Dive Brief:
- Truist recorded profit of $1.62 billion during the quarter ending Sept. 30, a 51% increase from the $1.07 billion it reported last year, the bank announced Friday.
- The bank’s bump in net income was driven by a $324 million release in loan-loss reserves, which the bank said it made in response to an improving economic outlook. The bank stashed away $421 million in anticipation of bad loans related to the pandemic a year ago. Revenue at the Charlotte North Carolina-based bank was essentially flat at $5.6 billion during the quarter, just 0.4% more than last year’s comparable period.
- During a call with analysts, Truist CEO Bill Rogers highlighted a "major integration milestone" the bank completed over the weekend, which involved migrating 7 million of the bank’s heritage BB&T retail, wealth and business clients to its new Truist technology ecosystem.
Dive Insight:
Rogers, who on Friday participated in his first earnings call as CEO of the bank, called the recent core bank conversion Truist’s "most significant milestone to date."
"We are excited about these successful milestones in the integration process and are one step closer to the finish line of the merger," said Rogers, who succeeded Kelly King last month. "While this was not a physical branding event, the conversion places us on excellent footing for the final conversion in the first quarter of 2022, when heritage SunTrust clients will transition to the Truist ecosystem and all branches will become Truist."
Truist, which was formed after the $28 billion combination of BB&T and SunTrust in 2019, said it remains on track to achieve $1.6 billion in merger-related cost savings by the fourth quarter of 2022.
The bank is counting on a portion of its merger-related cost savings to come from a reduction in branches.
Truist CFO Daryl Bible told analysts Friday the bank closed 39 branches during the recent quarter, bringing its cumulative closures to 413.
The bank is on track to achieve approximately 800 closures by the first quarter of 2022, he added.
The bank is seven-eighths of the way toward its nonbranch facility reduction target, which will likely have more reductions to come in 2022, Bible said. The number of full-time employees at the bank is down 11% since the merger, excluding acquisitions, he added.
"We still expect to incur a total merger cost of approximately $4 billion through 2022," he said. "We have incurred cumulative merger costs of approximately $3 billion through the third quarter, reflecting the considerable integration work ... We continue to expect these costs to decrease after the first-quarter final bank conversion, and then drop off entirely after 2022."
Truist paid $172 million in merger-related and restructuring costs, $191 million in merger-related operating expenses and $30 million for a one-time professional fee during the period.
Bible said the bank did not repurchase any shares during the third quarter, due the bank’s purchase of Constellation and Service Finance LLC in May. The bank has approximately $1 billion to $2 billion of potential capital deployment remaining through the third quarter of 2022, he said.
"We expect to consume approximately $500 million of this capacity via share repurchases in the fourth quarter, reflecting our own capital position and reduced integration risk on the heels of a very successful integration event," he said.
Eyes on positive operating leverage
During the call with analysts, Rogers said the bank is committing to achieving positive operating leverage next year as a result of the merger.
"I think it's totally reasonable to expect us to have positive operating for next year in the middle of this merger, and that's against investments we want to make, overcoming inflation, rate environment, pandemic — those types of things," he said. "We're committed to having a business that has positive operating leverage and has industry leading efficiency. I feel more confident about that today than I did the day we announced the merger."
