Okay, thanks everybody for joining us this morning. I have to read a disclosure for important disclosures. Please see Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your sales representative. We are so delighted to have with us today Bill Rogers, Chairman and CEO of Truist. Thank you, Bill, so much for joining us today.
Great to be here.
I see you're in Truist colors as well.
I'm always branded.
That's fantastic. Love it. Let's start off with the macro. Bill, you started off this year with momentum in loans and deposits increasing in the fourth quarter, and that continued into 1 Q. Given some of the obvious market volatility that we've been experiencing since April, can you tell us what you're hearing, seeing from clients, and how are they dealing with the uncertainties out there?
Yeah, so you know, and just think about in the last, since that first question, how much that has changed in the last couple of months. You know, I think most clients have still a little bit of wait and see, you know, sort of plans to expand, see opportunities to expand, want a little more clarity. In fairness, probably there is a little more clarity every day. That bridge seems to be closing. The consumer is still in the game. You know, the consumer's confidence, as exhibited by spending, continues to be strong. What we are seeing are the things that we are investing in are working. You know, we have continued to see some continued loan growth. We have continued to see a little bit of deposit growth. The consumer side for us has been really strong.
The areas that we've invested in, particularly the areas like our specialty consumer businesses, have been really strong, really relevant and responding to consumer needs. The CNI side, particularly in areas where we've invested, like middle market, we continue to see really, really good growth. You know, the overall macro environment still has a little more uncertainty to it. Micro, as it relates to Truist specifically, the things that we're investing in are working, and we're continuing to see success.
We see in the H.8 data, roughly 3% loan growth, 3% deposit growth. Is that, that's on a year-on-year basis?
Yeah.
How is it projecting? Does that seem high to you or?
I think the H.8 data can be, you know, confusing in terms of where it is at a one-year time. We are seeing good loan growth, deposit growth, again, a little more on the consumer side, probably a little lag on the wholesale side. I do not think that is sort of unnatural in terms of how you see things. I think the H.8 data can sometimes be a little bit confusing.
Okay, so your outlook for loan growth for the full year is low single digit, end of period, you know, in 2025 is.
Continue to be on that track, feel confident about that.
Okay. The areas where you're most optimistic for loan growth?
Yeah, the areas where we're most optimistic for loan growth, again, those are where we've emphasized. Consumer side, we've seen really good loan growth, and the middle market side, particularly of our CNI side.
That's interesting on the middle market side. I know you've been putting a little more feet on the street there. Can you talk through that strategy and what is coming through so far?
Yeah, I mean, if we looked at, you know, sort of post-merger, what are the areas that we had the biggest opportunity for growth? If we looked at sort of the commercial side, large corporate side, probably weighted it pretty appropriately to our business, so sort of saw, you know, normal kind of growth and investment on that side. The big area of opportunity was for us in middle market. We've, you know, as much as a 50% kind of opportunity in terms of growth relative to relative share, relative to our opportunity. To your point, we've invested a lot. We've invested a lot in talent. We've invested a lot in capabilities. We've invested a lot in the industry specialties that are most relevant to the markets that we serve, and then creating that continuum of effectiveness in terms of execution.
I think that's why we're seeing the momentum on that side. We're seeing the momentum like we want it. I mean, we're seeing that we're winning in terms of, you know, in relevance, so left leads, you know, as a percent of the business that we're doing. Also, the payments penetration of that business is really high relative to where we want to go. Our payments penetration relative to our overall portfolio is an opportunity, but where we see it on the new side, we're sort of seeing that gap to goal being filled pretty quickly.
New clients coming in with a fuller suite.
Full, much fuller suite, much, much better penetrated, and we see that as an opportunity for the entire book.
Okay. Can you speak a little bit to how you are set up for servicing private credit ecosystem?
Yeah, I think we think of private credit, I think of it sort of in the cooperation kind of model.
Cooperation?
Yeah, exactly. There are places where we're competing really hard against private credit, sort of the day-to-day, you know, opportunities client to client, but there are also opportunities where we're partnering with private credit. There are opportunities that we see where, in some cases, we can be the payment side. In some cases, clients are transitioning. In some cases, we can help private credit with some of their, you know, ABS capabilities and the things that they want to do to securitize it. I think the private credit market is, you know, competitive every day on the street against client to client, but also opportunities to work together.
Okay. Is this something that falls into your non-depository financial institution category?
Yeah, but we don't really think about the, we don't think about it that way. I mean, we don't have an NDFI department.
Okay.
We don't have a head of NDFI, you know. All of the things that I'm talking about would be related to business strategy. Is this related to an industry specialty? Is it related to a geography? Is it related to a middle market strategy? Where it lays out from an NDFI is just sort of where it lays out. We don't really manage to that number, and we don't have an NDFI department head.
Got it. Okay. In middle market, is there more to do in terms of investing to get to where you want to be? Your footprint is really robust for middle market, and I'm wondering how much share you think you can take.
Yeah, and we think about our market as not only our geographic market, but also industry specialties and other places that we're investing. We do see the continued upside on the middle market, as I said, relative to the penetration of our total portfolio. Middle market's probably the most under-penetrated, but it's also the place where we have the most skill and capability. All the work that we've invested in investment banking and serving that market, it's just bringing that down to the middle market and being effective. We've been really successful in attracting talent to the platform. People get the growth story, they get the fact that we have a lot of capital to deploy, they see the product and capability that we have for our clients.
What about pricing? Is pricing a lever that you can use to gain share?
Yeah, I mean, we look at return. I mean, we're really focused on total return. I mean, we want everything to be accretive to our overall ROTCE, you know, mid-teens kind of strategy. That's, everything's got to be deployed against that. I would say pricing as it relates to total return always is a tool, but pricing as a standalone tool is not something that we really want to deploy to get that growth.
Maybe you can be more price efficient if given the fee-related services that you deliver to these clients.
I think, again, total return, you know, as I said before, what we're seeing, you know, is sort of left leads, so you know, you're sort of getting a better return from that standpoint, and then better penetration from the payment side. If we look at sort of the overall return of that portfolio and that investment, it's highly accretive to where we want to go from our overall company return.
We talked a little bit about the capital markets, investment banking, and trading as a way of helping get in these middle market clients, but let's talk about it as the business itself.
Sure. Yeah.
You've been investing for the past several years. Can you tell us where you are relative to target goals and what specific verticals and industries you're focused on there?
Yeah. I mean, in fairness, we've been investing for over 20 years.
Right.
You know, so that business for us has been a, you know, high single digit CAGR kind of business consistently. You know, when we merged, it was under-penetrated by 50% just by definition. We continue to see that we can grow at that kind of long-term CAGR basis over time. Again, our ability to attract talent into industry specialties. We have specialties in consumer and retail and TMT and, you know, in FIG and in energy. In healthcare, those are places where we continue to grow and also fit really nicely into our overall platform in terms of bringing that down to the middle market and bringing that down in fairness all the way down to commercial.
That's the real beauty, to be able to bring that specialty all the way down to the smallest, you know, commercial client that's in that business that's going to grow, maybe as an acquisition candidate for, you know, a middle market company or a larger company, maybe it fits a profile of their expansion. That's a business we continue to feel really good about and continue to invest in.
How has that been trending in this volatile?
Yeah, so I think we've been trending consistent. Now, our trading business is client-centric. Our trading business would follow the investment banking patterns. You know, it's not going to sort of have an opposite hedge against that. It's going to follow that pattern. Investment banking business, as we indicated, was, you know, was lower coming out of the first quarter. We've seen that momentum start to shift. I looked at pretty significantly at sort of what our pipelines look like. Our M&A pipeline looks, or M&A pitch pipeline is probably the strongest it's been in the last several years. The other pipelines are starting to increase. They've got to materialize, you know. I think we, again, feel confident about where we are in investment banking. It feels like a bit of a pivot point.
You know, last four weeks feel a lot better than the four weeks before that. We are seeing that in the pipeline and the pitch activity.
Okay, great. Then on payments, any work to do there in terms of expanding or getting ready for digital, GENIUS Act, crypto, stablecoin?
Yeah, I'd say a couple of different things. As it relates to the second part of the question, as it relates to getting ready for all the other pieces, I call us in the athletic position, you know, meaning that we're spending a lot of time with our clients understanding how do they want to interact, what do they want, what role do they want us to play, what role does this play in the payment system, where do we fit in the payment system ecosystem, where does the industry fit. Again, I'd say we're in the athletic position. We're spending a lot of time with clients understanding where we want to be as part of that. Overall payments, so the overall payments business, we feel really, really good about. We've been investing significantly.
Again, that was another area where I think we were relatively under-penetrated and saw an opportunity. You know, I mentioned that we're seeing it sort of on the new side. What clients are voting with and telling us is that our products are really good, that our capabilities are really strong, it's relevant to what they want to do. Now we've got to create that same momentum for the whole backbook as it relates to payments. The things that we've been able to introduce and new product capabilities, I mean, the whole advent of APIs and technology and leveraging the core and all that, it's just allowed us to move, get in that left lane and move a lot faster. The shoulder against the wheel on payments for us is like really good timing.
Similar to the middle market discussion, investment banking discussion, we've also added a lot of really good talent. Look, people vote where they want to come work for companies that have growth dynamics, have the products and capabilities, and where they can be really successful and where they can, you know, deploy in an environment that they feel comfortable with. Our ability to attract talent there is also, I think, a good validation of the capabilities that we're building.
Yeah. Your digital infrastructure for your consumer and corporate payments sleeve is at where you need and want it to be.
We're always wanting to invest and improve. Again, back to the things that we look in terms of relevance. On the consumer side, you know, our net new client acquisition is really strong and it's really strong in the digital channel. That says to us, again, you know, clients vote, you know, in terms of by coming to your company and staying with your company and expanding. We feel good about the capabilities that we have in that. Are there always areas that we want to expand? Are there particular enhancements that they want to make? That's always got to be part of the process. Our overall relevance in the digital side for both the consumer and the wholesale side, we feel really good about the investments that we've been making and we're seeing that in the results.
Okay, great. Let's talk a little bit about wealth.
Yep.
An area that should present some nice opportunities for you. Could you talk through what you're doing in wealth?
Yeah, similarly to the other parts of the business we've been talking about on the wealth side, good investment and product capability. It's been a really strong business for us, but it's tied to our business. We're not trying to create a separate wealth business. We're trying to create a wealth business that supports our, you know, consumer business, supports our investment in the premier part of what we're doing in the consumer business. The investments and the momentum that we're building on the premier side in our consumer channel and how that relates to the wealth channel, really, really good pipelines along with that. Centered back on the franchise. All the commercial wealth that sits in our business that's going to transition over the next, you know, five to 10 years, we want to be in the position to capture that.
We don't have to go build a, you know, a new wealth business. We don't have to go start a new RIA. It's all sitting, those assets, those opportunities sit within our franchise. So our wealth business is very much a Truist inward business of capturing, accentuating and growing the assets that sit within our company or sit within our clients.
Your client-facing clearly digital is one, face-to-face is one. Is there utilization of the branch network in this or not?
The whole ecosystem is really, really important for us. I mean, we have this concept called T3. For us, it is that touch and technology equals trust. We think you actually have to have both of those working together synonymously. We have great examples across the company of where we have those working together. Our Truist Assist, you know, we have 3.5 million interactions with our clients, you know, digitally through Truist Assist. Our retention rate, solution rate's really high, but we always give the client a chance to opt into having a human contact. That is where that touch and technology sort of always work together. I think that is the same thing with the branch network. Those pieces have to work together. Someone who comes to us digitally, it has got to feel like they are with the same company when they deal with us physically.
They might want to start a transaction with us digitally, show up in a branch to complete that transaction. They might want to start in a branch and then go to the digital channel. We want all of those to work synonymously. I think, you know, for us, the branch network, we have a strong branch network that, you know, represents the complement of what we did through the merger. I also think that's an area you're going to see us lean into a little bit more as we go forward, as we think about, okay, what are the opportunities now from a go forward basis?
Is this increasing branches in new locations?
I think in markets where, you know, where we see, you know, particular opportunity in markets that have really good growth dynamics or markets where we're just under-penetrated relative to our branch network. And we've got sort of an equilibrium, a place where you think you have to sort of hit a certain market share to sort of be relevant from your branch network.
Just thinking about consumer small business, which are the main users of branch, any incremental products that you're thinking about for them? I know in the consumer lending space, you've got many unique product offerings. Can you walk us through what you're thinking about doing there?
Yeah. Yeah, I think the way to think about it is to think about those unique consumer products. What we try to think about is from the consumer backwards. So what does the consumer want versus what do we have to give to them? And when the consumer wants to put a pool in the backyard, to buy a jet ski, to, you know, buy a new car, they do not think about channels. They just think about what is available to me, what is the best alternative to me if I have a really high credit score, do not want to borrow on an unsecured basis, do not want to do that quickly. So one example of the things that you are in your question is we have taken our LightStream products. Our LightStream product was a digital sort of only offering.
In our term, you referenced, you know, my tie , we turned it purple, you know, so we brought it into our ecosystem. We say we have this great product, this great capability. It's really client-friendly. The net promoter scores are sort of off the charts in terms of the client experience. Why just offer it in that channel? You know, now we're bringing it into the physical channel as well. Someone who interacts with us physically and has a need that we can represent through this unsecured LightStream product, we now can do that sort of seamlessly. That's how we take these consumer products, really respond to consumer needs and build them across all of our channels.
Okay. Great. So there's opportunity there.
There's really significant opportunity.
Let's talk a little bit about the expenses and operating leverage, pulling it to that level. Can you talk a bit about how you found the cost saves to help offset some of the investments that we just discussed? Yeah, let's start there.
Yeah. You know, back in 2023, you know, we were coming out of a merger and we really had sort of an unsustainable sort of expense level. That really forced us to, you know, have done the merger, brought things together. We took some opportunity to really significantly simplify our businesses. We went into sort of an overall consumer business, overall wholesale business, give those leaders, and we've just talked about a couple of examples, give those leaders a chance to look at the total portfolio. How do I create the most efficiency within this portfolio versus my slice or my business? That created a lot of opportunity, a lot of momentum for us in terms of the cost save. We started that momentum in 2023. You know, we took a lot of cost out sort of immediately, sort of that stair step down.
A lot of those had inertia and momentum with them. They had, you know, longer lives in terms of the expense optimization. What we are doing now is taking that expense optimization and just redeploying it. Redeployed it in the company. All the things I talked about earlier in terms of payments infrastructure, you know, hiring and talent and investment banking and all those pieces, all that is funded and fueled by this momentum of expense savings that we created sort of in 2023 and continue to enjoy the momentum for that. They can be accelerated now by the advent of AI, the advent of other technologies that will help improve that going forward. Ours is sort of like save a dollar, invest a dollar kind of philosophy.
That expense ratio over the past five years has been running in the 57%-59% range.
Yeah.
How do you see that trajecting? Where do you think that can go?
You know, it's interesting because we don't really think about it in terms of like efficiency ratio. I think about it, but we have a, you know, top whatever it is, quartile efficiency ratio. I think we're an efficient company. Now we think about it in terms of operating leverage. You know, how do we create the top side of that growth? You know, how do we create the revenue side, achieve the growth side, and do that in a way that's effective from an operating leverage standpoint? The mindset is a little bit shifted to we have an efficient company, let's create positive operating leverage, which has to be created from the growth part of that, pulling it.
Okay.
Being the most efficient company that doesn't grow isn't really, you know, highly shareholder accretive. So the philosophy is to really grow, grow an efficient platform and create operating leverage.
With the top line.
Yeah. You got to, the top line's got to be the pull.
Right. Drivers of top line growth, I know we spoke about many of them, but when you think about biggest drivers for that top line growth over the medium term, what's top of the list for you?
Yeah. I mean, it's the areas that we talked about, the areas that we're going to focus in, and the areas that we think are uniquely advantaged for Truist, starting with our overall diversified platform, overall diversified business in really great markets. We don't have a limit, you know, in terms of the areas and the ways that we can grow because the business is really diversified and we're in really great markets and we're expanding into markets that can deploy our efficiency and our effectiveness and those tools and the skills and the things that we built. The particular areas of focus that we've talked about is our premier side of our consumer business. We made a really conscious decision, you know, 12 months ago to say, okay, let's really focus in this area.
You know, it's, you know, 20% of our business, 80% of our deposits, you know. This is an area of real strength for us. We've seen really good deployment against deposit generation, against loan generation, against investments, as I mentioned, on the wealth side. Really accentuating that premier side, under-penetrated and really significant opportunity for us. We talked about the middle market side in terms of that growth and potential. Payments is sort of the other component of that too. We have this really good combination of asset growth and fee growth, all positive contributors to not only the top line growth, but the improved return profile. This mid-teen return target, ROTCE target, all these things accretive to that target. They have, you know, higher paybacks because they're concentrated on our existing businesses, higher ROA.
These are not long-term, you know, dilutive, you know, investments that we're going to make with long-term paybacks. These are things that have sort of immediate accretive paybacks to that journey.
AI as it relates to this theme?
Yeah. I mean, I think AI is to every theme. It is related to the efficiency theme. It is related to the growth theme. It is a significant area of opportunity. I mean, we have got, you know, 100+ patents in AI, areas that we have invested in. We created, I think, wisely and appropriately, a really good risk framework. I think, you know, we spent a lot of time creating the rails, so to speak. Now we are putting more things over the rails that can go at speed. We have got a really good, you know, internal mechanism to, you know, approve AI projects, you know, for return profile, quite frankly, for purpose. You know, do they make a difference to the world? Are they important? We use the word augmented intelligence in our company. Words are really important to us.
The way we refer to things are really important to us. Thinking about it of augmenting. You know, you're augmenting the teammate experience and you're augmenting the client experience and augmenting the shareholder return. AI, I think, is going to be really important for all of these components. We have projects underway, you know, in virtually every element. Think about making, you know, our analysts more efficient in investment banking. Big project underway there. Think about our Truist Assist, which we talked about. A way that our clients can interact with us on a digital basis. Think about all the efficiencies in terms of fraud. Think about the efficiencies in the care center and all the things that we can deploy against. We have AI deployed against, you know, every element of the discussion we've been having.
Okay. Great. Are we beginning to see that show up in the efficiencies already?
I think you see it show up, as we talked about before, it's showing up in the ways that we create the efficiencies to invest. It's one more of those, you know, how do we create the dollar to invest the dollar and how do we use the tools and areas to do that? You know, it might not say, well, gosh, I haven't said, well, AI is going to contribute, you know, 72 basis points to our efficiency ratio. I will say that AI will be a really significant contributor to our growth story and our return story of what we're doing. It might be hard to pull it out to that specificity, but it'll be a really important part of what we're doing.
Super. As you've hit on the ROTCE target in the mid-teens, right? We've talked a lot about the numerator. Let's talk a little bit about the denominator. Your balance sheet clearly is in great shape from a capital perspective with the gain that you generated from the TIH sale and your CET1 of 11.3%, well above your, you know, minimums here. How does the backup in the long end of the curve impact you Q to date? Is there anything there we should be thinking about?
Yeah. I mean, you know, I think overall, you know, we try to create, you know, sort of a neutral position relative to rates. If we think about the backup of long in the curve, sort of the positives and negatives of that. The positives, as we have a lot of fixed asset repricing, you know. Six months ago, that really looked really strong. Two months ago, did not look as good. Today looks pretty strong again. There is a lot of positive on that side. Probably the negative side of the long end, it just takes the deposit repricing takes a little bit longer, right? That deployment, you know, you can see sort of being over the long term. There are positives and negatives and offsets.
That's the beauty of having a really diversified business strategy and business model as you're trying to, you know, understand and take advantage of differences in where the curve goes.
Okay. With this very robust capital positioning ahead of what looks like is going to be a reframing of regulation with Michelle Bowman in the seat, how are you thinking about ways to utilize this significant amount of capital that you have?
Yeah. The significant amount of capital we have is number one, two, and three against Truist. I mean, it is against the opportunity that we have with our existing client base, the markets that we're in, the ways to expand our existing client base, the ways to grow from a capital perspective. It's a great tool to attract talent in fairness. People want to come work for a company that's going to grow and can deploy capital against that. That deployment is going to be against the opportunity that we have within our existing client base. I mean, that's one, two, and three. We always have a great dividend. We've got a great dividend strategy. Quite frankly, we need to grow into our dividend percent. We're sort of a little high on the dividend side.
In the interim, will you share buyback to be the toggle? You know, will you share back to be the toggle? We will not be in a position, you know, having raised that capital efficiently, as you just noted, to not be able to deploy it against the growth opportunity that we see in the company. That will be one, two, and three.
I suppose the follow-up question to that is the timeframe to be optimized then is a function of macro plus.
Exactly. You know, how much growth opportunity sits there? What is the macro opportunity? You know, the great advantage we have is we can optimize and we can optimize against the growth dynamic. I think we'll be in a, you know, I think if you sort of put that scenario together, we'll be in a relative capital advantage position for the medium term. All that's also factored into the ROTCE targets. That's just another toggle in terms of how we think about things.
Okay. And medium term means what to you in terms of number of years?
I don't know, two to three years, you know, maybe in that kind of thing. Medium term can change, you know, if markets sort of really, really take off or if we see, you know, a market environment that might be slower for a longer period of time.
I understand it gives you significant optionality. I do think investors are looking forward to you utilizing that optionality.
The best way to utilize it is the strategies that I've just talked about, again, that are highly accretive. They have, you know, really good ROA impacts and deploy that capital in the most efficient way with the highest paybacks, not only for our clients, but most importantly also here for our shareholders.
Super. With that, Bill, thank you so much for joining us.