Q2 2025 Earnings Call Transcript

Greetings, ladies and gentlemen. And welcome to the Truist Financial Corporation Second Quarter 2025 Earnings Conference Call. Currently, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this event is being recorded. It is now my pleasure to introduce your host, Mr. Brad Milsaps.

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 continue 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 From sector-specific coverage to commercial and middle market banking to 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 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 now for several quarters.

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. In addition, we also received favorable results from the Federal Reserve's annual stress test. We expect that 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 greater median income which aligns with our strategy to engage clients early and building 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 mortgage indirect auto and other consumer 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 and 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 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% 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 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 to that's 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. 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 with 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 loan 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. Other consumer loans, which primarily include Sheffield and Service Finance, are typically seasonally strongest in the second and third quarters of the year.

But are 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, one additional day in the second quarter. Our net interest income or 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 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, 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 2025. Based on our current pipeline, and an improvement in overall activity.

On a light 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 like and linked quarter basis, reflecting our strong credit risk culture and proactive approach to quickly resolving 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 light quarter basis. Our loan loss provision exceeded net charge-offs by $92 million but improved outlook for loss rates in certain portfolios like CRE Office, and multifamily contributed to a four basis point decrease 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 light quarter 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 help drive our nonperforming loan level to multi-quarter loans. Turning to capital on slide fifteen.

On a linked quarter basis, RC CET1 ratio declined thirty basis points to eleven percent, as balance sheet growth seven fifty million dollars 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 and a ninety basis point decrease in our CT one erosion rate. As a result, we anticipate our stress capital buffer to decline thirty basis points and to be floored at two point five percent effective October first.

At 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. 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 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 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 to twenty five versus twenty twenty four. In terms of our outlook for adjusted expenses, we continue to expect full year 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, 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 approximately 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 noninterest 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 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. Wanna pause and thank all of our incredible teammates for their purposeful focus and productivity in moving our company forward. So thank you all for the your interest in Truist. And with that, let me turn it over to Brad for Q and 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.

We will now begin our question and answer session. On your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, We ask that you limit yourself to one question and one follow-up.

At this time, we will pause momentarily to assemble our roster. The first question today comes from Scott Siefers with Piper Sandler. Go ahead.

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 sort of overall sentiment among your customer base.

I guess especially on the interested on 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 on the maybe start with the consumer side first.

You know, our consumer business continues to be really strong. Consumers are staying in the game. 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, and doing in Sheffield and doing in 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 low.

As it relates to the wholesale side, our clients also came into this with a lot of strength, so a lot of liquidity, got through some of the post-COVID supply chain and all those issues. Still some wait and see in fairness. I mean, I think I'm really pleased with our results given the fact that there's still some uncertainty out there. Some certainty was cleared in the last several weeks.

Think about the tax bill. Think about some of the other things that have come in place. A lot of our activity, which I'm really happy about, is with new clients. So these are new to Truist.

So clients who are wanting to experience what we have to offer are impressed with our purpose-driven focus, impressed with the products and capabilities. I talked to a little bit about treasury management or whatever. So some of it's unique to Truist, some of it's unique to our markets that are really healthy. And I think we have a reason to still feel confident about where our both our consumers and our business and wholesale clients are going forward.

Terrific.

Okay. Thank you. And then, Mike, I was hoping you could apologies 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. You know, for us, the $750 million versus $500 million really was opportunistic as we watched the price simply 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.

Given our current capital position. You look at if you look at the quarter and sort of year to date, we are seeing the balance sheet growth that we've all been focused on. And so we still continue to prioritize, you know, our banking franchise first and then capital return second. So think the return to $500 million is probably a reasonable place to expect us to stay for the medium term.

You know, the SCB, we were pleased with the results there. I mean, I would say that our outcome was consistent with our expectations. You know, we expected in a less severe scenario to see improved loss rates. We feel like the balance sheet was in a touch better condition.

You know, we appreciated some of the transparency that we saw this year with the process, saw some improvements in PPNR modeling, etcetera. TIH was we feel like appropriately dealt with. So all in all, felt good about those results. I don't think that has necessarily an impact on how we think about a target operating area for capital.

We've been pretty consistent that we think sort of a ten percent CET one area is appropriate. You know, if you look at our result this quarter, we're at eleven percent stated and nine three adjusted for AOCI, and you sort of split the middle is sort of ten. And so think you'll see us continue to glide towards that ten percent area, you know, assuming, by the way, that we see a rule finalized at some point here.

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

The next question comes from Ken Usdin with Autonomous Research. Please go ahead.

Hey. Thanks. Good morning, everyone. Good morning.

I was wondering if you could start some you talked about the deposit cost 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 incremental as well. And what do you expect to see in terms of deposit cost from here, you know, ahead of getting any incremental help from rate cuts? Thanks.

Sure. Yeah. Good morning, Ken. I'll start with that one and, you know, maybe Bill, you can add.

So it you know, I'd say, you know, first and foremost, we're pretty pleased by how the deposit franchise has performing. We've seen some real strength especially on the consumer side of things. It is competitive. We think sort of rationally competitive.

But look, you know, we had a little bit of noise in the second quarter with the large sort of temporary M&A related deposits. X those deposits, we would have been down a touch that would have been consistent with what we would have otherwise expected just given some seasonal tax outflows. And the likes. Know, from a pricing perspective, as we move into sort of the third quarter and the fourth quarter, I think just losing the ten nine that we put noted in our in our disclosure, we would expect to see balances probably a little bit lower in the third quarter, but we would expect to make up hopefully some ground on pricing.

So maybe you see the betas move closer to a forty percent area or so. And now, by the way, I think that that contemplates a cut even though it's late. We think we might have some ability to get a touch ahead of that. And then the fourth quarter, we would expect continued momentum.

You know? Get that second cut in the fourth quarter. You know, maybe you start to see a little bit better rotation into some of the checking products. Continued momentum on the production side and consumer and in wholesale.

By the way, we've been onboarding a number of bankers in our new sort of corporate and commercial banking hiring. And so feel pretty good that we might see a little bit of a bounce in the fourth quarter. We also have public funds coming online in the fourth quarter. And, you know, look, all things equal, in our outlook, we assume getting back to sort of a mid forty beta by the end of the year.

Again, that's with two cuts.

Maybe I'll add Ken on the competitive side, maybe sort of break it up a little bit on the consumer side, Yeah. We sort of got two prongs going really well right now. One is the net news story, which is really important. So we're adding relationships.

And as I mentioned, they're more profitable, younger, higher median income. So really good net news story. Then our deepening story with existing relationships. So that's also a really strong part of our component here and growing not only the net new, but also growing the overall balance.

So you saw some pretty good growth on the consumer side. You know, really good growth in some of our expansion markets, which we've talked about, and then maybe more importantly, we've really know, we had some contraction in fairness in some of our key markets, and those are reversing. So think about markets like Charlotte, Tampa, etcetera, where we're really pleased with what we're seeing in some of the share early share numbers in those markets. So our relative competitiveness has increased significantly.

Mike talked a little bit about the wholesale side. You know, I feel like we're building momentum there. You know? So if we think about the new relationships that we're bringing in, much deeper penetration with those relationships, now coming with treasury relationships, deposits, ten to follow that.

So I think we have a good sort of some lead good leading indicators on the wholesale side as we think about the deposit franchise. So I feel good about the momentum. It is competitive, but most importantly, I feel really good about our competitive positioning. I don't think we've actually been better positioned than we are right now.

Got it. Thank you. And just a second question on the fee side. You mentioned the you know, obviously, we knew about the IB soft in April.

You also mentioned the trading. Is there a way you can help us understand, like, what that bounce back looks like, you know, amidst just your commentary about just, you know, stronger expectations and also just, 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 weakness in both, especially in the month of April. And then May a little better.

And then June almost fully recovered. And, actually, if you look even into July, we're seeing more normalized results. And so I think it's been that trend that gives us the confidence that you know, in the third quarter, we'll be back to a normalized level. And again, also in the in the, What's your second question on the on the non fall?

Yes. Yeah. So let's see. In the order, non-fault was better.

I think $25 million. And so where you'll see that from a geography perspective is in other income, you're higher, but from a PPNR perspective, it's neutral because you also would see an increase in personnel expense. By a similar amount.

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

The next question comes to Ebrahim Poonawala with Bank of America. Please go ahead.

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 it out very clearly on slide eight, Just talk to us 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? Was that sort of the view or do we need a meaningful pickup in fee revenue growth to actually drive that in order to get sort of narrow that gap to the fifteen percent offset. Thanks.

Yeah. I think, like, I think there's a variety of things that are gonna contribute to improve profitability and returns, Ebrahim. You know, you hit on one. You know, we do have an expectation.

You know, we've talked a lot about the initiatives that we've you know, have undertaken, the investments that we're making to improve just the our ability to drive more I'll call it capital efficient revenue through our existing sort of asset base and client base. Some of that's, you know, product, some of that deepening with existing clients. Of that's continued to invest in our businesses like wealth, like our wealth products, like investment banking. So yes.

You know? And then, of course, also, we expect to see some improvements in our margin. You know? We're seeing the fixed asset repricing phenomena that should continue for the rest of this year and next year.

You know, we're gonna continue to drive sort of smart growth. You know, funding is obviously a really important part of that. We're very, very focused on continuing to drive client deposit growth not always perfectly matched. You're seeing that this quarter where loan growth is perhaps a touch ahead of deposit growth.

That doesn't mean that we're not very, very focused on continuing to drive balances and operating accounts and so on and so forth. So not gonna be an overnight story. But we should continue to see, you know, sort of continuous improvement in that in that ROTC.

Got it and I guess, Bill, I think you mentioned in your prepared remarks around the RTP capability I'm just wondering the significance of that in terms of getting more commercial deposits. Like, is there a case to be made where you could see a much increased wallet share on 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 mean, I highlighted one product. It's not you know, one product doesn't drive, but it's but I think it's just evidence of our innovation.

And evidenced by our overall improvement. So treasury management fees being up 14%, you know, much more deepening with the wholesale relationships, The new relationships come now with treasury management penetration that more reflects what we think the back book can get to. So it's a combination of a lot of things. And our overall relevance to clients.

That specific product is sort of a unique product that allows clients to have, you know, faster safer disbursements with consumer side. So it's a nice sort of meat of the consumer and the wholesale side in terms of how funds flow. I think it's a bunch of things. It's a bunch of different investments that we've made.

And, again, evidenced by the growth that we've seen, And I think deposits as I said, these are leading indicators. I think deposits are a bit of a lagging indicators that come with more treasured business, more operating accounts, that drive that.

Thank you.

The next question comes from Betsy Graseck with Morgan Stanley. Please go ahead.

Hi. Good morning. Morning. I wanted to turn to expenses for a minute here.

And understand a little bit more about the restructuring piece of the expenses that you called out because I know you mentioned severance and wanted to understand how much of that is severance. And is that severance related to the merger from years ago or something else? And then also just understand a little 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 us a sense as to where the incremental investments you're making today, are they at pace, or is there an accelerator there?

Thanks.

Mike, why don't you take the first part of that? And then I'll take the second part if that's okay.

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

And we're always trying to continue to drive that efficiency as we go through. So I think that's not merger related, but also just restructuring and getting aligned with our strategic priorities of our businesses. And then Matthew, I think your bigger question is, you know, can you maintain a 1% expense growth and continue to invest in the company? And the answer to that's yes.

You know, because we continue to have I mean, if you think about sort of end of 2023, you know, we put a lot of cost-saving disciplines into our company. And they continue to accrue, meaning the discipline continues to accrue. Compliments to Mike. He's done a really great job of creating a process for us that we've got a lot of discipline.

We sort of know what's next up on the expense side, and we know what's next up on the investment side. So we've got a good calibration of thinking through that. And then the top priorities for investing are Then we talked about all those and then hopefully some of the prepared remarks enhancing our digital platform, you've seen the results of that. Payments and product capability.

I mean, I was intentional in mentioning some of the product capability that we've been investing in and seeing the results of that. Hiring and retaining talent, you know, continue to be a big part of what we're doing. And then and you see all those in the results. And then the infrastructure part, you know, you a little harder to see, but, you know, investing in the risk platforms, the data platforms, cyber controls, all the things that we need to do to make sure that we're running a great company.

So I think we've got the calibration of this right. That we can continue to invest in the company. Our teams and our leaders sort of get the, you know, save a dollar, invest a dollar kind of mentality. And I think we've got good calibration and good understanding of those levers of the company.

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. It's where they can really disbursements can relate to sort of how consumers want to interact. So they can have disbursements related to aliases like cell phones. As an example.

So that's a really pretty big advancement. So think about the you know, how disbursements are made that this can be done the way the client wants to receive it. And it speeds up the interaction with the business and the consumer. So it's sort of a twofer in the sense it's really good for the company.

In terms of understanding their cash flow. Really helps their businesses. So you may you think about the best product is more helping a client achieve their objectives.

And this is twenty four seven real time. Is that right?

Yeah. Yeah.

Okay. Thank you so much.

Next question comes from John Pancari with Evercore. Please go ahead.

Morning.

Hey, John.

Just on the expense front, I know you had indicated that you know, numbers came in a little bit the higher end of your expectation. It's part and 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 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. I mean, certain of our businesses, you know, as an example, if you look at our outlook and you might say, well, maybe there's risk in this stuff.

In a lot of cases, you know, if we're doing our jobs, our incentive designs are performance sensitive. Right? So to the extent that revenue doesn't sort of present itself, then we'll, you know, obviously take appropriate, you know, actions related to incentives. That's a part of it.

I'd say that the later you get into the year, you know, just to say it, it does get a little harder to stop and start things. But we've actually been pretty planful as it relates to that. And so we generally keep, you know, a number of levers handy and, you know, in the top drawer or whatever. Such that, you know, to the extent that the environment does change, we can be flexible.

I mean, we were I think we're crystal clear on the importance of generating positive operating leverage this year and into the future and so that's a real focus of our planning. And I, you know, I don't know how else to say it, but we just feel really confident in our ability to deliver there.

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 the on the commercial wholesale side, there's a bit of a wait and see. Still, but I guess if you give a little bit more color, where in the back half do you see commercial growth accelerating And maybe what areas and what would be the drivers? Is it M&A, finance, or do you see CapEx actually becoming a greater driver and maybe just talk about the line utilization aspect? Thanks.

Yeah. Let me start with the back part too because I didn't I really didn't talk about that earlier. Yeah. Line utilization is actually pretty flat.

So if we think about the components of loan growth, you know, the components are production, pay downs, and utilization. Pay downs have been pretty flat. Utilization's been pretty flat. There are pockets that the asset securitization, some of those others, they tend to they have a little bit, which I think probably may be tariff related.

But overall, pretty flat. So the story for us has been production. You know? So our confidence in sort of maintaining this is that we're producing at a pretty high level.

So that has tail attached to it. The quality of what we're producing is really, really high. So think about left leads, think about treasury penetration, and then a lot of net news. Know?

So these are a lot of new clients that we continue to have an opportunity to expand with. I do think pay downs could increase on the backside, by the way. So I think that's something to actually think about in terms of, like, how do we maintain? And they could increase with capital markets opening back up, clients getting more active in that.

And by the way, we'll benefit from that. Our capture rate on clients who use the use capital markets is really high. We've sort of been through those cycles before. So really, it's a production story.

And we've had consistent now production story, and it's a new client story. It's a new market story. So I think we feel confident. We've got good momentum.

And I think just feel confident in where we are in the second half. And what we have today is funding a lot of growth. And then on the consumer side, we're gonna talk about the consumer yeah. On the consumer side, know, similarly, really, really great production stories and consistent production stories.

We have a little seasonality. I think I mentioned that earlier. We have a little seasonality. If you think about our businesses like Sheffield and, like, service finance, you think about the market we operate in and HVAC and, you know, lake-related activities and mowers and those kind of things.

There's a little bit of seasonality in that. But again, the overall production numbers are really strong. And expansions. I think a lot of new lot of new dealers I've mentioned before.

To those businesses. So some of it's markets, some of it's idiosyncratic and relevance and importance with our clients in our markets.

Alright. Thank you, Bill. Appreciate the color.

The next question comes from Mike Mayo with Wells Fargo. Please go ahead.

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 kinda new world now that you're fighting back and more on offense. Thanks.

Hey, Mike, on the NIM, you know, you saw a basis point better this quarter. We would expect that positive trend to continue into the third and fourth quarter. Know, I think your question was more what's normalized. Yeah.

I'm not sure there's, like, a normalized I would expect us to continue to if the operating environment is relatively normal, to continue to improve. You know, I think last year at some point, we said we thought maybe a three teams area, you know, maybe even a touch better is achievable. That contemplates, you know, the balance sheet sort of continuing to evolve. With, you know, we kinda rolling up the curve, so to speak, And so and, you know, frankly, in our case, we think about the second half of this year and next year.

Getting some of the cuts being able to drive betas a touch. But I think, three teams is a reasonable expectation. It could be a little better, a little worse, just to say it because I think you know, I mean it. Know, we really do focus on NII growth and, of course, profitability is really important to us too.

But sort of quarter to quarter and know, the size of the balance sheet can change, you know this. But over a longer period of time, I'd like to see us, you know, more in that neighborhood than where we are today.

Right. And then, Mike, I hope you think I can answer a CFO question too, by the way. They don't have to be distinguished, but to go into the, you know, sort of the time spent and merger and regulation, I'd say, like, focusing on the merger integration is behind us. I think that's the real pivot that you feel.

The regulatory stuff sort of tectonic. I mean, it doesn't really a high rates of speed. Mike, you and I have talked about this you know, a lot of times that j curve, if you think about our merger, was longer and deeper than we anticipate accelerate part of that j curve. You know, so we don't we don't look back.

We're not inhibited by integration issues. But, you know, all of that's behind us. All the things that we see in terms of growth initiative, client service, you know, teammates on the ground, those who wanna be with us or with us, and those who joined us or, like, fired up and ready to go. The investments we're making are starting to pay off and create momentum.

So I think the large part of what you see here is integration you know, being clearly behind us and everything that goes along with integration. And we're on that positive, you know, high part of the slope of the of the j curve in terms of moving forward. You know, net news, probably like a really good example, net new in terms of consumer and new in terms of wholesale. So, you know, clients and markets are attractive.

We're turning the corner on know, some of the deposit share, you know, opportunities in some of our large markets. Which has been been really, really great. And, again, on the regulatory stuff, I think that's more of a go forward thing. You know, things don't things don't shift quickly.

You don't they don't have stair step, like, all of a sudden, you know, somebody's new in the office and we spend a lot of less time. We wanna create a really good risk infrastructure for our company. There are things that we're gonna do whether we're asked to do them by a regulator or not because we want to be you know, sustainable long term, you know, great governance and great risk controls to, you know, think about what the future opportunities are in a business. But I think the big one for us, Mike, is the know, the integration is fully behind us.

You know, we've taken it out back and, like, put it to bed.

So just a short follow-up, Bill. So, I mean, I think a lot of your competitors for a few years there that Truist was the gift that keeps on giving. In terms of you know, giving up chair. And you talked about the j curve being deeper longer than you expected.

But my sense is it's a little bit more of a knife bite in the South. I mean, it's just really competitive. It seems like you're really reinvigorated to go at it really hard. Can you just talk about the competitive dynamics in the fastest growing markets, but it also seems like some of the competitive and how do you adjust for that?

You know, Mike, it's always been competitive. So let think that's maybe the important part of this. This isn't sort of new to a market. It's always been competitive.

You know, some new entrants, but also, like, really sophisticated large competitors who we've had for, we've had for a long time. Maybe I won't get into the knife fights comparison, but I still think we've ever been better competitively positioned, you know. So our ability to sort of win every day, win every client, you know, compete with prowess and advice and capabilities. Just we've just never been stronger.

Our team you know, they've got a bring it on attitude. They've got a champion mindset. I mean, they're like, chin straps are buckled, and trust me, we're in the game competing really, really hard. And you see that start to see that now in our results in couple of quarters worth that benefit, I think you're gonna continue to see it.

And just real short follow-up. Just compared it before the global financial crisis, I guess, maybe the crazies are off the street is it might be competitive, but is it rational?

You know, we have a lot we just have a lot of sophisticated competitors. I mean, so, you know, we compete a lot on product capability and advice. I mean, that's sort of how we wanna lead is, you know, are we giving the best advice? Are we most relevant to our clients?

Are we satisfying their needs? Are we introducing relevant opportunities to help them grow and help them achieve shareholder value for their companies and for their individuals to help them grow along their, you know, their platform and, you know, increase their capabilities to satisfy their needs and grow and prosper. So I think it's a sophisticated competitive market, and we're a sophisticated competitive force.

Thank you. Ladies and gentlemen, we ask that you limit yourself to one question going to accommodate everyone. The next question comes from Chris McGratty with KBW. Please go ahead.

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 it all easier given with the progress on deregulation. I guess that's the first point. And then two, I'm interested in whether that might be any savings might be used to increase technology and to compete you know, more with the CAT ones.

Thanks.

Yeah. Chris, I think it's a lot of things. Again, I don't see the stair step on the regulatory and expense side over time. Yes.

But I think that's just a result of us having better infrastructure, better governance, better foundational elements that we can operate on. And we've had and we have invested a lot in those over the last few years. So that has been a significant part of our investment. Again, I would say that's more us versus sort of, like, you know, regular regulatory driven necessarily.

But I think your other point's exactly right. And by the way, throw other technologies, throw AI into this, throw other developments and opportunities on the expense savings side, As long as we continue to see ways to invest and grow our markets, I think we do have those kind of trade-offs. And, you know, the best way to drive operating leverage is to grow the top line. You know?

So we wanna use some of the expense saves and some of the opportunities to continue to drive revenue and get that mix right. So having positive operating levers with no growth is not a good outcome. You know? So we wanna have positive operating leverage and growth that reflects the markets and opportunities that exist for us.

And some of the areas Bill's talking about are they sell fund. Right? So if they're investments we can make in things that create efficiency, and there are a number of those right now given sort of innovation that's happening. Those are that's also a phenomena that's helping support that positive operating leverage expectation. Exactly.

Thanks.

The next question comes from Steven Alexopoulos with TD Callen. Please go ahead.

Hey. Good morning, everybody. Good morning, and welcome. Thank you. I wanted to try to better understand the sense to rate cuts. And the question is, if we don't see any rate cuts, do you guys think you could still get into that revenue range and the positive operating leverage range for the year? Hey, Steve. Good morning. Yeah. I think we could. Right? I mean, I think it depends.

I think the shape of the curve matters a lot. I think to the extent we didn't get the cuts, but we and we see, you know, a pretty stable, call it two year or maybe we even stay a touch higher, and those forces would offset one another. I think if you saw no cuts and you saw the long end lower, an example, that would maybe create some risk. But think the end of the day, we're I don't think we feel super sensitive to sort of the rate path second half of the year.

On our revenue outlook, we're gonna be working pretty hard to manage our funding costs and to generate, you know, good core funding. Know, it's probably more of a watch item for next year. Right? We, you know, we'd love to get more cuts you know, sooner and keep it going.

But I mean, most of it's embedded for this year. I mean, our rate cut forecast is the end of the year, you got a pretty small impact. It really ends up being a lot more curve shape, I think.

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

Thanks. Thanks, Steve.

The next question comes from Matt O'Connor with Deutsche Bank. Please go ahead.

Good morning. Just wanted to circle back. Again on the investment banking capital market fees. Look.

I mean, I know versus, like, the big banks, it's hard to comp you guys versus regionals. It's everybody's got a little bit of a different mix. But I guess I was surprised, like, how low the number was then your characterization of June is kind of being more normalized as opposed to maybe kind of strong as we're hearing elsewhere. So just trying to understand, like, is it a mix difference?

Is it timing? Is it know, we're gonna have this massive number in three q and, you know, those questions pretty irrelevant. How should we think about that a little bit more?

Yeah. Thanks, Matt. I mean, sort of remember, you know, sort of distinguish you know, between the large guys. I mean, we have a trading business that's driven by our client business.

So you're right. We don't have sort of a separate trading business. And then and in April, some of those markets were substantially disrupted. I mean, think sort of the public finance market as the prime example.

And we have a, you know, we have a good business in public finance. By the way, it's a huge deposit driver for So it's an important part of our overall business structure. So that was a case where you know, that was probably as a weighted element, probably a little more idiosyncratic. To us in terms of a little overweighting in our treasure.

But not overweighted to our business. And I think that's sort of the way to think about it. On the M&A front, you know, it's a little bit like which deals are you in. Know?

So we had a lot of deals get deferred during the second quarter. By the way, none went away. Many are back in the market already. So there's a little bit of you know, there's reason to be optimistic that that didn't really change the trajectory.

And then as Mike mentioned, June's sort of back on track. I mean, sort of May got better. June's back on track. You know, all the elements that you see in loan growth and new clients and building our corporate, you know, banking business and all those elements, those are all regular way business that we've been doing for, you know, decades.

And you know, I think we have every reason to be confident that we'll continue to be on that trend. So a little bit was, you know, the client-oriented businesses that we're in. And the businesses that we support. But I think that diversity also really benefits us on the other side.

Okay. Thank you.

Yeah. Thanks, Matt.

The last question today comes from Gerard Cassidy with RBC. Please go ahead.

Hi. Good morning. This is Thomas Leddy standing in for Gerard. Just a quick high-level question on credit quality.

So it was strong in the quarter. And many of your peers also saw pretty healthy metrics. Given all the noise and uncertainty in the macro and geopolitical environments, I'm not asking you to comment on other banks' credit trends, but what in your view is driving the generally strong credit results this quarter?

Well, let Brad Bender do that, Brad. Yeah. Thanks, Thomas. You know, as you mentioned, you know, we did see strong performance and continue to see signs of stabilization and resilience.

I think in terms of the short run, it really is around we're starting to see some certainty that is helping. There are some macros out there that we're watchful and that's but that is also why you saw us revise guide into the fifty-five to sixty range. CRE, we see that that sector now is largely behind to perform really strongly there. We took the right actions several periods back.

I'd say areas that we continue to just focus on and watch is around what is consumer confidence, where is spending, what are those cost pressures, that are in the system, If all of those continue to hold, we see really strong positive trends to continue.

Okay. Great. Thank you for taking the question.

This concludes our question and answer session. I would like to turn the conference back over to Brad Milsaps for any closing remarks.

Betsy, that completes our earnings call. 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.

The conference is now concluded. Thank you for attending today's presentation. May now disconnect.