Truist Financial's Q3 Earnings Beat as NII & Fee Income Rise

Truist Financial’s TFC third-quarter 2024 adjusted earnings of 97 cents per share handily surpassed the Zacks Consensus Estimate of 89 cents. The figure, also, jumped 21.3% year over year.

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Results benefited from higher net interest income (NII) and non-interest income. Further, lower provisions and a decline in expenses acted as tailwinds. On the other hand, a fall in average loan and deposit balances was the undermining factor.

Results in the reported quarter excluded an increase to gain on the sale of Truist Insurance Holdings (“TIH”) and credit for an FDIC special assessment. After considering these, net income available to common shareholders (GAAP basis) was $1.34 billion or 99 cents per share, up from $1.07 billion or 80 cents per share in the prior-year quarter. Our estimate for the metric was $1.15 billion.

TFC’s Revenues Rise, Expenses Fall

Total quarterly revenues of $5.14 billion grew 4.3% year over year. The top line beat the Zacks Consensus Estimate of $5.05 billion.

Tax-equivalent NII increased 2.2% to $3.66 billion. The rise was driven by the balance sheet repositioning undertaken in the second quarter. Our estimate for NII (FTE) was $3.65 billion.

Net interest margin (NIM) grew 20 basis points (bps) to 3.12%. We had projected the metric to be 3.11%.

Non-interest income was $1.48 billion, jumping 11.2%. The increase was driven by higher investment banking and trading income, and service charges on deposits. We had expected this metric to be $1.42 billion.

Non-interest expenses were $2.92 billion, down 4.3%. Excluding certain non-recurring items, adjusted non-interest expenses declined 2.3% to $2.83 billion. The decline was mainly attributable to lower personnel expenses. Our estimate for adjusted non-interest expenses was $2.99 billion.

The adjusted efficiency ratio was 55.2%, down from 58.9% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.

As of Sept. 30, 2024, total average deposits were $384.3 billion, down 1% on a sequential basis. Average loans and leases held for investment of $303.2 billion declined 1%.

TFC’s Credit Quality: Mixed Bag

Net charge-offs were 0.55% of average loans and leases, up 4 bps. Also, the allowance for loan and lease losses was 1.60% of total loans and leases held for investment, which increased 12 bps.

Provision for credit losses was $448 million in the third quarter, down 9.9% from the prior-year quarter. Our estimate for provisions was $518.6 million.

As of Sept 30, 2024, total non-performing assets (NPAs) were $1.53 billion, down 3.5%. We had expected NPAs to be $1.51 billion.

TFC’s Profitability & Capital Ratios Improve

At the end of the reported quarter, the return on average common equity was 9.1% compared with 7.5% in the third quarter of 2023.

As of Sept. 30, 2024, the Tier 1 risk-based capital ratio was 13.2% compared with 11.7% in the prior-year quarter. The common equity Tier 1 ratio was 11.6% as of Sept. 30, 2024, up from 10.1% as of Sept. 30, 2023.

Update on TFC’s Share Repurchases

During the reported quarter, Truist Financial repurchased shares worth $500 million.

Our Take on Truist Financial

A decent loan demand, business restructuring initiatives and TFC’s efforts to bolster fee income are expected to continue supporting its top line. However, elevated expenses and ambiguity over geopolitical and economic risks are major headwinds.
 

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 TFC’s Larger Peers

Wells Fargo’s WFC third-quarter 2024 adjusted earnings per share of $1.52 surpassed the Zacks Consensus Estimate of $1.27. In the prior-year quarter, the company reported earnings per share of $1.39.

WFC’s Results benefited from higher non-interest income and a decline in provisions and non-interest expenses. However, lower NII and loan balances were the undermining factors.

High interest rates and solid investment banking business performance drove JPMorgan’s JPM third-quarter 2024 earnings to $4.37 per share. The bottom line handily surpassed the Zacks Consensus Estimate of $4.02.

Robust capital markets performance and a rise in NII majorly supported JPM’s quarterly performance. On the other hand, higher non-interest expenses and provisions and subdued mortgage banking performance were the headwinds.

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Wells Fargo & Company (WFC): Free Stock Analysis Report
 
JPMorgan Chase & Co. (JPM): Free Stock Analysis Report
 
Truist Financial Corporation (TFC): Free Stock Analysis Report

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