Truist Financial Corporation (TFC) — Q2 2025 Earnings Call Transcript

Thank you, Betsy, and good morning, everyone. Welcome to Truist's second quarter 2025 earnings call. With us today are our Chairman and CEO, William Rogers, CFO, Mike Maguire, and 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 second quarter results, share their perspectives on current business conditions, and provide an outlook for 2025. The company presentation as well as our earnings release and supplemental financial information are available on the Truist Investor Relations website ir.truist.com. Our presentation today will include forward-looking statements and certain non-GAAP financial measures. Please review the disclosures on Slides two and three of the presentation regarding these statements and measures as well as the appendix for appropriate reconciliations to GAAP. With that, I'll turn it over to Bill.

Great. Thanks, Brad, and good morning, everyone. And thanks for joining our call this morning. Before we discuss the second quarter results, let's begin like we always do at Truist with purpose on slide four. At Truist, our purpose to inspire and build better lives and communities, it's more than a statement. It's the foundation of our strategy. It's the lens through which we make decisions. The reasons teammates show up every day with conviction and care. In the second quarter, we continued to bring this purpose to life in meaningful ways. We welcomed a dynamic slate of new leaders across our company, reinforcing our commitment to attracting top talent to our already highly experienced and very capable teams. These leaders were attracted to our purpose-driven culture and are already making meaningful impact. Strengthening our presence in key growth markets and expanding our capabilities across high-growth areas such as sector-specific coverage, commercial and middle market banking, small business, wealth, premier banking, and payments. Our teams are deepening client relationships, driving new business, and positioning Truist for long-term sustainable growth, all of which were evident in these second quarter results. On slide five, for the second quarter, we reported net income available to common shareholders of $1.2 billion or $0.90 a share, which included $0.02 of restructuring charges related to severance and $0.01 of losses from the sale of certain investment securities. At a high level, our solid performance in the second quarter reflects the diversity of our business model and the execution of many of our strategic growth initiatives that we've been discussing for several quarters now. These initiatives include accelerating growth through the addition of new clients and deepening existing client relationships in areas like payments, wealth, and premier banking. We're executing our plan while maintaining our expense and credit discipline and returning capital to shareholders. During the second quarter, average loan balances increased 2% and end-of-period loans increased 3.3% linked quarter. Growth was broad-based across our consumer and wholesale segments and driven by increased loan production and new client acquisition. Our lending pipelines remain strong, and overall loan production is up significantly year over year. Growth should also benefit from our expansion efforts in markets where we have smaller but growing share and from many of the new teammates that have joined our company. This quarter's loan growth helped offset the equity and debt market volatility that occurred early in the quarter. This volatility impacted trading, capital markets, and M&A activity for the industry, resulting in lower revenue for investment banking and trading. As you've heard me discuss previously, I'm confident that our advice-driven business model is well suited to help our clients navigate current market conditions and continue to grow our share given the ongoing investments we're making in talent, products, and industry verticals. We believe that our investment banking and trading business is well positioned for a second-half recovery as we saw steady improvement in overall investment banking revenue in each month during the quarter. Adjusted expenses did come in at the high end of the expected range but remain confident in our ability to deliver our 1% expense growth target and positive operating leverage in this year. That includes the impact of ongoing investments in talent and technology. We also maintain strong asset quality metrics as both nonperforming loans and net charge-offs were down nine basis points linked quarter. Additionally, we received favorable results from the Federal Reserve's annual stress test. We expect our stress capital buffer will decline and be floored at 2.5% effective October first. Finally, we remain in a strong capital position, which allows us to support our balance sheet growth and return capital to shareholders. During the quarter, we returned $1.4 billion of capital to shareholders through our common stock dividend and the repurchase of $750 million of our common stock. Our share repurchase activity in the second quarter included $250 million of repurchases above our recent $500 million quarterly target as we opportunistically took advantage of market volatility and weakness in our share price early in the quarter. We do plan to target approximately $500 million of share repurchases during the third quarter. Before I hand the call over to Mike to discuss the quarterly results, I want to spend some time discussing the progress we're already making on our strategic priorities and the positive momentum we're seeing within our business segments and with our digital initiatives on slides six and seven. In consumer and small business banking, I'm encouraged by another solid quarter of consumer loan and deposit growth. Net new checking account growth, and progress with our premier banking clients, as we deepened relationships and acquired key new clients in households through digital and traditional channels. Net new checking account growth, which is a key measure for the growth potential and health of our company, was once again positive in the second quarter as we added nearly 37,000 new consumer and small business accounts. Importantly, we're attracting younger clients with higher average balances and greater median income which aligns with our strategy to engage clients early and build enduring relationships over time. Average consumer and small business loan balances increased 2.8% linked quarter and end of period balances increased 3.8% due to growth in residential mortgages, indirect auto, and other consumer loans with production up significantly year over year. Over the last year, we've added significant numbers of new partners and dealers to our service finance and Sheffield platforms, which is helping drive the growth in other consumer loan balances. We also saw a significant increase in loan and deposit production per banker in our premier banking segment, which is a key area of strategic focus. We're growing while also maintaining our credit and pricing discipline. Consumer net charge-offs of 71 basis points reached their lowest levels since the third quarter of 2023, and new production spreads remained accretive to the overall portfolio. In wholesale, I'm encouraged by this quarter's loan growth, improved production, and progress in key focus areas like payments and wealth. During the quarter, we saw 1.5% growth in average wholesale loans, and 2.9% growth in end of period loans, driven by growth from new and existing clients and increased production. Average C&I growth was driven by all of our industry banking groups with particular strength in FIG and Energy, middle market lending, and structured credit. As I've mentioned previously, we have a specific focus on capturing more of the middle market. We've seen these balances increase in each quarter this year driven by new clients in a wide variety of industries and targeted select geographies where we continue to expand. Year to date, we've attracted twice as many new corporate and commercial clients to our platform as compared with the same period a year ago, while we're also seeing a 40% increase in revenue per client. In wealth, net asset flows were positive despite volatile equity and fixed income markets as we saw a 27% increase in year to date AUM from wholesale and premier clients compared with the same period a year ago. Our payments team continues to launch new services that meet our client needs for solutions that provide them with speed, simplicity, and safety. During the second quarter, we also experienced more digital innovation. Truist became the first financial institution to prove request for payment over the RTP network via an alias such as a cell phone or an email address. This innovation is designed to unlock meaningful value for both commercial and consumer clients, accelerating cash flow, improving reconciliation, and delivering real-time confirmations. These enhancements, along with continued investments in our team, have driven a meaningful increase in treasury management penetration rates with our existing clients and helped drive a 14% increase versus the second quarter of last year. Enhancing the client experience and growing our digital capabilities are also important parts of our strategy. Let me discuss that detail on slide seven. We continue to see strong momentum in our digital strategy with meaningful progress, platform integration, engagement, and production. In the second quarter, digital account production rose 17% year over year, with 43% of new to bank clients joining us through digital channels, a 900 basis point increase versus the second quarter of last year. This momentum reflects investments we've made in our digital platform onboarding experience. A key milestone this quarter was fully integrating the LightStream Lending product into our digital platform under the new LightStream by Truist brand. This integration expands access to lending solutions for all Truist clients and further strengthens our digital offering. We're also seeing deeper engagement across our digital platform. More than 1.8 million clients are now using our digital financial management tools, which is a 40% increase from last year. Together, these results highlight the strength of our digital foundation and our continued focus on delivering value, operating efficiently, and deepening client relationships. We expect to continue growing our digital presence with clients as we further leverage our modern and scalable technology platform. Let me turn it over to Mike to discuss our financial results in more detail. Mike?

Thank you, Bill, and good morning, everyone. Let's start with our financial performance highlights on Slide eight. We reported second quarter 2025 GAAP net income available to common shareholders of $1.2 billion or $0.90 per share. As Bill mentioned, included in our results are $0.02 per share of restructuring charges, which are primarily related to severance. In addition, our results included an $18 million pre-tax loss, or a penny per share after tax, related to the sale of $398 million of lower-yielding investment securities. We invested the proceeds from the sale into higher-yielding investment securities and anticipate an earn-back of approximately two years. Moving now to 2Q25 results. Adjusted revenue increased 2.1% linked quarter due to 2.3% growth in net interest income and 1.8% growth in non-interest income. Adjusted expenses increased 3.1% linked quarter primarily due to higher personnel expenses related to annual merit increases and strategic hiring efforts. As Bill mentioned, our asset quality metrics showed improvement as both non-performing loans and net charge-offs declined on a linked quarter basis and year-over-year basis. Next, I'll cover loans and leases on slide nine. Average loans held per investment increased 2% on a linked quarter basis due to growth in both average commercial and average consumer loans. End of period loans increased $10.2 billion or 3.3% split evenly between commercial and consumer loans. Average commercial loans increased $3 billion or 1.6% due to $3.3 billion of growth in C&I loans, partially offset by modest declines in CRE and commercial construction loan balances. In our consumer portfolio, average loans increased $3.2 billion or 2.7% linked quarter due to growth in residential mortgage, indirect auto, and other consumer loans. Other consumer loans, which primarily include Sheffield and Service Finance, are typically seasonally strongest in the second and third quarters of the year, but they're also benefiting from new partners and dealers added to the platforms throughout the course of the year. Moving to deposit trends on slide ten. Average deposits increased $8.3 billion sequentially or 2.1% driven by growth in interest checking, time deposits, and non-interest bearing demand. Average deposit balances were impacted by $10.9 billion of short-term client deposits that we discussed on last quarter's earnings call. These deposits remained on our balance sheet for the entire quarter but have since been withdrawn. Excluding the impact of these deposits, average deposit balances would have been down slightly on a linked quarter basis. As shown in the chart on the bottom right-hand side of slide ten, our cumulative interest-bearing deposit beta declined from 43% to 37% on a linked quarter basis. If you were to exclude the impact of the two larger short-term deposits, the rate paid on interest-bearing deposits, and our cumulative interest-bearing deposit beta, would have been relatively stable. Moving to net interest income and net interest margin on slide eleven. Taxable equivalent net interest income increased 2.3% linked quarter or $80 million primarily due to the impact of loan growth, fixed asset, fixed rate asset repricing, and one additional day in the second quarter. Our net interest income margin increased one basis point on a linked quarter basis to 3.02%. As you can see on the top right-hand side of the slide, we updated our outlook for fixed rate asset repricing. We expect to reprice approximately $27 billion of fixed rate loans and investment securities over the remainder of 2025. Depending on the level of loan and deposit growth in the second half of 2025, we may opt to use cash flow from the investment portfolio to fund a portion of our loan growth for the remainder of the year. Based on our current view of interest rates for the remainder of 2025, we anticipate that new fixed rate loans will have a run-on rate of around 7% compared with a run-off rate of approximately 6.4%. We also updated our swap portfolio disclosure in the bottom right-hand corner of the slide. This reflects a small increase in our received fixed swap program from the prior quarter. Turning to non-interest income on slide twelve. Adjusted non-interest income increased $25 million or 1.8% versus the first quarter of 2025 as growth in our other income was partially offset by lower investment banking and trading revenue. The linked quarter increase in non-interest income was primarily attributable to an $83 million increase in other income related to higher NQDCP income, which is offset by personnel expense and income from certain equity investments and other investments that were lower in the first quarter of 2025. Investment banking and trading income declined $68 million or 25% linked quarter reflecting weaker trading results, lower capital markets activity, and lower M&A volumes during the first half of the second quarter. Early in the quarter, our trading business, which primarily supports our investment banking franchise, incurred losses driven by market volatility. The month of May was much improved and June was more consistent with the performance we have historically experienced in this business, and we'd expect to perform for the remainder of the year. As Bill mentioned, we also saw improvement in investment banking in the second half of the quarter and we remain optimistic about investment banking and trading revenue improving in the second half of 2025. Based on our current pipeline and an improvement in overall activity. On a linked quarter basis, adjusted non-interest income declined $20 million or 1.4% compared to the second quarter of 2024 primarily due to lower investment banking and trading income and lower wealth management income due to the sale of Sterling Capital Management in July 2024. Next, I'll cover non-interest expense on slide thirteen. Adjusted non-interest expense which excludes the impact of restructuring charges, increased 3.1% linked quarter due primarily to higher personnel expenses related to annual merit increases and strategic hiring efforts. On a year-over-year basis, expenses remained well controlled and were up 2.1% due primarily to higher professional fees and outside processing expense related to ongoing investments in technology and in our risk infrastructure. Moving now to asset quality on slide fourteen. Our asset quality metrics remain strong on both the linked and year-over-year basis, reflecting our strong credit risk culture and proactive approach to quickly resolve problem loans. Net charge-offs decreased nine basis points to 51 basis points linked quarter and were down seven basis points versus the second quarter of 2024. As we benefited from lower consumer and CRE losses on both a linked and year-over-year basis. Our loan loss provision exceeded net charge-offs by $92 million, but improving outlook for loss rates in certain portfolios like CRE Office and multifamily contributed to a four basis point decrease to our AIIL ratio to 1.54% of total loans. Our CRE office portfolio, which represents just above 1% of total loans, declined almost $500 million linked quarter on an end of period basis. Nonperforming loans held per investment as a percentage of total loans decreased nine basis points linked quarter and seven basis points on a year-over-year basis to 39 basis points of total loans. We saw linked quarter improvement in several categories, including CRE and C&I non-performing loans, which helped drive our nonperforming loan level to multi-quarter lows. Turning to capital on slide fifteen. On a linked quarter basis, our CET1 ratio declined thirty basis points to eleven percent, as balance sheet growth, $750 million of share repurchases, and the payment of our common dividend more than offset our period earnings. Our CET1 capital ratio including the impact of AOCI declined thirty basis points linked quarter to nine point three percent reflecting the aforementioned factors. During the quarter, we also received favorable CCAR results resulting in a fifty basis point decrease in our total loss rate which resulted in a ninety basis point decrease in our CET1 erosion rate. As a result, we anticipate our stress capital buffer to decline thirty basis points and be floored at two point five percent effective October first. As of June thirty, our CET1 ratio was four hundred basis points higher than our new regulatory minimum of seven percent, leaving us well positioned to both grow our balance sheet and return capital to shareholders. Next, I'll provide additional color on our guidance for the third quarter of twenty twenty-five and for the full year. That's on slide sixteen. For full year twenty twenty-five, our outlook for revenue and expense growth is unchanged. We continue to expect revenue to increase one point five percent to two point five percent relative to twenty twenty-four adjusted revenue of twenty point one billion dollars. Net interest income remains on track to increase three percent in twenty twenty-five versus twenty twenty-four. Our net interest income outlook assumes low single digit average loan growth and two twenty-five basis point reductions in the Fed funds rate in September and December, compared with three previously in June, September, and December. We expect non-interest income to remain relatively flat in twenty twenty-five versus twenty twenty-four. In terms of our outlook for adjusted expenses, we continue to expect full year twenty twenty-five adjusted expenses to increase by approximately one percent in twenty twenty-five versus twenty twenty-four, which is also unchanged from our previous guidance and continues to imply positive operating leverage of approximately fifty to one hundred and fifty basis points. In terms of asset quality, we expect net charge-offs of fifty-five to sixty basis points in twenty twenty-five compared with sixty basis points previously. Finally, we expect our effective tax rate to approximate seventeen point five percent or twenty percent on a taxable equivalent basis in twenty twenty-five compared with seventeen percent and twenty percent previously due to a lower contribution from nontaxable income and certain tax law changes in states in which we operate. Looking into the third quarter of twenty twenty-five, we expect revenue to agree approximately two and a half to three and a half percent relative to second quarter revenue of five point one billion dollars. We expect net interest income to increase approximately two percent in the third quarter primarily driven by loan growth, the benefit from fixed asset repricing, and an additional day in the third quarter relative to the second quarter. We expect non-interest income to increase by about five percent driven primarily by higher investment banking and trading income partially offset by lower other income. Adjusted expenses of three billion dollars in the second quarter are expected to increase about one percent linked quarter. As it relates to buybacks, as Bill mentioned, we plan to target up to five hundred million dollars for the third quarter. So with that, I'll hand it back to Bill for some final remarks.

Great. Thanks, Mike. At the beginning of the year, we outlined several strategic priorities that would be key to driving our performance this year and beyond. These top priorities included a keen focus on executing our strategic growth initiatives, driving positive operating leverage, continuing to invest in talent and technology, maintaining our credit and risk discipline, and returning capital to shareholders. Although there's still a significant amount of opportunity that lies in front of us, I'm pleased with both the performance and the momentum at the midpoint of this year. We're seeing solid progress and in our key strategic focus areas, including premier banking, wealth, payments, and middle market as production deepening with our existing client base and banker productivity have increased in all areas of our business. We also remain on track to deliver our goal of positive operating leverage in 2025 despite what's turned out to be a more challenging first six months in our investment. We continue to invest in important areas like talent, technology, and our risk infrastructure to improve the client experience. Our credit and risk discipline has remained strong as evidenced by a favorable CCAR and the improvement in asset quality metrics which currently set at multi-quarter lows. Finally, our strong capital position continues to afford us the ability to grow our balance sheet while also returning more than $2.6 billion for the capital to our shareholders through the first half of the year. We will remain focused on these key strategic initiatives as we strive to generate better returns and greater shareholder value over time. I am optimistic as ever about our future, especially in light of the momentum that I see every day inside our company. I want to pause and thank all of our incredible teammates for their purposeful focus and productivity in moving our company forward. So thank you all for your interest in Truist. And with that, let me turn it over to Brad for Q&A.

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 participants to freely limit yourselves to one primary question and one follow-up in order to accommodate as many of you as possible today.

Good morning, everyone. Thank you for taking the question. Bill, it was really nice to see the strong loan growth. I was hoping you could spend just a quick second sort of expanding upon your thoughts on overall sentiment among your customer base. I guess especially on the interest side of the commercial side, but, you know, maybe kind of across the portfolio given the stronger second quarter.

Yeah. Scott, thanks for recognizing that. You know, it's interesting. So let me maybe start with the consumer side first. You know, our consumer business continues to be really strong. Consumers are staying engaged. The quality of the consumer, particularly as it relates to our portfolio, continues to be strong. So we've had really good credit quality as part of this production. That's been a lot of the initiatives and things that we put forth. And it also is a lot of product-specific things. So things we're doing in service finance, Sheffield, and LightStream. So we're relevant to how consumers want to borrow, and I think that's a really important component of our growth story on the consumer side. In terms of the wholesale side, our clients also came into this with a lot of strength, a lot of liquidity. They got through some of the post-COVID supply chain and all those issues. There's still some wait and see, but I'm really pleased with our results given that there's still some uncertainty out there. Some clarity has emerged in the last several weeks, particularly regarding the tax bill and other factors. A lot of our activity, which I'm really happy about, is with new clients. These are new to Truist. Clients who want to experience what we have to offer are impressed with our purpose-driven focus and are excited about our products and capabilities such as treasury management. So some of it is unique to Truist and some of it relates to our healthy markets. Overall, I think we have reason to still feel confident about the trajectory of both our consumer and wholesale clients moving forward. Terrific.

Okay. Thank you. And then, Mike, I was hoping you could apologize if you mentioned this in your prepared remarks, but just given the small step down in the anticipated pace of repurchase in the third quarter and understand, you know, April, in particular, might have presented kind of a unique opportunity on pricing. But, you know, maybe just sort of thoughts on why this step down in the anticipated pace of repurchase and then just thoughts on sort of broader capital management ambitions, especially given the lower SCB results.

Yeah. No problem, Scott. For us, the $750 million versus $500 million was really opportunistic as we watched the price present itself at a more attractive level. You know, at $500 million, coupled with our dividend, we're at around a 100% of total payout and we feel like that's appropriately elevated based on our current capital position. Looking at the quarter and year to date, we are seeing the balance sheet growth that we've focused on. So we continue to prioritize our banking franchise first and then capital return second. Therefore, the return to $500 million is probably a reasonable place to expect us to stay for the medium term. Regarding the SCB, we were pleased with the results and would say that our outcome was consistent with our expectations. In a less severe scenario, we anticipated improved loss rates and feel the balance sheet was in a better condition. We've appreciated the transparency we saw this year with the process and noticed some improvements in PPNR modeling. Overall, I feel confident about those results. As for our target capital area, we've been consistent in aiming for around a ten percent CET1 area. Given this quarter's results, we're at eleven percent stated and nine three adjusted for AOCI, which suggests we can continue to glide towards that ten percent area assuming we receive timely regulatory approvals.

Okay. Perfect. Alright. Thank you all very much.

Hey. Thanks. Good morning, everyone. I was wondering if you could start with some comments on deposit costs and some of those higher costs coming off already in the second quarter. Just talk about underlying deposit competition and you obviously are seeing good loan growth and you're funding that incrementally as well. And what do you expect to see in terms of deposit cost from here, ahead of getting any incremental help from rate cuts? Thanks.

Sure. Yeah. Good morning, Ken. I'll start with that one, and maybe Bill, you can add. First and foremost, we're pretty pleased with how the deposit franchise has been performing. We've seen some real strength, especially on the consumer side. The competition is present, but we view it as rational. In the second quarter, we had some noise with the large temporary M&A-related deposits, but excluding those, we would have been down a touch, which aligns with our expectations given some seasonal tax outflows. Regarding pricing, as we move into the third and fourth quarters, we may lose the 10 and 9 rates, but expect balances to decrease slightly in the third quarter. We should be able to make up some ground on pricing, getting closer to a forty percent area. Furthermore, we're optimistic about the fourth quarter, where we might see continued momentum. Additionally, we're onboarding new bankers in corporate and commercial banking, which should help improve performance. All things equal, we expect our beta to return to a mid-forty range by the end of the year, especially with two anticipated rate cuts.

Maybe I'll add, Ken, from the competitive side. We have two strong prongs ongoing right now. First, we have a robust net news story, which is very important because we're adding profitable relationships. Additionally, we are deepening existing relationships, contributing significantly to our growth. We're witnessing impressive growth on the consumer side, especially in expansion markets like Charlotte and Tampa, where we've seen remarkable share gains. The competitive landscape is intense, but I feel we are better positioned than ever. The combination of new clients and deepening relationships strongly indicates a positive momentum for us.

Got it. Thank you. And just a second question on the fee side. You mentioned, obviously, the IB softness in April. You also mentioned trading. Is there a way you can help us understand what that bounce back looks like, especially with regard to your commentary about stronger expectations and also do we know how big that DCP event was on the other side as well? Thank you.

Yeah. Sure, Ken. On the trading and banking side, what I'd say is we saw weaknesses in both, especially in April. May was slightly better, and June almost fully recovered. We're expecting normalized results in the third quarter. Regarding the DCP event, I believe it was $25 million better than expected. In terms of geography, this was seen in other income, so you'll notice there was a high figure, but it netted out to neutral from a PPNR perspective due to similar increases in personnel expense.

Okay. Perfect. Yeah. Got it. Great. Thank you.

Good morning. I guess two questions. Maybe Mike for you as we think about the trajectory of how we get to a fifteen percent ROTCE or at some point. When I look at the operating leverage you spelled out very clearly on slide eight, just talk to us about the perspective on that. There wasn't much this quarter. It was barely anything in the first quarter. We think about the positive operating leverage kicking in. Is it back-half loaded? What is your view? Or do we need a meaningful pickup in fee revenue growth to actually drive that to narrow the gap to the fifteen percent offset? Thanks.

Yeah. I think there are a variety of factors that are going to contribute to improved profitability and returns, Ebrahim. You’re correct; we expect to see a pickup in some elements, particularly in fee revenue growth. However, I'd like to emphasize that we have ample expectations regarding continued improvements in our margin due to fixed asset repricing throughout the year. We're also focused on smart growth and driving efficiencies across our operations. While we want to capitalize on all our growth opportunities, I don't think these improvements are going to manifest overnight, but we believe we can achieve continuous improvement in ROTCE.

Got it. And Bill, I believe you mentioned in your prepared remarks about the RTP capability. I was just wondering the significance of that regarding gaining more commercial deposits. Is there a case to be made that you could see an increased wallet share with the commercial clients where you've been making a big push? Just give us a sense of how we should think about that opportunity, particularly as it relates to fee revenue or deposit growth. Thanks.

Yeah. Thanks. I highlighted one product, but I think it’s just evidence of our overall innovation and improvement. Our treasury management fees are up 14%, showing deeper engagement with our wholesale relationships; new relationships are coming in now with treasury management penetration reflecting the potential for our back book. We're seeing promising growth indicators, and those specific products highlight our relevance to clients. It's important to understand that this is a multifaceted strategy involving numerous investments contributing to our overall growth and capacity to serve clients. The deposits are lagging indicators related to more treasury business and operating accounts.

Thank you.

Hi. Good morning. I wanted to turn to expenses for a minute here and understand more about the restructuring piece of the expenses that you called out. I know you mentioned severance, and wanted to understand how much of that is severance and if that severance is related to the merger from years ago or something else. And then also just understand a bit more about how you're thinking about the investments needed to continue to build. I mean, you're already building, so I'm assuming it's in run rate, but maybe you could give us a sense of where the incremental investments you're making today are, whether they are at pace or if there is an accelerator there. Thanks.

Yeah. I mean, all but I think $2 million of restructuring charges in the quarter were related to severance. It was not related to the merger; these were repositioning different parts of the company. I won't go into specifics, but that's the answer to your question.

We continue to drive efficiency and align ourselves with our strategic priorities. As for maintaining a 1% expense growth while also investing in the company, I can assure you we can achieve that. Think about the end of 2023; we implemented a number of cost-saving disciplines into our company, which continue to carry over positively. We have a solid process in place for managing expenses, allowing us to effectively balance investments in technology, enhancements to digital platforms, including talent acquisition and risk controls that ensure operational integrity.

Yeah. And the call out that you gave earlier, Bill, on the payments piece, was what I got from it—tell me what I missed—is that corporate treasurers can now process activity via their cell phones twenty-four seven.

Well, it's really disbursements. Disbursements can now relate to how consumers want to interact as they can process disbursements through aliases like cell phones. That's a significant advancement. It allows businesses to better understand their cash flow. So this product enhances how both business and consumer clients interact, offering significant benefits.

And this is twenty-four seven, real-time, is that right?

Yes.

Okay. Thank you so much.

Morning.

Hey, John.

Just on the expense front, I know you had indicated that numbers came in a little bit higher than your expectation. Part of that is your investments in your hiring. Can you just talk about the flexibility there? I mean, how can you manage that? Or what are the areas of managing it if you do see revenue remain stubborn here? Do you have as much flexibility given that you're still hiring in select areas and investing into businesses and select areas of technology? So can you just talk about the ability to drive the positive operating leverage regardless of the uncertainty on the top line?

Yeah. John, it's Mike. I'll respond to that one. In certain of our businesses, some might perceive risk in our expectations for future performance. But to be clear, our design for incentives is performance-sensitive. To the extent that revenue does not materialize, we will take appropriate action regarding incentives. As we progress further into the year, it does become more challenging to halt or accelerate initiatives. However, we've been strategic in planning for the upcoming quarters and maintaining flexibility.

Got it. Okay, Mike. Thank you. Just separately, on the loan front, I just wanted to see if I can get a little bit more color on the low single-digit outlook. I know, Bill, you had mentioned on the commercial wholesale side there’s a bit of a wait and see still. But could you provide more detail on where in the back half you see commercial growth accelerating? What specific areas and what would be the drivers? Is it M&A finance, or do you see CapEx actually becoming a greater driver? Also, can you just discuss line utilization?

Yeah. Let me start by addressing line utilization. Line utilization is showing pretty flat growth. The components behind our loan growth include production, pay downs, and utilization. Pay downs have been consistent, and utilization remains stable. Some pockets do experience changes, particularly in asset securitization, likely due to regulations. Our story is largely about the production side. We maintain higher production levels and the quality of what we're delivering remains strong. This encompasses treasury penetration and acquisition of new clients. I do believe pay downs could increase moving forward as capital markets open again. Our capture rate on capitalized clients is historically high, and I feel confident due to our consistent production record. The growth potential is considerable.

Hey, first day, a CFO question, a CEO question, but CFO question is, what do you think about a normalized NIM or where should NIM be over time and how long might it take to get there? And then the CEO question is, how much of your time has been spent on the merger and regulation? If you go back one to two years ago, and how much time should be freed up given this kind of new world now that you're fighting back and more on offense? Thanks.

Hey, Mike. On the NIM, you saw a basis point improvement this quarter. We would expect that trend to continue into the third and fourth quarter. You're right to ask about what a normalized rate might be; it's hard to specify. In prior discussions, we discussed a potential goal in the three hundred basis points range, contingent on the balance sheet's evolution. We want to maintain our focus on NII growth as profitability remains key. Overall, we're optimistic about achieving something near or in that range this year.

Right. As for the time spent on the merger and regulation, I would say focusing on the merger integration is now behind us. This has been a significant pivot, and the regulatory aspects are ongoing but at a manageable pace. When we consider the J-curve effect of our merger, we realize its duration and depth. It took us longer to adjust than we anticipated, but we've significantly improved. We're now focused exclusively on growth initiatives, client service, and cultivating our workforce. The investments being made are yielding positive results, as evidenced by our current momentum.

So just a short follow-up, Bill. A lot of your competitors for a few years saw Truist as the gift that keeps on giving in terms of giving up share. You talked about the J-curve being deeper and longer than expected. However, I sense that it's a little more challenging now; the South is certainly competitive. Can you discuss how the dynamics are shaking out in the fastest-growing markets, and how are you adjusting for that?

You know, Mike, the competition has always existed, and it's never been absent. While there may be some new entrants, our long-standing competitors remain. I won't comment specifically on the 'knife fight' comparisons; I believe we are simply better positioned competitively. Our success in gaining clients and providing robust services speaks to our team's spirit and readiness to excel. The engagement of our workforce lends itself to the positive results you've noted.

And just a real short follow-up. Before the global financial crisis, I guess some crazies were off the street. It seems very competitive, but is it rational?

You know, we have many sophisticated competitors vying for our business. We focus on product capabilities and delivering advice tailored to our clients' needs. The aim is to understand and satisfy their requirements fully. This approach makes our business model effective, and clients appreciate our ability to serve them well.

Oh, great. Good morning. Thanks for the question. Bill, just going back to the expense comment for a moment, the operating leverage. I think you talked about not only this year but over the next several years generating positive operating leverage. I'm wondering if that narrative gets any easier with the progress on deregulation. I guess that's the first point. And then two, I'm interested in whether any savings might be used to increase technology and to compete more with the CAT ones. Thanks.

Yeah. Chris, it's a multifaceted situation. I don't see a direct correlation on the regulatory side impacting expenses immediately. However, our improvements in foundational elements have been significant, allowing for more efficient operations. Simultaneously, we’re in sync with our investments in technology and innovation which factors into our expense management. We want to utilize opportunities for savings to maintain revenue growth. The key to positive operating leverage is growing the top line while effectively managing costs.

Meanwhile, many of the areas Bill mentioned are self-funding. Investments that enhance efficiency represent another avenue supporting positive operating leverage expectations.

Thanks.

Hey. Good morning, everybody.

Good morning, and welcome. Thank you.

I wanted to try to better understand the stance on rate cuts. The question is, if we don't see any rate cuts, do you guys think you could still get into that revenue range and positive operating leverage range for the year?

I think we could, if the curve remains stable. The structure of the curve matters a lot. If there weren't cuts, but we saw a stable environment, yet relatively higher, we might find costs balancing out. However, without cuts and if the long end dips, that could create some risk. Overall, we're focused on managing funding costs efficiently and we're reinforcing core funding. So long as we maintain our outlook, we're optimistic about revenue stability.

Yeah. Curve shape. Got it. Okay. I'll limit myself to the one question.

Good morning. Just wanted to circle back again on the investment banking and capital market fees. I know, like, with the big banks, it's challenging to compare you guys with the regionals as everybody has a different mix. However, I was surprised at how low the numbers were; your characterization of June as being more normalized as opposed to a stronger outlook elsewhere surprised me as well. Can you help me understand: is this a mix difference? Is it timing? Are we gearing up for the third quarter when those metrics look more favorable? How should we interpret this a little more?

Yeah. I mean, remember, there's a distinction among larger firms. Our trading business is client-driven rather than separate. In April, markets were severely disrupted, notably in the public finance market, which has posed challenges. We have good business in public finance, which historically has been a significant deposit driver. This presents a unique opportunity. The M&A front is also influenced by specific deals; some got deferred this quarter. However, most are rushing back into the market now. June and forward have been more optimistic, so the overarching production and client-driven activities are promising.

Okay. Thank you.

Hi. Good morning. This is Thomas Leddy standing in for Gerard. Just a quick high-level question on credit quality. It was strong in the quarter. Many of your peers saw similarly healthy metrics. While I won't ask you to comment on other banks' credit trends, could you share what you believe is driving the generally strong credit results this quarter?

Well, let me address that, Brad. As you mentioned, we indeed saw strong performance and stabilization in our asset quality metrics. In the short run, this has been fostered by increasing certainty, but we do keep an eye on underlying macro concerns that exist. Those are some of the drivers behind our updated guidance. In the area of CRE, we believe it's significantly improved, maintaining strength across the sector. Concurrently, we're keeping focus on consumer confidence and spending trends; thus far, there are many positives.

Okay. Great. Thank you for taking the question.

Betsy, that completes 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. Betsy, you may now disconnect the call.