good about deposit growth. First, we saw wholesale deposits grow 400 basis points faster in the latter part of 2025 versus 2024. We have a lot more clients, a lot more clients with treasury management products that are still funding. Deeper penetration in the middle market base. We also have net new clients. The quality of those clients has increased year over year. You see the accelerating growth in the coming year.

Hey. Good morning. Thanks for taking my question. Just a quick follow-up from Matt's question. Just to clarify Mike, the guidance implies $12 billion of expenses. That does have some level of restructuring expenses embedded in it.

Yes, the outlook for expenses includes some restructuring expenses, but there's an expectation that they'll be lower over time.

Thank you, everyone. That concludes our earnings call. If you have any additional questions, please feel free to reach out to the Investor Relations team. Thank you for your interest in Truist, and we hope you have a great day.