It's so far a quarter of some puts and some takes, and so I'd say, you know, from our perspective, and you framed it, I think, the right way, especially as it relates to some of the strategic transactions that drive our investment banking and our sales and trading business, we've definitely seen a slower start than we would have expected, you know, earlier this year when we talked about the quarter, so you know, as we think about, you know, what does that mean for our quarter? Again, you know, maybe just to add some balance, like we do feel actually quite good about the balances in the business, loans, deposits, while, you know, I think we have, you know, an outlook this year for, you know, low single-digit end-of-period balance growth.
Whether that will be linear or some starts and some stops, you know, we're not off to an okay start there, but on the investment banking side and the trading side, we definitely are seeing some weakness, so you know, as we thought about the quarter, you know, back in January, we talked about maybe being down 2% or so. That's probably trending closer to, call it maybe 3.5%. On the other hand, you know, as investment banking pipelines are a little slower and delaying, we're also seeing some better trend at expenses, so you know, we guided expenses for the quarter to be down, I think, 3%. And I think we'll probably see that down 4% at least, so some puts and some takes.
You know, it's still very early, certainly even in the quarter, but for the year, we still do feel quite good about the outlook for the full year. And hopefully some of this strategic transaction activity that we're seeing sort of pause or spin a touch, you know, will be really more a matter of timing.
When you say expenses down maybe as much as 4%, that's sequential or is that?
That's linked. Yeah. Yeah. Same, and same with revenue. You know, our previous guide was down 2%. And, you know, again, just with investment banking, again, hopefully timing moving out. You know, we see that pressure.
Yep. And I remember in the fourth quarter earnings call, you guys were talking about maybe 3%-3.5% total revenue growth for calendar 2025.
That's right.
How does that break out between fees and net interest income? And what are some of the opportunities or challenges?
Sure. Yeah. You'll, you'll recall we said from a fee perspective that we thought we'd be up low single digits, but that takes into consideration, you know, a variety of components. So banking, as I just mentioned, you know, we, we believe can be up low double digits, right? And, and I'm not willing to let go of that yet, right? I mean, we're only a couple of months into the quarter here, into the year. And we do believe that there's still good origination activity. There is, there's, you know, whether it be M&A especially, which is, serves as such a catalyst around some of the financing work that, that we do. We think that that, you know, hopefully does still, still come through.
On the wealth side, you know, lower single-digit growth, but that was including the tough comp we mentioned when we reported the fourth quarter that if you think about the fact that we sold our Sterling business, if you were to adjust for that, we'd probably be more of a sort of a mid-single-digit grower there from a wealth perspective. And then very focused on our payments business as well. So which I think we believe can grow in this sort of high single digits. So blend it, you know, it's low single digits. And then on the NII side, our expectation, I mentioned, you know, we believe that we can get, you know, the balance sheet to grow this year. We had some nice momentum in the fourth quarter.
As I mentioned, we're seeing balances, you know, look okay, you know, so far in the quarter and have an expectation that despite some of the volatility and uncertainty that we're seeing in the market and in some of our customers' minds, we do believe that we can see that balance sheet growth and also, you know, benefit from some of the margin expansion that we would expect throughout the course of the year.
Yep. It's interesting that some of the challenges are more macro related, obviously investment banking that you touched on, others have done the same, as well. Of the things that you can control, where is the most confidence for 2025 in that, you know, where you guys know you can have a better control of it?
I think for me, what gives me the most confidence in terms of, you know, what we can control is just the mindset. Like our teammates across the board, and this has been a change over the last year, are completely on offense. I spent the last couple of days visiting with some of our teammates in Richmond and the Greater Washington area, met with investment bankers, met with wealth managers, commercial bankers, and we are clear-eyed on the growth agenda that Truist has established for itself. We feel like we've got the right products, we've got the right sales focus, we've got the capital capacity to grow the business probably faster than the market will allow. So that gives me probably more confidence than anything else. Our brand is more seasoned than it's ever been.
So I really feel great about our opportunity still in 2025 for Truist.
When you talk about loan growth, what areas within the portfolio do you see opportunities for that, you know, to drive the total number?
You know, I think CRE, it's across the board, you know, I mean, we're still being cautious there and working through our office portfolio. We can talk more about that, if you'd like. But, you know, as I sort of think about especially our C&I business, both in our commercial and corporate and investment banking units, we have an appetite to grow. Obviously in our industry verticals, we've just recently hired Kerry Jessani to join our firm. She's now leading Corporate and Commercial Banking . They have a growth agenda that's focused on sort of that, you know, truly kind of upper middle market corporate businesses as well as continuing to serve our clients locally in the commercial bank. So we really believe we can grow our sort of core C&I portfolio.
And then on the consumer side, you know, we've got you know a great collection of specialized businesses, as well as our you know our one to four business, so or pardon me our resi business. So really across the board, we'd like to see these businesses grow. We don't want to remix the balance sheet. You know, we sort of like that 60/40 mix. But we recognize that you know the market will give and take. But over a longer period of time, we'd like to stay about how we're mixed today.
Aside from the residential business that you mentioned on the consumer side, you've also got other differentiated consumer loan products. Do you think those also could be a driver of the growth this year?
I think they can. You know, one of the interesting things about our consumer loan portfolio is we don't have a very large credit card business.
Right.
But we do have a number of really specialized and I believe very defensible leading sort of market share businesses in their niches. So you know you've heard us talk about our auto businesses which span prime and subprime. But you know we have businesses that focus in the home improvement lending sort of at the kitchen table promotional financing. We have a similar type of business that focuses on outdoor power equipment and outdoor power sports. So that's Service Finance and Sheffield. And then of course we have our LightStream business which is a direct-to-consumer personal loan business. So these are businesses that are all designed to serve clients in a much more modern way. So I mean literally in LightStream's case you can apply for an unsecured personal loan and apply and be funded same day. That's a great experience.
Service Finance, you know, you get a quote for a HVAC replacement or a roof replacement or windows or a kitchen or whatever it is. You're at the kitchen table, you get offered a rate that in a structure that's really attractive. It's been subsidized by the dealer. And you know, you are instantly approved and the work gets done. And same thing with Sheffield. You walk into a dealership, you pick out, you know, whatever it is. It's maybe a snowblower, maybe it's a side by side, whatever it is, and you get offered a really attractive rate and you know, drive away with the piece of equipment. So people like that, sort of, you know, embedded finance, as you might think about it. So great businesses. We think they've got capacity to grow.
Each are growing nicely and will definitely be a part of our growth agenda.
Got it. Moving to the other side of the balance sheet, if we talk about deposits a little more, where are you seeing the growth of the mix of deposits and the pricing of the deposits?
You know, deposits have been, you know, I'd say broadly speaking, much more stable, you know, in the last, really maybe the second half of last year and coming into this year. This is an important time for us, you know, tax and bonus season, but much more rational, in general. I think you're seeing the effects of the Fed's balance sheet, you know, velocity changing, so you know, the system is overall more stable. I think the rate seeking behavior that you maybe saw and sort of at the height of rates and before we started to see some decline in the policy rate, you know, has really subsided. You know, if you look at our DDA mix, for example, relative to our total deposit portfolio, it's been stable now for two or three quarters at around 28%.
So just a very rational market. And we're beginning to see, you know, balance sheet growth on the deposit side too. And loan growth will obviously begin, deposit growth as well. So that's been a nice change.
Now there you go. And then coming back to just interest rates and obviously they're very volatile at times as we've seen with the 10-year. And can you characterize the risks and the opportunities in NII when it comes to the rate environment that's going forward?
Yeah. Yeah, sure. No, I can't. And that's one of the things we did talk about in January as we thought about the year and, even thinking out into 2026 and beyond, is it was really nice to have a little more steepness to the curve. And I think the whole industry appreciated, you know, what you know seems fleeting at the moment. We've seen a little flatter curve. Look, at the end of the day, we try to position the company to be successful in a wide variety of interest rate conditions. You know, obviously, you know, it looks like we probably won't get the cut we were looking for in March. And, but even in the last couple of days, you've seen a lot of movement in people's expectations for how the short end might move around.
Even the long end has been pretty volatile here, volatile here lately. So look, for us, we're positioned to benefit over the short term from a deposit pricing perspective from a lower short end. So we would welcome, you know, whether it's a cut or two or three throughout the course of the rest of the year. Look, it would obviously benefit our earnings momentum if we could get a little bit more steepness to the curve, but harder to manage that risk. Obviously just that has an impact, you know, not immediately, but really on our ability to reprice our fixed rate loan portfolio. So keeping a close eye on it.
Yep. And speaking of portfolios, obviously you restructured the bond portfolio and in the second half of 2024, added securities. What are the expectations for the balances going forward on how you were managing that portfolio?
Yeah, the size of the portfolio back in May when we did the initial repositioning, we remixed into a little higher, we added to our cash position at the time. And you know, at the time, you know, we weren't exactly sure what loan demand would look like throughout the course of the year. And I think in our mind, we had a view that cash and securities probably, you know, based on whether it be our liquidity sort of objectives, you know, loan demand outlook, and other factors, we sort of said, hey, maybe it's between the two, $150 billion-$160 billion or so. We were at the low end. We added securities in July, and throughout sort of the second half of 2024 and took our position up to closer to the higher end, about $160 billion.
If you think about the bonds and cash, I think that's about right for us. That's the high end. So I wouldn't expect us to continue to add securities. And you know, to the extent that loan demand accelerates, you might even see us, you know, slowly reduce the size of the portfolio. You know, we have about $2.5 billion-$3 billion of cash flow a quarter just from maturing securities. And so we could very easily sort of just redeploy some of that liquidity into the loan portfolio.
Got it. You talked a moment ago about capital markets and how things are starting off this quarter, and we all know again, as you pointed out, it's gotten off to a slower start than we all thought maybe in December. But can you share with us how you've positioned your capital markets business and you've made some investments here? What should we expect going forward in this area?
Yeah, despite my comments on being off to a slow start, we still are quite optimistic about our investment banking franchise and have consistently been investing in it. It's been a very consistent, at least high single digit grower for us. And as I mentioned, you know, we expect low double digit growth this year based on sort of a market outlook. But we've been, you know, constantly are thinking about productivity and uptiering, you know, our talent. You know, it's, you know, typically our approach to, at least on the banking side has been, you know, to pick sectors where we think there's good critical mass and business value that we can go, create a franchise around. And we hire entire teams.
So you'll see us, you know, add bankers and research and product people to go prosecute that full service strategy in banking. So that's. We're going to continue to do that. I mean, we've added. Not only are we focused again on, you know, the productivity element and bringing new sort of blood into the organization, but also net adds on, you know, at the MD level. And again, that's across coverage as well as product and the likes. You know, we made some investments in our trading platform last year as well. We're starting to see some benefits from those investments as well. So this is a business that we like a lot and we are very hopeful that, you know, it will continue to be an important part of our growth story.
Is there a targeted level? I don't want to say end game, but is there another 20% that you need to add to really get it to the level you think is optimal or what?
I don't think so. I mean, I think we've got plenty of headroom in terms of like how big this business could be, you know, in as with respect to all of Truist. You know, our fee income is, and you know, our ROTCE objectives, you know. A big part of this opportunity will be based on our opportunity to take a lot of these products and services and to deploy them into this sort of corporate banking expansion, and continue to be successful driving into the middle market and commercial banking businesses that we have, and so I think, you know, continuing to grow at least at the pace we've been growing, you know, suits our eye.
Yep. And sticking with the fee revenue growth for Truist, when you think about the opportunities to grow wealth and treasury and payments, you touched on payments just a moment ago. Can you give us, you know, more details or scope about the opportunities in these three areas?
For wealth, it's really, you know, we've been focusing on our platform, so the experience that our wealth clients, you know, have as they engage with us, but also the advisor platform itself and how our teammates utilize technology to provide, you know, better service to their clients, so we've made those investments, and really, I think that the new frontier for us is just continuing to add great advisors and teams, and so we're on the hunt there, and so that team's very focused on bringing new talent to Truist, and that's one growth vector. Another on the wealth side is just doing a better job connecting to our, I mentioned investment banking team that's creating wealth through exits and recaps, et cetera.
But also in our Premier Banking segment, which Dontá's talked a lot about, you know, we have a sizable amount of office assets, which aren't always deposits. Oftentimes these are investment assets as well. And so we think we've got a huge opportunity that we can mobilize against just on getting assets that are, you know, that our current clients have on our platform, you know, under management. And on the payment side, it's been a story of investing in the product, which has been a multi-year journey and it continues and we feel great about the condition of the product, talent, both product leadership and sales leadership, and then ultimately accountability and execution and sales culture.
That's where you hear, I'm really delighted, you know. Most recently we shifted our payments business under Kristin Lesher, who has all of our wholesale businesses. That's the biggest opportunity in payments for Truist relative to how we're performing. Her focus on it is extreme, as is Kerry's, who's just joined us. I mentioned to run Corporate and Commercial Banking and Chris Ward and his team are doing a great job. So the engine is warming up and that's a slower sales cycle for some of this stuff. So on the backbook, it takes a little time, but on new clients to Truist, it's a, it's sort of a new day for how we're thinking about payments and how what we expect of ourselves and of our bankers.
Yep. Coming back to deposits, we've seen a number of banks decide to expand into the Southeast, Southwest, which is your core footprint. Can you share with us the competitive nature? Do you find it more competitive as you're seeing new entrants come into the market? Or how's that shaping up?
Yeah, without a doubt. I mean, we've always, you know, one of the things that people love about the Truist story is that we're in some of the most attractive markets in the country. And companies who don't operate, you know, at scale in our markets, you know, see that same opportunity. And so we've had that. Again, that's always been sort of a characteristic of our markets. And I think lately, I mean, look, the game is, it's competitive. And so some of the largest firms are aggressively expanding into the Southeast as our firms are sized and smaller. And so that's, look, that's the life we've chosen for ourselves. We feel like we can compete. We have a right to win.
I think just the evolution of the mindset of our teammates, you know, honestly and looking forward, not backwards around many of the distractions that came with putting two world-class companies together and living through, you know, some of the obstacles that we all face together. Everybody's looking forward now, and so look, our view is our value proposition is we have all the capabilities and the prowess that the largest firms, the most complex firms in the country can offer to their clients, but we can offer it in a more local way where we're just embedded in the communities where we've served these communities for 100 years + in certain cases, and so we think we can bring the best of both worlds together and we're focused.
Got it. You mentioned a moment ago about with the loan growth, commercial real estate obviously is not an area of growth for you and for others. Maybe talking, shifting about credit quality and what are you guys seeing, you know, currently in not just commercial real estate, but in all the different broad categories that you service?
Man, I, you know, it's funny. We have a new Chief Risk Officer, Brad Bender. He's excellent, long-time risk executive at our company, but really a lot of his life spent on credit. And he joined our last earnings call and I, you know, we prepped him and he got ready, not a single question on credit, Gerard. I usually, we can depend on you.
Yes.
But there's really not a lot of story right now. I mean, honestly, I mean, I, you know, we've talked a little bit about multifamily and, and obviously that's an area where we're focused, but just it's not even comparable to what we're seeing in terms of asset value deterioration and some of the structural changes that are impacting the office space. Consumer, I mean, I think, you know, with all the change and uncertainty that's happening, you know, right now, there are questions. We're doing work, you know, trying to understand some of the puts and takes around things like tariffs or changes in policy. You know, but that, that's just, you know, good risk management. We don't see any signal right now that you've got deterioration at this point.
You know, with short end rates a little higher for a little longer and inflation maybe being a touch sticky, who knows? Like we're, we have our eyes on all these things, but we're really just not seeing deterioration out there, you know, at the moment. Knock on wood.
Yeah. No, we agree with you. The credit's strong across the board. Shifting over to regulatory. And when you think about with the election and the change coming with all the heads of the regulatory agencies essentially being changed, how are you guys viewing that landscape? And second, we're also seeing some potential changes with the stress test, maybe more transparency. Any color that you'd like to share with on that as well?
I think on the broader kind of rule-making front, you know, I think we're just, it just sort of pays to be patient, right? I mean, we, you know, obviously our firm, you know, went through a pretty significant sort of evolution, you know, doubling in size and thinking about the expectations for a firm our size. And, you know, and obviously in early 2023, there was quite a bit of momentum, excuse me, around, you know, Basel III End game and a long-term debt, you know, requirement, liquidity rules. There was a pretty broad suite of changes that were being contemplated. And so we've been doing a lot of work to prepare for, you know, what we assumed would be, you know, eventual rules across the board on those areas.
I think at a minimum, you know, our take is that those rules will, their implementation and, you know, how they're finalized, if finalized, will be delayed. For us, that's not a take your foot off the gas. I mean, like there's, you know, a lot of work that we've been doing to strengthen a lot of the areas, you know, whether it be capital, liquidity, otherwise. So I think time will tell. I mean, you know, we need to see some of these appointments sort of come through. Some of these rules require interagency cooperation and alignment. So still a lot of sort of green, you know, on the table, so to speak. As it relates to the stress test, look, I mean, I think, transparency would be welcome.
I think, you know, everybody in our industry, I think would say that, the annual stress testing work that we do is a really important part of our capital planning, you know, framework. It's not the only piece, you know, in our case, and you know, in fact, you know, I'd say like our SCB is not, you know, necessarily the binding constraint on how we think about capital management. We have our own perspectives around, you know, what a sort of post-stress capital level should be and what severe stress looks like and other factors that go into thinking about an appropriate level of capital to operate the company.
But I mean, I think anytime, any chance we get to have a better sense for whether it be, you know, some of the assumptions or input into the scenarios or the models, I think would only, you know, improve the overall, you know, overall process. And so we'll see, we'll see what happens there.
Speaking of capital, can you just remind us what you're comfortable running the company at from a CET1 ratio standpoint? And then second, what will you do with any excess capital that accumulates due to the earnings that you're achieving?
You know, we crossed last year at about 11.5%, I think on like a today's CET1. You know, there we have this assumption that at some point AOCI will be, you know, deducted from CET1. And so I think we were at 9.6% or so. So look, we have. I think we're a little reluctant to sort of set a long-term target at the moment. We've talked about a 10% area as a longer-term goal. I think that's appropriate at the moment, but as it relates to Truist, right? Like we're in a position now where we have, you know, frankly, more capacity than the market's affording us the opportunity to leverage. And so to your point around excess capital, you know, it was important to us and I think to our shareholders that we put in place an elevated buyback.
And so we've been buying back stock at about $500 million a quarter. I think over the medium term, that's a reasonable assumption that we'll continue to do so. I think when coupled with our dividend, that's, you know, not perfectly 100%, but, you know, almost 100% of our earnings. And so that feels like an appropriate approach to continue to return capital to shareholders, but also, you know, ensuring that we have the capacity to go grow, which we're very, very focused on.
Yep. When you look at your guide or your targeted ROTCE you gave us in the middle of the fall of 2024, can you share with us the initiatives you're using to reach that target and just to remind people what the target is?
Yeah, well, our target we said was mid-teens ROTCE target. And a lot of the initiatives I've touched on today, whether it be, you know, deepening. I didn't talk a lot about this, mentioned it with wealth, but on the consumer side, like finding a way to more fully serve our clients there, whether it be with wealth, or bringing more, you know, deposits on us, you know, doing financial plans, et cetera. On the wholesale side, not just growing footings, but having a fuller share of wallet. Payments is obviously a really capital efficient, you know, revenue stream and sticky, lots to love about it. So we're very focused there. Our advisory business also, you know, for a dollar of capital to the extent that we could be more successful, advising clients, you know, leading capital markets deals, continuing on the journey we've been on.
We've had a continuous path of improved relevance and in relationship, so leading more deals, average economics per deal, you know, just general prominence in the roles we're playing on the capital markets and advisory side, so really, you know, all these initiatives, the idea is like we really need to improve our ROA if you think about it.
'Cause I, you know, at the end of the day, you know, we'll, the company will be leveraged in a way that sort of reflects the environment and look, today, if you look at how we're capitalized, you know, based on our RWA density, you know, we're just below 8% on sort of a TCE ratio, you know, that may move around a little, but for us, if we can drive more, you know, again, capital efficient revenue through our footings and through our franchise, that will be the way that we achieve and hopefully exceed our target. And I do expect to continuously improve, you know, our position there from an ROTCE perspective. A big focus for our board, for Bill, for all of our leaders.
Got it. We saw this week that the FDIC has rolled back the M&A guidelines they put into place in 2024, which were somewhat onerous. How do you guys see the M&A in the, I mean, the bank M&A environment? We all know, you know, for our careers, consolidation has been part of banks. How do you see it evolving and maybe impacting Truist as we go forward?
Certainly, you know, the move the FDIC took this week was, you know, all things equal, like constructive to the bank M&A environment. You know, I think you'd have to that they're not the only stakeholder, you know, you'd have to see, you know, how the DOJ and OCC and other agencies, you know, think about, you know, guidelines and approaches to mergers. I mean, all things equal, it's useful, I think for perspective, you know, deal analysts and executives to sort of have a better sense for the feasibility of deals, you know, so having clearer expectations around what it takes and the like is all useful.
All that said, I mean, just to say it, you didn't ask. I mean, for us, you know, at Truist, I mean, look, there, I know there's a lot of widespread, you know, perspective that you might see more M&A in the banking sector and that may or may not be true for Truist. Very, very focused on just organic growth, leveraging the capital into our franchise, continuing to pay our dividend, buying back stock at scale, are really our priorities, you know, versus M&A.
Yep. And we're running. We're in the red zone, but one just follow up quickly. When you and Bill, you know, obviously you're talking to regulators, do you think the regulators are supportive of creating another close to trillionaire bank? You know, there's some talk out there that, you know, to compete against the Bank of America and JP, do we need two or three or four 800 billion kind of sized banks? Do you guys have any thoughts on that?
You know, I don't think I have a perspective on that.
Okay. Well, but we are in the red zone, so we've run out of time.
Thank you.
So, saved by the bell. But please join me in a round of applause. Thank you, Mike.
Thank you.