Q1 2026 Earnings Call Transcript

Greetings, ladies and gentlemen, and welcome to the Truist Financial Corporation's First Quarter 2026 Earnings Conference Call. [Operator Instructions] 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 First Quarter 2026 Earnings Call. With us today are our Chairman and CEO, Bill Rogers; our CFO, Mike Maguire; and our Chief Risk Officer, Brad Bender, as well as other members of Truist's senior management team. During this morning's call, they will discuss Truist's first quarter 2026 results, share their perspectives on current business conditions and provide an updated outlook for 2026. The accompanying presentation as well as our earnings release and supplemental financial information are available on the Truist Investor Relations website, ir.truist.com.

Our presentation today will include forward-looking statements and certain non-GAAP financial measures. Please review the disclosures on Slides 2 and 3 of the presentation regarding these statements and measures as well as the appendix for appropriate reconciliations to GAAP. With that, I will turn it over to Bill.

Thanks, Brad, and good morning, everyone, and thanks for joining our call today. Before we discuss our first quarter 2026 results, let's begin, as we always do, with purpose on Slide 4. At Truist, our purpose is to inspire and build better lives and communities. And one way we bring that to life is through the work we do every day for our clients. One example of this is our project finance business, which is a client-focused platform that provides financial advice and capital to help develop essential infrastructure that drives long-term economic growth, job creation and stronger and better communities throughout our footprint in the United States.

Our relationships with these clients have led to broad-based franchise engagement, which includes deposits, payments and lead roles and capital market transactions. From a financial perspective, there are aspects of this business that generate returns somewhat differently than our other businesses. A meaningful portion of this benefit is realized through reductions to our tax provision rather than reported revenue. Mike is going to walk you through the impact of that later in the call, but this dynamic contributed to our lower tax provision in the first quarter and is a factor in our expected lower tax rate for 2026 compared to 2025. This, though, is a great example of how serving our clients and communities is true to our purpose and also drives strong financial outcomes for our shareholders.

Now turning to our results on Slide 5. Before I get into the details of our first quarter, I want to spend a moment on the quality of what we're delivering across the company and how we're executing against our strategic priorities. What I'm most excited about this quarter is the underlying momentum we're seeing. New client pipelines are growing. Activity levels remain healthy, and we're continuing to add talent and execute in the areas that matter most to our strategy of driving improvement in our profitability.

During the quarter, we once again added new clients, deepened existing relationships and grew profitably in the business and products where we've chosen to focus with loan growth coming from priority segments, fee growth driven by core client activity and stronger referrals and connectivity across the company. I can clearly say that we're focused, we're aligned, and we're executing well, which is evident in our first quarter results. As you can see on Slide 5, we delivered net income available to common shareholders of $1.4 billion or $1.09 per diluted share for the first quarter, which represents a 25% increase over the first quarter of last year earnings of $0.87 a share.

Our performance was driven by continued execution against strategic priorities, including growth in both consumer and wholesale loans, along with strong noninterest income growth led by investment banking and wealth management businesses. Together, those factors along with our expense and credit discipline contributed to 250 basis points of year-over-year positive operating leverage in the quarter. As a result of this execution in managing our capital through share repurchases, return on tangible common equity improved by 150 basis points to 13.8% compared to the first quarter of 2025, representing meaningful progress towards our full year 2027 ROTCE target of 15%.

While we remain firmly on track to achieve this target, as I've said before, it's not a ceiling for our company. The progress we're seeing today across our company gives us confidence in our ability to drive profitability higher over time. With continued execution against our strategic priorities, continued capital return and the benefit of expected changes to the capital framework, we're establishing a long-term ROTCE target of 16% to 18%. Before I hand the call over to Mike to discuss quarterly results, I want to spend some time discussing the positive momentum we're seeing within our business segments and with our digital strategy on Slides 6 and 7. First, let me start with Consumer and Small Business Banking.

CSBB delivered another solid quarter that was consistent with our expectations and strategy to drive profitability improvement across the enterprise. Average consumer and small business deposits and loans were up 1% and 4%, respectively, versus the first quarter of last year of 2025. Average loans declined modestly for the fourth quarter which is consistent with normal seasonality and our goal of emphasizing growth in categories offering the most attractive risk-adjusted returns. As you can see on the slide, Premier Banking was again a source of strength with both deposit and lending production up significantly, driven by deeper client engagement, adviser productivity and continued momentum in financial planning activity.

Digital continues to be a key growth engine for CSBB. Digital share of new-to-bank clients increased to 45% with Gen Z and millennials representing more than half of the growth. Active digital users grew year-over-year and digital transaction volumes remained strong, reflecting sustained client engagement with our platforms. Building on that digital progress, we're increasingly focused on how AI can further enhance productivity, decision-making and client engagement across the company.

We see AI as a real operating lever, one that improves the client experience while also creating productivity and operating leverage across our businesses, without compromising control, safety and reliability. Our focus is on using AI to strengthen relationships, giving clients faster, more personalized service and enabling our teammates to spend more time advising and problem solving not navigating processes. We're already deploying AI across Consumer and Small Business Banking and practical client-facing ways. Truist Insights delivers personalized financial guidance at scale.

Truist Assist handles most routine service requests digitally and around the clock, improving consistency in reducing call volumes. AI-enabled call summarization is live for care center agents, lowering after-call work and enhancing insight capture. Overall, our disciplined focus on capital allocation, pricing, productivity and digital execution is translating into strong underlying performance and positions consumer and small business banking well as we progress through the year. Now turning to Wholesale on Page Slide 7. In Wholesale, we delivered a strong start to 2026 with continued momentum across loans, deposits and fees, while maintaining a disciplined focus on relationship returns and capital efficiency.

Average wholesale loans and deposits increased 9% and 2%, respectively, versus the first quarter of 2025, reflecting diversified growth across our industry banking, middle market, and CRE teams as we continue to prioritize high-quality relationship-driven loan growth. Middle market deposits, in particular, an area where we've invested heavily grew 11% year-over-year, driven by 7% growth in our legacy markets and 30% growth in expansion markets such as Texas, Ohio and Pennsylvania. Wholesale fee performance was also stand out this quarter with strong results in Wealth Management and Investment Banking and Trading.

Investment Banking and Trading delivered its highest quarterly revenue since 2021, driven by strength across a broad set of product areas. Importantly, we're also seeing even stronger connectivity among our commercial, corporate and investment banking platforms. This is driving higher quality fee growth with an increase in the number of lead roles and meaningful contributions from existing commercial and wealth clients. We're also leveraging AI across Wholesale to enhance productivity underwriting and client engagement using predictive analytics to improve adviser effectiveness, accelerate underwriting speed and precision, and scale lead generation and conversion among payments and wealth.

These capabilities are helping us serve clients more efficiently while improving returns and speed to market. Overall, we see clear evidence that our strategy is working. We are pairing high-quality balance sheet growth with improving fee mix, stronger client engagement and enhanced operating efficiency, which gives us confidence Wholesale -- in Wholesale's outlook for the remainder of this year. Now let me turn it over to Mike to discuss our financial results in a little more detail.

Thanks, Bill, and good morning, everybody. We reported first quarter 2026 GAAP net income available to common shareholders of $1.4 billion or $1.09 per diluted share. Earnings per share increased 25% versus the first quarter of 2025 and were up 9% versus the fourth quarter of 2025. Revenue decreased 1.9% linked quarter due to lower net interest income primarily related to day count. Revenue increased 5.1% versus the first quarter of 2025 due to higher net interest income driven by strong loan growth and higher noninterest income primarily due to growth in Investment Banking and Trading and Wealth Management income.

GAAP noninterest expense decreased 5.9% versus the fourth quarter of 2025, primarily due to other expense. Noninterest expense increased 2.6% versus the first quarter of 2025, which helped drive the 250 basis points of year-over-year positive operating leverage. Our effective tax rate in the first quarter was 12.4% versus 17.9% in the first quarter of 2025. Approximately half of the year-over-year decline was due to increased client transaction activity in our project finance business that Bill mentioned earlier in the call. Next, I'll cover loans and leases on Slide 9. Average loans held for investment increased $2.3 billion or 0.7% on a linked quarter basis to $327 billion, driven by 1.8% growth in commercial loans, partially offset by a 0.9% decline in consumer loans.

End-of-period loans increased modestly linked quarter as 1% growth in commercial loans was offset by a 1.1% decline in consumer loan balances. Both average and end-of-period loan trends are consistent with the expectations for loan growth and mix that we outlined in January. As a reminder, our expectations for 2026 were that average loan growth would be driven primarily by commercial and other consumer categories with relatively slower growth in residential mortgage and indirect auto. This outlook reflected our focus on profitability and being selective in where we deploy capital.

Within consumer, average other consumer loans, which include our specialty lending businesses like Sheffield, Service Finance and LightStream, were relatively stable on a linked quarter basis, consistent with normal seasonal patterns. We continue to expect these portfolios to grow at a mid- to high single-digit pace in 2026, given their attractive risk-adjusted returns. Based on our current pipeline and economic outlook, we continue to expect average loan growth of approximately 3% to 4% in 2026. Moving now to deposits on Slide 10. Driving client deposit growth is a key priority across many of our top businesses and growth initiatives, and I'm encouraged that we saw growth in client deposits in what is typically a seasonally weak quarter for client deposit growth.

Average deposits increased 0.7% linked quarter, driven by growth in interest checking, partially offset by declines in all other deposit categories. Average interest-bearing deposit costs declined 14 basis points linked quarter to 2.09% and average total deposit costs declined 9 basis points to 1.55%. As shown in the chart on the bottom right of the slide, our cumulative interest-bearing deposit beta increased from 45% to 46% and our total deposit beta increased from 30% to 31% on a linked-quarter basis. Moving now to net interest income and net interest margin on Slide 11. Taxable equivalent net interest income decreased 2.8% linked quarter or $105 million, primarily due to 2 fewer days in the quarter compared with the fourth quarter and seasonal changes in our deposit mix.

Our net interest margin decreased by 5 basis points linked quarter to 3.02%, driven primarily by that same seasonal change in deposit mix. For full year 2026, we now expect net interest income to increase 2% to 3% compared with our prior expectation of 3% to 4% growth. The change in our outlook is primarily driven by our expectation that the federal funds rate will remain unchanged throughout 2026 compared with our previous expectation for two 25 basis point reductions, one in April and one in July. Our net interest income outlook still assumes 3% to 4% average loan growth and the continued benefit from fixed asset -- fixed rate asset repricing.

Although we expect the net interest margin to remain relatively stable in the second quarter, we do anticipate the full year 2026 average net interest margin will exceed the '25 average of 3.03%. As you can see on the right-hand side of the slide, we also updated our fixed rate asset repricing outlook and our swap disclosure. Turning now to noninterest income on Slide 12. Noninterest income increased $7 million or 0.5% versus the fourth quarter of 2025, reflecting strong growth in Investment Banking and Trading income and lending-related fees, largely offset by a decline in other income due to lower investment income.

Investment Banking and Trading income increased $37 million or 11% linked quarter to $372 million, reflecting stronger trading income and capital markets activity, partially offset by lower M&A fees. Noninterest income increased 11.6% versus the first quarter of 2025 due primarily to the 36% growth in Investment Banking and Trading and 7.6% growth in Wealth Management income. Next, I'll cover noninterest expense on Slide 13. On a linked quarter basis, noninterest expense declined 5.9%, driven by lower other expense and lower personnel expense. Other expense in the fourth quarter of 2025 included an accrual related to a legal matter, while the decline in personnel expense was driven primarily by lower incentive compensation.

These benefits were partially offset by higher regulatory costs as the fourth quarter of 2025 benefited from an FDIC special assessment credit. On a year-over-year basis, expense growth remains well controlled. Noninterest expense increased 2.6% versus the first quarter of 2025, reflecting higher personnel expense, partially offset by lower professional fees and outside processing costs. Moving now to asset quality on Slide 14. Our asset quality metrics remain strong on both a linked and like-quarter basis.

Net charge-offs increased 4 basis points linked quarter to 61 basis points and were up 1 basis point versus the first quarter of 2025. Nonperforming loans held for investment increased 2 basis points linked quarter to 50 basis points of total loans, driven by higher consumer and nonperforming loans, partially offset by improvement in C&I and CRE. The increase in consumer nonperforming loans was primarily due to a change in the nonaccrual criteria for certain indirect auto loans, which we disclosed in our 10-K rather than any deterioration in underlying credit trends. While this enhancement will result in higher reported nonperforming indirect auto loans over time, there's no impact to the cash flows or loss expectations over the lifetime earnings of these loans.

Before I move on to discuss our capital position on Slide 16, I do want to spend a few moments on our nondepository financial institution or NDFI exposure and how we think about the risk profile of that portfolio. To support that discussion, we've included expanded detail our NDFI loan portfolio on Slide 15. As of March 31, loans classified as NDFI represented 12% of total loans. This is a well-diversified portfolio across 35 different asset classes, and it's structured with protections that have held up well historically in stressed environments. Our largest NDFI exposure is the diversified equity REITs.

This is a client-driven business that we've been active in for more than 20 years, and it's an area where we have deep experience. These loans are secured by income-producing real estate, underwritten with conservative leverage and supported by strong covenant packages which helps mitigate downside risk. With respect to private credit, our exposure is primarily through lending relationships with business development companies or BDCs and middle-market loan funds. In total, these exposures represent about 1% of our loan portfolio.

From a risk standpoint, these facilities are underwritten with advanced rate limits, borrowing base mechanics and meaningful equity positions beneath us, all of which are designed to provide significant loss protection in more stress scenarios. Moving now to capital on Slide 16. Our 10.8% CET ratio was stable with the fourth quarter. During the first quarter, we repurchased $1.1 billion of common stock compared with $750 million in the fourth quarter. We are targeting repurchases of $1.2 billion in the second quarter and approximately $5 billion in 2026, compared with our previous expectation for $4 billion of repurchases for full year 2026. Overall, our capital allocation priorities remain unchanged.

These priorities include supporting the organic growth needs of our clients, paying our common stock dividend and returning excess capital to shareholders through share repurchases. M&A is not a priority for Truist as we remain focused on improving our own profitability and returning capital to our shareholders. Finally, we are well positioned for the recently issued Basel III proposal. Under the newly proposed capital rules, we estimate that risk-weighted assets could decline by 9% under the revised standardized approach and by 11% under ERBA.

We believe the proposed changes align well with our lending strategies and support continued elevated capital return to our shareholders. And now I'll review our guidance for 2026 and the second quarter on Slide 17. As I previously mentioned, given the shift in market expectations for interest rates this year, we now expect 2026 net interest income growth of 2% to 3% compared with our prior expectation of 3% to 4%. On the other hand, we now expect stronger noninterest income growth this year, reflecting continued momentum across all of our fee-based businesses. We now expect high single-digit growth in noninterest income compared with our prior expectation of mid- to high single-digit growth.

In addition, we now expect full year GAAP noninterest expense to increase approximately 1.75% in 2026 versus our previous expectation of 1.25% to 2.25% growth. Taken together, although we are modestly refining our revenue outlook to the low end of the prior 4% to 5% range, our overall earnings expectations for 2026 remain unchanged. In terms of asset quality, there is no change in our expectations for net charge-offs to be about 55 basis points in 2026. As I mentioned earlier in the call, due to increased client-driven transaction activity in our project finance business, we now expect our effective tax rate to approximate 14.5% or 16.5% on a taxable equivalent basis in 2026 versus our previous expectation of 16.5% and 18.5%, respectively.

Finally, as it relates to buybacks, we're now targeting $5 billion of share repurchases in '26 versus our previous expectation of $4 billion. In other words, despite the pressure we see in net interest income, our stronger noninterest income, increased share repurchases and a lower tax rate from client-driven activity result in an overall earnings expectation for 2026 that remains unchanged. As a result, we remain confident in the EPS trajectory we expected in January and in our ability to achieve our 14% ROTCE target in '26 and our 15% ROTCE target in 2027. Now looking into the second quarter of '26, we expect revenue to remain relatively stable relative to the first quarter revenue of $5.2 billion.

We expect net interest income to increase approximately 1% in the second quarter primarily driven by an additional day and increased client deposit balances. We expect noninterest income to decline approximately 1% linked quarter due to lower Investment Banking and Trading income, partially offset by higher other income and card on treasury management fees. Noninterest expense of $3 billion in the first quarter is expected to increase by 3% to 4% linked quarter due to higher personnel expense. Consistent with our full year outlook, we're targeting approximately $1.2 billion of share repurchases in the second quarter of 2026. Now I'll hand it back to Bill for some final remarks.

Thanks, Mike. With close, I want to reinforce the confidence I have in Truist's direction and earnings trajectory we're building. As shown on Slide 18, we continue to have clear line of sight to a 14% return on tangible common equity in 2026 and 15% in 2027 driven by improving profitability, continued execution across the franchise and strong capital return. As I mentioned earlier, our 15% ROTCE target in 2027 remains a firm and achievable target.

However, we view it as an important milestone, not the endpoint. With continued execution and discipline, we have the ability and clear line of sight to drive returns to 16% to 18% over the next 3 to 5 years as earnings power continues to strengthen and capital is deployed. Achieving these returns will be driven by the same core factors we've discussed today and on previous calls. These factors include sustained growth in our key businesses, positive operating leverage, disciplined expense and risk management, and elevated capital return to shareholders.

Overall, we're encouraged by the progress we're making, and we remain focused on executing with discipline, delivering for our clients and creating long-term value for our shareholders. I want to thank our teammates for their commitment, focus and their purposeful work and thank our shareholders for your continued trust and support. Brad, let me turn that back over to you.

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

[Operator Instructions] The first question today comes from Scott Siefers with Piper Sandler.

Mike, when you think about the rationalized NII outlook for the year, could you please provide just a little context regarding just more specifically, how the lack of likely Fed fund rate cuts impact things? Just hoping to understand, is that just what it means likely for deposit cost leverage? Or are there other factors involved? And maybe you could talk a little about the competitive environment, particularly on the deposit side, please.

Yes, sure. Scott, no, I think you said it. I mean, we had cuts in April and July. With both coming out of our outlook, we've, I think, been pretty consistent about the fact that we're positioned liability sensitive on the short end.

And so saw a little bit of pressure there that came through. And frankly, the second part of your question is probably the other contributing factor, which is it is competitive. I think with rates where they are, we're seeing a little bit more rotation on product. We're seeing a little bit more yield seeking and rate awareness in the market across the businesses.

So probably not unexpected, given the expected path on rates but that's where the pressure is really coming from that drove our outlook a little lower. I think the good news, Scott, just to say it and we mentioned this in our prepared remarks, we are seeing great momentum on the fee side. And so I think when combined allowed us to hang on to the low end of the revenue guide and that coupled with the tax outlook and the buyback tweaked a little higher, we're seeing the bottom line, still in line with our January expectations.

Yes. Perfect. And then on that last point, it's great to see the pace of repurchase step up in the first quarter as well as the higher expectation for the year. Maybe if you could talk a little more about that decision?

How much would you say is sort of confidence in your own outlook versus just sort of panning in the risk-weighted asset release that we get from the offense new proposals, for instance?

Yes. I wouldn't attribute the increase from $4 billion to $5 billion to the Basel III proposal. I think that will have an impact in terms of, we mentioned the durability of being able to stay at an elevated buyback into '28 and maybe beyond. We'll need to see where the rule finalizes.

This was more of a follow-through on how we've been thinking about capital management in '26 and '27. We're targeting that 10% CET1 level in '27 as the various moving parts that you would expect to contribute to capital planning that just retrended the buyback a little bit higher this year. So hopefully, that answers your question.

The next question comes from Ken Usdin with Autonomous Research.

A follow-up to the longer-term 16% to 18% ROE. Just wondering, you just talked about the kind of capital part and what that might look like. How do you think the ROA trajects as you think about that new 16% to 18% and how much extra that might be on top of the -- once you get to 15%?

Ken, it's Michael. I'll start there. Look, I think as you think about the 16% to 18% over just that extended horizon, right, I think we've got a lot of confidence based on a lot of the areas that Bill mentioned in his remarks in terms of the areas where we expect to improve profitability, right, client deposits. We expect our margin to improve.

Our fee businesses are all generating accelerating growth. Those same factors are going to contribute to that next horizon the 3- to 5-year outlook of 16% to 18%. I see our ROA profile moving closer to, call it, [ 1 20 ] in that sort of 2017 outlook, and I think it creeps a little higher from there.

Yes, Ken, I would just add, I think the 16% to 18% is a mixture. Mike talked about just accelerating our growth in fees, expanded NIM, margin, client deposit growth, optimizing the balance sheet, benefits, prudent capital allocation, more durability in our return on capital. Think about things like that, for us, the HTM pulled a par and then just efficiencies in our business. So not only is it an ROA story, but it's also an efficiency story.

I mean I think that we're seeing some of the benefits of things like AI, but in fairness, just the process improvements that we're making that we can redeploy for growth and also harvest for profitability.

Got it. And second, just a question on Investment Banking, a really solid result this quarter. I know Mike, you talked about the second quarter a little bit. But just can you talk about the different sides of the business? What was the drivers IB versus Trading? And then just how you're seeing the environment and customer confidence in terms of transaction willingness?

We had broad-based strength this quarter, especially on a like-quarter basis, you saw outsized performance and trading. But I'd say we're seeing really good activities across the core banking business as well as trading. If you think about our outlook for the year, I think at one point, we were thinking about kind of mid-teens growth. I think it could be higher than that, high teens, maybe even 20% across that full line.

A lot of that is trading year-over-year, but we expect double-digit growth in what I think of as like the traditional investment banking business. And it's broad-based. It's really across all the products.

And I mentioned in my comments, I think one of the things I'm probably most excited about is just this connectivity to our core franchise. I mean I think that's a set of our secret sauce in the investment banking business. The fees from our commercial and wealth businesses were up actually substantially, and the pipelines are up substantially as part of that. So it feels and the confidence that we talked about, it just feels more durable and feels more sustainable because it's tied in tightly to that to the franchise.

The next question comes from Erika Najarian with UBS.

Bill, this one is for you. I guess I'm wondering why unveil today a new long-term ROTCE target. I fully realize that you have the Basel III reform coming. But you also -- Mike also mentioned that wasn't a factor in the repurchase. So I guess, is there something in the ROA profile that you saw accelerating or improving that gave you the confidence to unveil a new ROTCE target today?

Yes. I mean, I think, Erika, you and others have asked us a lot is 15% sort of the endpoint or is it a point on the journey. And I think one, we feel confident where we're going. You can see this quarter's results, and we feel confident in the momentum that we're building.

Quite frankly, the Basel III is a component. So we wanted to answer that question as well, sort of how does that fit into this piece. And as Mike highlighted, it's pretty beneficial to our balance sheet. It's beneficial to the -- how we do business.

And so our ability to redeploy capital as it relates to that part of it. So I think it's a variety of things. We felt it was important to start putting a stake in the ground for you, your constituency, for our shareholders. and for our teammates. We just feel really good about the momentum we're building.

Let me just to add to that, Erika. I mean, in fairness, we didn't really have a long-term target out there. The 14% and 15% ROTCE targets really are short term and I think Bill said it, I think it was appropriate for us to establish a long-term target. I think having clarity on the evolving capital framework contributed to that.

But really, I think it's the confidence in the business that we're -- and the momentum that we're seeing in the businesses. So really, all 3 of those factors contributed to our decision to provide a new target.

And my second question, we have to ask because obviously, Truist was in the news a few weeks ago. There was a Bloomberg article essentially speculating that you could potentially be attractive to another partner. And I know you just put a stake in the ground. So clearly, you have a view of your future that's right.

At the same time, your market cap to core deposits is quite low relative to your peers. And looking at your Board, you have some heavyweight financial institution veterans on your Board. Bill, I guess, like this is sort of a free-flowing question. What are your thoughts on that -- monetizing your business that way?

Yes. I mean, Erika, we've all been at this a long time and to ask me to speculate on some rumor and some article which by the way, has been repeated, I think, pretty solidly by the person identified in that. So let's just like put that aside. Now, how do we feel about our business?

I think we feel great about our business. And we feel great about the trajectory that we're establishing. We've sort of -- we've set forth a plan that achieves mid-teens EPS growth over an extended period of time under a really good risk posture. I think that provides an advantaged return to our shareholders, and that's always going to be the goal is let's make sure we have a plan that gives an advantage return to our shareholders.

And that's -- that's the 100% focus of our Board, myself and our team.

The next question comes from Manan Gosalia with Morgan Stanley.

Bill, a question for you on the ROTCE target. I know you laid it out as a 3- to 5-year target. But as we think about that 15% number for next year, do you need to see the benefit from the lower capital requirements come through before you get to the lower end of that longer-term ROTCE target? Or can we continue to see some improvement post that 15% as we get into 2028 and beyond?

Yes. I mean, if the question is the 15% was established without any regard to Basel. So if that's the question, that's how we establish that goal. And then the 16% to 18% starts to take a first sort of nibble at that in terms of how we might deploy capital and confidence in how we would use capital to continue to grow our business.

But as Mike highlighted, it's really about our just accelerated confidence in our business, our ability to improve margins, accelerate growth in fees and continue to stay on the trajectory that we've already established. So the 15% was established under sort of, I would say, non-Basel and then 16% to 18% has some incorporation, but more in terms of how we would utilize the capital against our strategies. Does that make sense to your question?

Yes, it sounds like it's coming from both the numerator and the denominator as we go out beyond 2027.

Absolutely. And I would just add, the Basel impact while it's a contributing factor is not the majority of the benefit that I think we'll see over that period. It's going to be more capital-efficient revenue. It's going to be a more efficient balance sheet efficiency, productivity.

So it's really -- we're focused on the numerator and the denominator and glad to have both, but have good line of sight to operating in that area.

Got it. And just as my follow-up, as we think about net interest margins, Mike, you noted yield-seeking behavior and more competition on the loan side. I guess, how are you thinking about that 3 teens level on NIM going forward?

Yes. I think -- so we still feel good about getting to a 3 teens net interest margin. I think without the cuts this year, we won't get there by the end of the fourth quarter, which is what we said we'd be able to do in January. And again, I attribute that to the rate path.

I think current curve has a cut in '27. That, coupled with some of the other benefits like the cumulative fixed asset -- fixed rate asset repricing and other factors, I think, do get us there in '27. And who knows? We don't know what the rate path actually will be, so we can hold off some hope. But 3 teens this year is not likely to happen. We will see, by the way, it just to clean it up. we will see our net interest margin continue to expand throughout the second half of the year.

So we get a little bit of benefit in the second quarter from some seasonality on the CSBB side, on some deposits which show up in the third quarter, and then we have good seasonal patterns in the fourth quarter as well around public funds plus the other factors I mentioned. So you will see us after kind of a stable Q2, expand, and we do expect for the full year to have a net interest margin better than we had in 2025. We just won't get to that 3 teens exit rate as we see it right now.

The next question comes from Mike Mayo with Wells Fargo.

You mentioned an increase in yield-seeking behavior among customers for deposits. And I guess, everybody loves your markets, obviously. And they're moving there, they vacation there and all the banks are opening branches and hiring bankers. So I ask this question every quarter.

It just seems like it's continues to pick up. I don't you say none of this is new, you're used to that, but just seems to be reach to the next level. I think you have like the Truist One checking sign-up bonus. So I guess my question is, what's the temperature on the degree of competition?

How much are you using kind of marketing expenses, such as paying customers to move their accounts and what impact is it happening?

Yes. Mike, it is competitive as we've noted. And we're seeing that, that show up from people who've moved into our markets, and they're coming to our markets for the right reason. Our markets grew net migration by almost 300,000. And last year, and Charlotte, as an example, grows by 150 people a day.

So we see and feel that in migration into our markets and the competitive nature of that. On the deposit side, we also grew net-new. So that's an important barometer that we look at. So first quarter, again, grew net new, that's a critical barometer for us.

It's sort of like in the are we winning category. Yes, we use marketing tools like everybody else does. Yes, we use incentives for clients to join us. But you also saw the really good production in the places that we're emphasizing.

So think about our premier banking, production was up 20%. Premier is a bit of a place where we've just started leaning in the last couple of quarters. So we're starting to see the real benefit of very focused, very targeted deposit production. And then we're seeing deposit production outside of our core franchise.

So if you look at sort of our overall deposit production. We talked about this earlier. As you know, it's up pretty significantly outside of our franchise, our core franchise. So not only are we competing, we're also on the offensive side in lots of places.

So -- but as Mike noted, if rates higher for longer is a tough operating environment for deposits. And what we look at is are we creating net new or we're growing our business with new clients, and we see that both in the wholesale and the consumer side. So while the profitability of those clients is less today, the fact that we're adding them as a good harbinger for profitability in the future.

Okay. So planting seeds for the future. And just a follow-up to your answer to the other question, I wasn't sure on the exact answer of that. What is Truist -- under what conditions would Truist consider, say, another merger of equals?

Under what conditions would Truist consider selling to another bank? Under what condition would Truist consider buying another bank? And this topic does come up, not just in the press but with investors, as you know. And as you said, 16% to 18% ROTCE with a lower risk profile over 3 to 5 years, it seems like you have a game plan.

Having said that, the question does come up. And also, Bill, you sound like you have a lot of energy as we hear you right now, but how -- what's your plan to stay on? How long -- is there a mandatory retirement? I forget the succession and that whole kind of big question.

So Mike, we're just going to go after all of them. Okay. All right. Well, let's go down it.

So on the succession side, I've got a great job leading a great purpose-led company. We've got a great team, incredible teammates, strong leadership team, businesses hitting on more cylinders every day towards our performance and return objectives and just be confident that our Board has a strong succession process, and they can apply against this incredible framework. So just like put that 1 in that category. We've been really clear on the M&A front, Mike.

I mean I don't know how to be more clear that, that's just not a priority for us. So I mean, I'll just say it one more time. And to your part of your question is part of the answer is we've got a great plan. We've got a really strong plan.

I think this quarter is one more evidence of the fact that we're executing against that plan. We have an opportunity to deliver return to shareholders that I think are advantaged and they are advantaged given where we're coming from, given the growth that we see. And look, that's going to be the goal is how do we maximize this franchise? How do we create advantage shareholder value?

And that's the focus every day. Again, from me, my team, the Board, and our incredible teammates.

All right. That's great. If I can squeeze 1 more. Your core investment banking business growing double digits even without trading. That seems to be much faster than peers your size. I'm not sure why you're growing so much faster than others there.

Well, a couple of things, Mike. I mean I think, one, we've been at this for a long time. So this is a multi-decade build of our business. And as I mentioned in the earlier answer is this tie into our franchise.

So this isn't a separate business that's just solely market dependent. We really have incredible bankers on the field right now that really understand how to utilize the skills, the advice, the industry specialization, the products for all of our commercial, corporate and middle-market clients. So I think the confidence that we have not only in the future, but a bit of the -- you noted the excess performance is really tied to this durability of our franchise. And this is a culture that we've built over decades.

This is why teammates want to come, be part of this investment banking business and be part of our core corporate and middle market business. They want to come here and be part of it because they can see that opportunity, and it's manifesting itself in the results.

I mean the consistent pattern, Mike, for IB is that we're playing more meaningful roles in even larger transactions. So you've got some leverage there, too, just as we continue to bring great talent to the platform and again, our earning, again, more important roles. So hopefully, that will continue.

[Operator Instructions] The next question comes from Matt O'Connor with Deutsche Bank.

Was just hoping to dig into the loan growth a little bit. I guess, first, why don't we see a little bit more on the commercial side this quarter? And why not more optimistic on the year? And is there some kind of loans that are being fed through kind of the banking network instead as we just think about kind of the business holistically?

Yes, sure, Matt. So let me take a shot at that. So if you look at the commercial -- commercial corporate banking business, it's up a little over 8% year-over-year and a little under -- just under 2%. So we've got good momentum in the places that we're emphasizing.

And what I really like about it is this is -- our team is really focused on the return side. So 22% more new relationship, 60% of payments and business associated with it. It's a higher quality. So as we enter into the risk profile, it's a higher quality.

The revenue per client is higher. So I see this investment in the future. And then we're seeing really good activity in other markets, Texas, Pennsylvania, Western PA, Ohio, so I think our model is actually resonating really well. I think our teams are focused on the right things on higher returning, more fulsome relationships where we can play a lead in more meaningful role.

So maybe our at -- bats are a little smaller, but our batting average is really high. We're winning where we want to win. And then on the consumer side, there was some intentionality on that side, so some of the places that have lower returns, I think indirect auto spreads have tightened pretty significantly there. That's an area that we throttled back a little bit.

But our core consumer businesses, I think Sheffield, Lightstream, Service Finance, that's up 7.5-plus percent of like, average balances are up. And remember, that has a seasonality to it. So the production in those businesses, remember, if you think about power equipment and HVAC and all that, production will go up 30% to 50% here in the next couple of quarters. So I think we're -- I think we're actually positioned in the right place to be focused on higher returning businesses that achieved really good return for us.

So -- and pipelines are strong. And again, pipelines in the businesses and the places where we think are most important to win and achieve the best return long term for our shareholders.

The next question comes from Ebrahim Poonawala with Bank of America.

Just wanted to follow up, Bill, I guess, with all the questions and just from a stock standpoint, like I think you said like you've got a great plan, strong momentum just as you talked about the businesses. Correct me if I'm missing something. When we look at the revenue growth outlook for the full year, 4%, expenses, whatever up 2%, is that the algo? Or do you think this bank should be doing much better than 4% in nominal GDP world of 3% to 5%?

Just how do you put sort of the medium-term growth outlook for the company? And is 4% the right way? Because I think part of it is, you've got the scale, you've got all these businesses, shouldn't you be doing better in an environment which seems generally constructive?

Yes. Ebrahim, I think what you're seeing is that building over time, right? So we're hitting on more cylinders. So that growth in revenue continues to increase.

As it relates to this specific outlook, I mean, we took a posture that we've looked at the forward curve and took a view that that's going to have an impact on NII and wanted to reflect that. But if you look at the momentum in terms of new clients, the activity, the fee businesses, the things that are going on, I think we'll continue to sustainably build that business and sustainably build it with a more positive and continued operating leverage. And you see it in this quarter, and you see it in our confidence in establishing that in a longer-term goal. And that was the purpose of doing that.

We'll continue to improve, continue to hit on more cylinders. And I think every day, it better reflects the opportunity that's our franchise.

The next question comes from John Pancari with Evercore.

Just on the -- back to the deposit side of the equation, could you maybe just update us on your growth expectation there? And then the areas of what businesses that you're really focusing on? I know deposit generation on the core side has been an intensified focus for the bank this year. And if you could talk to us about that progress you're making in remixing the deposit base?

And then just lastly, what is your updated rate sensitivity to moves along the curve?

I'll get the first and the third and maybe let Bill provide a little commentary on some of the deposit production stuff. I think we -- our outlook for deposits year-over-year average is low single digits, John. We feel fine about that, very focused on mix as well. Obviously, based on some of my comments about DDA and rotation, defending clients, it's -- obviously, it's a competitive environment out there.

You asked about IRR sensitivities. Relatively unchanged relative to the new baseline, right? We've got no cuts in now. We've -- so we see a touch of risk in the up 50s and the down 50s.

We're sitting at this strange place where you've got the clients along the option on both sides, right? So whether it's rotation or prepayment, but we're relatively neutral, maybe a better way to put it.

Yes. And then in terms of the focus area, John, so I mentioned before, the premier production, which is really strong, net new, which is good. And then overall, like in our middle market business and across wholesale, we've had a really significant increase in their activity in deposits. 60% of our new business has a mandated component to it. So while some of those are more interest-bearing at this point, I think it's indicative of the quality of the relationship and ability to improve the profitability on that going forward.

And so I feel good about the momentum that we've established in the wholesale side and the consumer side. I think today, getting new clients is actually really important. And I think our engine is firing on a lot of cylinders and the profitability of that, certainly from the deposit side will improve over time.

The next question comes from Gerard Cassidy with RBC.

Thank you for the added disclosures on the NDFI and everyone is obviously giving us better disclosures, which is great. So the question is there's really no concerns, I don't think today about credit losses. And the way the loans are structured as you described, and your disclosure suggests that even in the downturn, losses might be limited. But I guess -- and you guys have done credit well through the cycle.

So from your perspective, can you share with us in a downturn, what are the real risks in this portfolio for you folks, again, in a normal recession, normal credit cycle where we know everybody is going to have higher credit issues?

Yes. Thanks, Gerard. I appreciate the question. So I think first for us, we start with really strong relationships.

We have solid bankers covering these asset managers and the clients. And then as you noted, the structural protections that exist, particularly in the BDC or the private credit section that middle market, our advance rates are sort of in that 60% to 70% range. And so we have significant protection in there. So we've also modeled this in a stressed environment, and this overall actually performs better than our aggregate C&I portfolio.

And so we're confident in where we sit today with how we've underwritten these credits and how we manage and monitor them. As you know, they have regular collateral inspections, strong borrowing base. So we're confident in where we sit today with it. I think how it manifests in a downturn, you would watch what happens to the underlying companies and their performance within those structures.

The next question comes from Saul Martinez with HSBC.

I want to follow up on the investment banking outlook. Good quarter, high-teen growth expectations, which does -- which is off of maybe some easy comps in the first half of last year. But I wanted to ask just about your confidence in sustaining double-digit growth beyond 2026. What drives that? Which products?

Is it ECM, advisory? And how are you thinking about the growth there? And just as a clarification, when you say double digits, are you talking about core investment banking or Investment Banking and Trading -- the trading line as it's presented in the consolidated income statement?

I'll take the easy one first. When I said double digits, I was talking about nontrading for the year. And as we think about the sustainability of double-digit growth, this business for us has been a high single digit, low double-digit grower. Obviously, transaction activity and marketing a lot, but it has been consistently performing in that range.

So -- and I think for the foreseeable future, we're going to continue to invest in the business, continue to hire great talent. We feel like we've got the products that we need to win and to serve our clients all along the spectrum and the industries that we're focused in, but we're constantly finding new and other ways to serve those clients as well. So for us, it's a growth business, and I think an expectation for high single digit, low double-digit growth is appropriate.

Yes. And you've mentioned it. I mean, this is a broad-based, which is really good. I mean in the sense that we've got a strong equity capital markets business and FRM business, and we talked about project finance earlier in the call, our debt capital markets has been a strong contributor for a long time.

I think M&A will be a bigger part of the growth going forward. We've invested a lot in that area. And again, back to this tie-in to the franchise. The other part is we've got our corporate and middle market banking teams, about 23% of them are new to the platform.

And so they came to this platform to leverage these capabilities and products. So what we're seeing is their productivity is really high, and that gives us more confidence in the future of where we're going. We've added good teams in the Investment Banking side, the specialty areas that we've chosen to specialize in, our strong pipelines are strong. Now quarter-to-quarter, there will be volatility.

So we just -- we all know that. I mean there'll be volatility quarter-to-quarter. But our overall confidence in the business is predicated again on a multi-decade organic strategy. Remember, I mean, we built this business organically sort of one step at a time, adding teammates and creating product and capability along the spectrum to build this momentum going forward.

The next question comes from Chris McGratty with KBW.

Mike or Bill, I'm interested in the operating leverage narrative over the 3 to 5 years that you lay out for your new targets. I'm interested in, does that get easier? Or does that get perhaps more challenging? And what role does AI and investing in the company play in that? Any kind of color would be great.

Chris, look, I do think that we're going to be able to continue to drive positive operating leverage over that horizon. There are -- I think it was maybe as Ebrahim's question a moment ago about revenue growth. There are natural accelerants, whether it be the under-earning in our NIM. Bill mentioned the bond portfolio, we've got sort of natural fixed asset -- fixed rate asset repricing it's happening.

We've got more focus and rigor around capital allocation and portfolio construction. So I think we feel good about the top line. And then to your point around tools like accelerants like AI, I think, will play a role in that. I think too soon to necessarily quantify that over a 3- to 5-year period.

But certainly, we have an expectation in establishing that target that we're going to be able to continue to drive efficiency and productivity through the business.

Yes, I think as you noted, Chris, I mean, I think AI is going to play a really big role and give us a lot more flexibility and flexibility in terms of reinvesting in the business, as I mentioned earlier, a harvesting for profitability. So we've -- we're pretty -- we're far down the process. We consolidated our tech and ops units for a specific reason. So people can look at process or end to end, we're seeing significant improvements and opportunity.

And as Mike noted, I mean, we're just starting. I mean, I think this is a significant opportunity for industry as a whole. And I think we've got a great team on this. And looking at the ways that we can expand our client business, improve efficiency, make this a great teammate experience and benefit shareholders along this path.

The last question today comes from David Chiaverini with Jefferies.

So it sounds as if the pricing pressure is more on the deposit side versus the loan side, can you talk about the loan pricing environment and how spreads are holding up?

Yes, I'd say credit spreads have actually remained relatively tight despite all that's happening in the world. And so that's been a little bit of a head scratcher. As you look at our yields, you've got a lot going on, right? You've got some remixing.

We're expanding our corporate and commercial banking business. So you might see a touch of mix in yield. You might see obviously, spreads across the board, still relatively tight as well. So that will be a welcome development if we see some expansion of margin on the credit side.

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

Okay. Thank you, 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 line.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.