Good morning, everyone. We got Truist presenting next. Truist is a financial services company formed by the merger of SunTrust and BB&T. It's headquartered in Charlotte, North Carolina, and it's the sixth largest bank in the United States, with $543 billion in assets at September 30th. Presenting today for Truist is Mike Maguire, the Chief Financial Officer and member of the company's executive leadership team. Prior to becoming CFO, he served as Chief Consumer Finance and Payments Officer, where he led the company's consumer finance business. So please join me in welcoming Mike.
Thank you very much.
I'm gonna just start off with some questions, and we'll leave plenty of time for the audience to participate. But first, Mike, you know, maybe you could just start off talking about, you know, loan growth, different factors in different markets, and what's impacting them right now.
Yeah, sure. So, you know, as we think about the ... I guess, you know, a couple of factors. One, we've talked, like others, about just being a bit more, you know, calculated in terms of managing RWA in general. So there's a component to our, to our growth and balance evolution that's driven by our own sort of just being a bit more selective and emphasizing certain businesses versus others. But, you know, maybe to your question, focusing on the demand side, perhaps, you know, we have seen sluggishness in demand. You know, we've got, I think, relative to other parts of the country, you know, attractive markets that are still growing.
But if you just look at the high funnel, you know, pipeline, for example, in our commercial businesses, in terms of just borrowing needs, we have seen, you know, muted demand. So maybe that's just, you know, a little less expansionary, you know, business activity, you know, with higher borrowing costs, perhaps driving some of that, just a little bit more caution in general. So I think that's probably a factor again, as well, you know, coupled with the fact that we're being a bit more, a bit more disciplined around RWA management.
I mean, do you see balances stabilizing soon?
You know, we were down a bit more in the Q3. You know, we sold a student lending portfolio, which drove a lot of that decline. We also shrunk the balance sheet a bit on the cash side. We had some of the securities portfolio decline, so earning assets were down a little more in the Q3 than they would be in the Q4. But I think they still will experience a little bit of pressure, but it's, you know, I think, you know, very, very manageable. And again, it's growth that we are, you know, efficiency that we're really seeking as it relates to the portfolio.
So, you know, we might continue to apply brakes to some of our national consumer finance businesses, like indirect auto or correspondent mortgage, but we might, you know, on the other hand, based on profitability profile, you know, lean a little heavier into, you know, our Sheffield specialty business or into our C&I portfolios-
Right.
and the like.
Maybe that we should just segue into the RWA optimization strategy. You mentioned you sold-
Yeah.
-the student loan portfolio. Are there any other opportunities like that? And, if so, where, and, you know, you talked about focusing on the relationship and, you know, focusing on the customer on a holistic basis. You know, it's more of a grind-
Yeah.
Right, over time. So maybe we can kind of dig a little further in that.
I think you got it. I mean, we don't have a long list of non-core lending portfolios that we intend to divest. You know, student was an obvious choice for us. It was a portfolio that was really more of a sort of a trading asset. It was serviced by others. We purchased these loans after they'd been, you know, rehabilitated and guaranteed by the government. So a really truly, you know, not a strategic business for us. But as we think about, you know, really more calibrating, that's, I think, what the next, you know, phase of the journey is for us as we think about, about, you know, capital conservation. And that's, you know, you said it, I mean, we're gonna evaluate ... We're open for business in our, in our communities.
We want to do more commercial lending and support our corporate clients and our consumer clients, too. We want to have really fulsome relationships with those clients. That's the promise we think of Truist, is having really, you know, a fantastic brand and great teammates and loyal clients who want to do business with us, and finding ways to fully serve them with, you know, really a world-class, full service, you know, platform. And that's both on the wholesale and the consumer side. So, getting that right and getting our offenses right.
You know, Bill's talked a lot about simplifying our business and having, you know, a very good alignment around the offense and how we go to market, and that finds its way to all these discussions around capital management, around pricing, around, you know, other things I'm sure we'll end up talking about today.
Yeah. I mean, before we move on to talking about deposits, just any commentary you have. You know, you get offsetting factors on the pricing, right? And you're clearly being more disciplined, as well as the rest of the industry. You also have the shadow banking market that's applying some pressure. So kind of where spreads are now and, you know, versus where you think they should be at this point-
Yeah
point in the cycle and what you see coming.
You know, look, our cost of doing business increased and is increasing. And so as we think about how we allocate capital and the returns that we expect on capital and our delivery model, you know, we have to be more disciplined. So we are seeing some improvements in credit spreads, and you know, we look at this on a you know, monthly basis around you know, renewed and new originations, you know, adjusted for you know, obviously for credit tier. And we are seeing some upside there. That's obviously... You know, if you think about, like, the totality of the margin, that's a good guy. We're still-
Mm
You know, facing some, you know, creeping liability costs as the betas grind a bit, and we can talk about that. But we are seeing some improvement, some widening in the credit spreads, which is, which has been welcomed. I don't think that—I'm not sure what the destination is there. I mean, you know, we had a view on where we thought, you know, the degree of that improvement could be. I think there's still room for improvement. So, you know, hopefully that'll be a good guy as we sort of roll into the Q4 and early next year.
And just one follow-up. So historically, where we are in the rate cycle, I don't even know if this is answerable, but are we where we should be with spreads?
Oh, that's a tough question. I mean, look, I mean, I, I think, you know, it depends on if you, if you believe we've seen our last hike, you know?
Right.
I think you would expect that, you know, the betas grind from here, and you start to get some benefit of the fixed asset portfolio repricing, and we get some credit spread widening. It should be stabilizing, you know?
Mm-hmm.
you know, a lot of assumptions
Right
... you know, go into that.
All right. Well, why don't we move on to deposits then? Why don't we talk about your deposit, deposit strategy now, and maybe compare and contrast with, I think, it's been termed March Madness-
Ah!
earlier in the year.
Yeah, no. So, you know, Q3 was really important for us to focus on rate paid. You know, well, first of all, I'd just say, stepping back, we feel really good about how our deposit portfolio has performed. You know, the diversity of our portfolio, the strength of relationships that we have with our consumer clients, with our commercial and corporate clients, wealth clients, really showed through during, you know, what was ultimately a really tumultuous moment for the industry. But look, you know, and we're in competitive markets, and QT is still in the background.
Mm-hmm.
So, we spend a lot of time thinking about the efficient frontier around our liabilities management. So, you know, a couple things we've done throughout the course of the quarter, which is driving some improvement in results for us. You know, we have been thinking about, you know, exception-based pricing and local authority. We made some adjustments to that, which we saw that come through, which was great. You know, just changing the mindset. You know, if you're a frontline teammate in March, April, you know, you probably had one sort of mindset and mandate, and that's changed in Q3 as we think about retaining and acquiring clients. So we want to be more thoughtful about that. We've been, you know, making adjustments to promo rates on the money market side.
We've had a little bit more interest in CDs, not surprisingly, as some of the depositors, you know, want to lock in rates. And so we've been doing some testing on pricing there. And so I guess maybe just without going through a long inventory of items, you know, there's a number of initiatives that we've put into place in the Q3 that we think really helped us on the rate paid side, and we think that those are going to continue to contribute in the Q4 as well. But look, there's still some pressure out there on balances.
Mm-hmm.
The backdrop is what it is. And so for us, you know, whether it's a, you know, you know, 1%-2% sort of pressure per quarter, it just feels—it feels a lot more like pre-March, you know, I'd say right now.
Mm
... in terms of sort of balance pressure. And I think some of the even incremental pricing and rate sensitivity seems to have muted a bit as well.
Right. So just one more on that. So you, you talked about, some of the on-balance sheet money market accounts terming out, and going to CD.
Yeah.
Have you seen any off-balance sheet coming on looking to do the same thing, just lock in term?
You know, maybe anecdotally. I mean, you know, I've got to think about that. I mean, what we're not seeing is a lot of, you know, off-bank product, and we're not. You know, there was a moment earlier this year when I think there were more questions about, you know, banking in general, and you saw, you know, large clients and small clients alike think about, you know, non-bank alternatives like treasuries and the like. We haven't seen those same kinds of flows. I mean, there were moments that all of us in the industry were, you know, looking daily, hourly, weekly, whatever, at sort of where dollars were flowing. In our case, you know, for example, we would track, you know, if a money market or a DDA dollar was leaving wealth, where was it going?
In our case, it was usually going to the wealth platform into a treasury-
Mm-hmm
... or investment account. But I guess my point is, we're not seeing that same amount of just money in flight. It seems to have really settled.
Okay. Management has mentioned that you expect the net interest income to bottom in the H1 of 2024. And, I mean, we've had, you know, diverging views across the industry. Just kind of maybe you could walk us through what drives your expectations there.
Sure. Well, a couple factors, and we talked a little bit about the margin already. You know, I think so long as we're, you know, at the current short rates, you know, you'll continue to have some pressure from the deposits. Again, not from step-function evolution, but just sort of grinding a little higher. We think that we can mitigate some of that margin pressure, as I mentioned, whether it be, you know, some of the non-mortgage fixed assets repricing or whether that be, you know, some wider spreads. So, you know, you've got some margin compression in the current sort of rate scenario. And then, you know, I mentioned also, you know, a little bit of pressure on balances.
So those two together both are, you know, going to put, apply some modest pressure to the NII. And in our case, we're positioned intentionally to be a touch liability sensitive. And so I think when we talk about, you know, the H1 being, you know, probably the period where you see a trough, that's driven by the fact that we believe that you could see a cut as early as as the middle of next year, and that would be the catalyst for us to turn positive, both on the margin and the NII side.
Okay. Maybe we'll take that to the balance sheet side-
Sure.
In terms of, you know, a lot of macroeconomic uncertainty out there. You know, how the balance sheet's positioned in different rate scenarios and how you're managing the interest rate risks there?
Yeah. Well, again, I mean, look, we, you know, we, we're, we're positioned relatively neutral, a touch liability-
Yeah
... sensitive. We're probably, you know, the disclosure that we provide to our investors around NII sensitivity contemplates a 50% through the cycle beta. And obviously, if we saw a rate cut, you know, we believe that the betas would be higher than 50 on those first cuts. So we're perhaps a touch even more liability sensitive than that disclosure would otherwise imply, but that's how we're positioned, you know, for rates.
Okay. Well, why don't we go on to fee income growth? Just curious if you expect growth next year. It's been a bit, you know, suppressed for the industry.
Yeah.
Kind of, what are the puts and takes as we move into 2024?
You know, you know, our insurance business continues to perform very well. You know, we're continuing to experience high single digits organic growth. On the insurance side, there's a good backdrop there from a pricing perspective and a retained premium perspective, and John and the team are just doing an excellent job. You know, from an investment banking perspective, we continue to see a good progress in our franchise. You know, we look at a lot of different signals of health, you know, whether it be market share and league tables, whether it be you know, average deal size or average economics or proportion of deals that we you know, lead or actively lead, whatever it might be.
In that business, we feel really bullish about the progress we're making in terms of the quality of the franchise and the importance of the relationship that we have with our clients. We expect next year that business will, you know, experience, you know, greater levels of activity. I don't. Does it go back to the 2021 levels, where the deal making was pretty rampant? I don't think so, but I think our view is probably consistent with what I've seen a lot of sort of analysts, you know, put forward around deal activity next year. So, yeah, we're contemplating growth in the fee businesses next year. You know, some probably still pressure on mortgage, right?
Mm-hmm.
You know, I think deposit service charges you know continue to you know feel some pressure. Wealth should be, is always a nice business for us. We have had good net asset flows, I think, for you know it's a very nice track record there, and the team's doing well. So I feel good about the fee business portfolio.
Are you leading in anywhere and looking to pick off teams and such?
Yeah. I mean, we're always... Look, we're. For us, our advisory businesses, it's all about people, right, and relationships and expertise.
Right.
And so we're regularly evaluating our teams across investment banking and wealth and insurance and welcoming new teams and teammates to the platform. So absolutely.
Okay. Great. Why don't I pause there, see if we have any questions from the audience. Mike?
Yeah, I've said this before, but, you know, fantastic footprint. You treated, you know, a lot of the communities well and your customers well, but shareholders feel left behind. So why wouldn't you go ahead and monetize the insurance business, given such a disparity between the valuation of insurance and your bank?
Yeah, no, you know, Mike, we obviously, you know, the transaction we did this spring with insurance, we thought, you know, made a lot of sense, you know? And if you think back around the reasons why we executed on the minority stake sale, there were several, but the few that sort of, to me, are most important were, number one, we agree it's a great business, it's a valuable business. We need to make sure that it can continue on its trajectory of growth and profitability. And so, it was, we thought, useful to bring additional capital providers to the table to potentially create that flexibility.
You know, number two, and along similar lines, creating a new currency to be competitive in terms of retaining and recruiting producers in that business, critically important, and so we were able to do that, to accomplish that through that transaction, to stake John and a lot of our producers, you know, in the business, and to allow the value that they create through growing the business to translate to wealth creation. And then for Truist, of course, as well, and for our shareholders to create strategic and capital flexibility. Now, obviously, that was all done, you know, prior to some of these the proposed rules on capital and liquidity before, you know, some of the seismic activity in March and the like.
But those three objectives were true then, and they're true today. A fourth objective, you know, which we talked about when we disclosed the transaction initially, was that we, you know, hoped that it would highlight the value of the insurance company. Not necessarily, I guess, unlock. We, you know, were very specific to say, like, "Maybe it's not as well understood that this business is as valuable as it is." You know, TBD, it sounds like, Jason, you don't believe that that value's been unlocked. I think maybe a lot of people would agree with you, but those are kind of the facts.
And so, you know, since then, I think we've been, you know, pretty straightforward that there are a lot of trade-offs to consider in terms of the journey forward with insurance. The objectives that we laid out initially are still intact. You know, we feel like having that option is a distinct advantage for Truist. And we talked most recently in our Q3 earnings call about some of the separation readiness costs and investments that we're making. And just to be clear on that, because there have been a few questions, you know, really the origin of that was to make sure that we're operating the company in a way that's reflective of its new capital structure.
If anything, that actually just improves, you know, that optionality in terms of, you know, wherever we go with the insurance company. But look, we, you know, and Bill mentioned, like, we're having discussions about all of our, you know, businesses, and insurance is a great performer for us. There are trade-offs around how it's capitalized today versus how it was capitalized prior to February versus sort of where we go in the future.
And then just one follow-up. Anything else you can do to show that shareholders have moved up in the pecking order? And I only say that because, again, whether it's your annual meeting or the CEO shareholder letter or a lot of presentations, always about the purpose, which is important.
Yeah, sure.
But I think a lot of shareholders feel that they've been left behind, like whether taking your whole pay in stock or just anything else that you say, "You know what? We're going to show shareholders-
Yeah
... we really care about them as a stakeholder, one of the primary stakeholders.
Yeah. Well, look, absolutely. I mean, when we, when we chose the word "stakeholders," you know, shareholders are, you know, absolutely right in the center of that, but, there are other stakeholders, too, right? You know, you know, whether it be our regulators or whether it be our, our bond investors or, or otherwise. So I don't want to sort of overindex on this word versus that word and what it meant. I'll tell you that we're highly motivated to drive, you know, shareholder outcomes. You know, we've talked about the, the KPIs that we believe are most correlated with TSR. We're focused on measuring our progress against those KPIs, growing EPS, growing PPNR, tangible book value per share, plus dividend growth. So we...
It's, I think it's a fair challenge, Mike, and we are highly focused on driving shareholder value.
Yeah, but a couple of questions around Federal Home Loan Bank borrowings. Earlier this summer, I believe Sandra Thompson, head of the FHFA, introduced the idea of restricting borrowings from the Federal Home Loan Banks. I think it was now growth of the Silicon Valley situation, where they had borrowed a lot but hadn't financed the housing market in a similar manner, put it that way. Are you aware of what restrictions she might impose on your ability to borrow from the Federal Home Loan Bank systems?
You know, that's, you know, I... No, maybe short answer. You know, we've view the Federal Home Loan Bank as a good partner. You know, we've been, you know, you know, as it's part of our liability, you know, management strategy. We've, you know, taken advantage of the facilities in place and... But no, I don't have any insights into, you know, whether that would be restricted.
Okay. As a follow-up on Federal Home Loan Bank borrowings, I think the FDIC has shifted the philosophy from you need to sell assets to raise liquidity, to you need to pledge assets and get those structures set up, you know, at the Fed window or at the Federal Home Loan Bank window. Am I correct in that, that they're stressing more pledging rather than selling of assets?
Are you talking about in the context of-
Of a liquidity, you know, developing a liquidity facility or improving your liquidity profile?
Yeah, I mean, I think they want, you know, as we think about liquidity, I think what they want to see is that you have ability to monetize, you know, liquid asset buffers and the like. So, if that answers your question, they, there needs to be readily available monetizable liquidity.
Right. But they don't... As I understand it, they don't want you to actually monetize it. They want you to pledge it.
Yeah. Yeah.
Which is an important difference because if you have to liquidate it, it puts pressure on the rate structure. If they pledge it, it takes. In other words, they're drawing from the success of the BTFP program.
Sure
... where all you had to do is pledge, not liquidate.
Yeah.
That takes some of the rate pressures off the market. Am I correct in that?
Yeah, I think, I think you're right. My, my point was simply that you have to be able to demonstrate that it can be monetized.
But I get the sense they don't want you to monetize it.
No,
All right, never mind.
Yeah.
Ken?
Thanks. Mike, you know, this year has obviously been made more difficult by what's happened with rates, what's happened March through May. Towards the end of last year, the company was kind of really, you know, fully emerging post-merger, talking about better unit growth and declining attrition. And just wondering, like, if we kind of move aside some of all this macro stuff-
Yeah
... that we're talking about, like, what's happened over the last, you know, 6-9 months underneath and just trying to move the core franchise forward? And can you give us some tangible examples of where-
... and, you know, that's starting to show incrementally, like the premise and promise of the merger-
Yeah.
Really starting to show just, you know, underlying in terms of business metrics, new wins, attrition, et cetera? Thanks.
Yeah, no, great. And that's a place, obviously, we're spending a lot of time right now, is just sort of getting back to the core on Truist and our core franchise. And we've talked more about some of the businesses that perhaps were more complementary versus where we really want to emphasize investment and progress going forward. Yeah, there's a number of good proof points, I think, around, you know, where Truist is winning. So, you know, from a net new accounts perspective and small business and retail, you know, we're adding net new accounts. That's been good to see. So we're winning share in the market.
I mentioned, you know, in our advisory businesses, you know, the net asset flows in our wealth business and onboarding new advisor teams that are excited to join our platform and become a part of Truist Wealth continues to show great results again by nine out of the last 10 quarters. We've had net asset flows that have been positive on the wealth side of the business. Investment banking, I gave you a good sense for. I mean, there are certain sectors where, you know, we've been able to go, you know, further atomize into specialties and add, you know, banking captains with industry expertise. That's pulling through.
You know, the last analysis I saw showed us literally on the examples I gave you, you know, whether it be, you know, high yield or, leverage loans or investment grade. We're seeing our market share again, gently, but improve. But more importantly, we're seeing, you know, the, again, average, you know, whether it be deal size or average economics or average, you know, active, like, the importance of the role we're playing in transactions improve. So, same, you know, our insurance business, again, you know, hitting on all cylinders. The retention of business, retention of teammates has been, you know, stronger in the last, you know, six months since we did our transaction. So you know, we feel good about the core Truist.
You know, and just connecting it to some of the work we're doing around cost management, which is really important obviously, given you know the relative revenue environment that we as an industry are in. You know, I feel really good that you know. I've got great visibility into sort of the bottoms up on the $750, that we're not putting that at risk. You know, we're actually putting that first. The ability to serve clients and grow new relationships and improve our share and improve our penetration and relationships, that's sacred. The work we're doing around the $750 to manage the cost growth is you know I don't believe puts that at risk.
Julian.
So your bank, like most other regional banks, has substantial unrealized losses on held-to-maturity securities. And you actually, yours actually had kind of slightly slower roll off from longer duration. I guess the question is: how does it impact strategy beyond kind of scaling back buybacks, which the whole industry is doing for multiple reasons? Does it impact anything else, in particular, lending appetite? Does it impact lending appetite, given those unrealized losses?
Are you being specific to just the HTM portfolio or just broadly?
Broadly.
Yeah. Yeah.
Yeah, broadly.
Yeah. Okay. Yeah, I got it. Yeah, like, certainly, I mean, like, I think the, you know, how the balance sheet position certainly has, it has an impact on our, you know, liquidity position and, and how we create liquidity, and it has an impact on our, you know, particularly with the proposed rules, you know, going forward, our, our regulatory capital position, and how we think about, you know, growth and, and, and fuel to grow. And it, and it, and it impacts profitability. If you think about our, the yield on our securities portfolio, one of the implications of, of it being, as long as it is, is that the, the yield on the securities portfolio is lower than, you know, perhaps some of our peers, and that impacts our net interest margin.
So I think it impacts, you know, just about every part of our business, if you think about it that way. And look, I mean, as we think about, you know, the positioning today, we did disclose that, you know, over the next three years, you know, we have a roll-off rate of about $3 billion a quarter. And we've tried to dimension for all of you what impact that will have in terms of capital accretion over the next three years.
Just specifically on the lending question.
Yeah.
Does it impact your lending appetite?
Well, I mean, look, I mean, if you think about, we talked about RWA optimization. I mean, RWA optimization is driven ultimately by, you know, capital planning, right? And so as we look forward and acknowledge the fact that, the unrealized losses in the AFS portfolio will, you know, over time, be a component of capital, then, you know, that's a, that's a constraint. It's not the only, but so to that extent, you know, absolutely could, could impact our growth prospect.
Maybe I'll jump in here. Circle back to Mike's original question, just on the insurance company.
Yeah.
You know, maybe you can give us a little bit more color on what the independent readiness costs are comprised of?
Yeah.
and why they keep increasing.
Yeah, and you know, we mentioned them conceptually back in April, and then felt like it was important to begin to dimension the costs as they increase in magnitude. And we mentioned at Q3 that we expected the cost in the Q4 to be around $35 million. To try to explain the nature of these costs, I mean, initially, in the early days of the spring and summer, it was simply planning, like understanding, okay, for the company to operate more independently, what are some of the gaps that exist? That very quickly rolls into beginning to execute. So, you know, I'll give you a really good example. Some of it's just people. You know, so if the CFO of Truist Insurance Holdings and her finance team historically-...
would have reported, you know, to me, and had a certain, you know, complexion based on how we, you know, run the finance group within Truist and for all of our businesses. Those now report to John, and John has to add expertise around things like accounting policy and SOX and internal controls, and so on and so forth. Perhaps not a very exciting, but a very maybe tangible example. Other examples of more of larger investments might be, so, for example, the application ecosystem that supports insurance. So there are a lot of applications that are insurance only, so it could be maybe it's a premium quoting tool, or maybe it's a commission tracking tool.
Those applications, while you might think, "Well, no problem, those are just insurance tools," well, they're sitting in Truist data environments. And so our view is that, you know, moving them from a Truist data center into a fenced, you know, in this case, TIH data infrastructure is sensible, so we're moving forward with that. At the same time, you may also have certain applications that were, you know, services that we provided to TIH. So, general ledger is an example. An HR system is an example, and so doing that implementation work and then having an ongoing license that's separate and apart from Truist. So those are examples.
But a lot—it's governance, it's controls, it's reporting, it's all the services that you would imagine a company like ours would provide for one of our, you know, subsidiary companies.
I, I guess if you had to break it down roughly in terms of what's one time and what's recurring, how should we think about it? I don't know how much color-
Yeah
... you can give going forward, and-
I think we'll give more details about that probably in January when we talk-
Okay
... about 2024. But there are some one-time costs, and they're standup costs and planning costs, and then there are others that are more, you know, like a license that's gonna maybe be in the run rate. You know, something that's been important to us as we've thought about what you might think about as investors, is sort of dyssynergies that come along with something like that, is making sure that we're leaning out other processes, to do the best we can to make sure that we maintain the profitability of the insurance business.
Right. Okay. And then on the cost saves, you were talking about how it was a bottom-up built plan. Perhaps you can give us a little bit of insight on progress so far, and-
Yeah
... basically, what you want to achieve with a simpler organization.
Sure. Well, I think at the highest level, on simpler, and I know Bill's looking forward to talking more about this, and we talked about it a little bit at another conference, in September, is really making sure that we have great alignment around, again, the offense in these businesses, and creating the right incentives, creating the right, behaviors, enforcing those behaviors. You know, thinking about, you know, even, like, within segments, how we sort of deliver our service. So we think there's, you know... And by the way, that simplification and that, you know, avoidance of any sort of siloed or inefficient decision making, we believe, not just on the revenue side, will create productivity, but also will help guide a lot of the decisions we're making around-
Mm-hmm
... just organizational design and, you know, the org chart, said another way. But, you know, from the progress we're making, it's been fast-paced. So first of all, you know, this is planning that we've been doing for, you know, a number of months, and we didn't talk about it earlier this year, but we, you know, we're obviously aware that that expense control was gonna be a really important part of our agenda for 2024. We, you know, had a chance to talk about it in September and again, when we released earnings here in the Q3. But, the fastest sprint and the fastest savings that can be realized have to do with just assessing, you know, what I just described, which is organizational health. So-
Mm-hmm
... you know, based on the design that our go-to-market strategy is, that Bill's laid out, making sure that we have, you know, assessed the spans, the layer, exercises, assessed what work is, you know, needs to continue, what work needs to stop. That's, you know, a very, you know, productive exercise from an efficiency perspective, and we're making good progress on that. You know... So that's, that's very much in flight. You know, some of the other work that we talked about was just rationalizing the investments that we're making or spend that we have on the technology side of the business.
So understanding, hey, if, you know, again, getting back to the guiding light of, hey, this, the core Truist and, you know, more fully serving clients, like, that's the sacred, you know, path. Okay, well, if that's true, then maybe some of these other things that we had planned to work on are less important. It could be deferred or altogether stopped, and so that's, that work's underway. There's facilities rationalization that we're working through. There's consolidating vendors, medical providers, things that, you know, with the whole company focused on cost control, we've been able to really, you know, from the bottoms up, identify and begin to action. So feel very good about the progress we're making there and the commitment that we've made around managing expense control next year.
So it sounds like a good portion is blocking and tackling, and I don't know what else to say, but it sounds like it's front-end loaded, so it seems like you can be well-positioned. I'm just curious how you think about looking even further out, like, how does it position you for growth in 2025?
Yeah. Look, I mean, I think the way we think about it is, as we roll into 2024 with the benefit of a lot of these efficiency actions we're taking, you know, we'll have growth in the expense base, but it'll be very moderate. And we think we will have designed, you know, our teams and our processes and our structures to succeed going forward. So I, you know, and there's, is there another horizon of cost? This is something that you have to do all the time, right? So, you know, I think we thought it was important.
Our investors wanted to better understand what our plans were for 2024, and so we felt confident in dimensioning the $750 program, and that was a, you know, a true initiative. But that's not something that you sort of put down in six months and say, "Okay, well, mission accomplished." You know, you constantly have a focus on identifying and eliminating waste and managing costs. So, and look, and you said it right, some of this stuff is maybe faster and low-hanging fruit, but there are other horizons as well, you know, whether that be, you know, and things that frankly take a little longer. Could be like, how do you better leverage automation and those types of tools to drive efficiency?
Right. Okay, and I'll ask one more than John. Just on—just continuing on, so how do you... Just how do you think about the potential for positive operating leverage in 2024, then? You know, assuming the forward yield curve is correct-
Yeah.
which is a big assumption these days.
Well, look, I mean, I think we're off to a feel really good. As I mentioned, we're not here to talk about guidance for 2024, but we did earlier than typical, give you a sense for what our expectation is on the expense side. And we're committed to that. We're also committed to and deeply appreciate the importance of generating positive operating leverage. I mean, if you look at the revenue environment that we're in, especially in the H1, you know, I think that that's tricky. But you know, and we hear it from a lot of our you know, investors, and that that's an important criteria for them. It's important for us, and it's absolutely something we think about constantly in the planning we're doing and in the decisions we're making.
Okay, thanks. John?
Hi, Mike, just regarding the $750 expense program, I know you mentioned the revenue backdrop and taking management efforts to lean out the bank a bit, but how much of that is also in response to reaction to some underlying expense pressures? You know, you're seeing very significant to invest still in certain areas, you know, as either risk, regulatory or anything.
Yeah.
Not front line, but back-end investment pressure that may be driving rationale for the 750.
Well, no, I mean, that, that's, you know, when we initially talked about the 750 and the 0-1, you know, we were very intentional about, you know, acknowledging that there are other just natural expense, you know, growth factors. You know, some of that's just the, you know, simple fact that we're in an inflationary environment. You know, think about our entire sourcing portfolio of vendors. They reprice and recontract over time. Sometimes we can, you know, improve the pricing. Oftentimes, you know, there are actually contractual reasons why, you know, those costs get higher. You know, obviously, you know, we're a highly regulated company, and supervisors are give us feedback all the time around ways that we can, you know, improve our business.
That drives investment in spending and expense, and so those are two examples. There are others, right? I mean, look, look, you know, back to, you know, the earlier question about the franchise. You know, we're going to make investments as well in onboarding and lead generation, and client acquisition, and promotional marketing, and, and we want to pay people who are generating business to go generate business. So those are natural expense drivers. And to, you know, to be successful financially, we've got to offset as much of that as we possibly can through these efficiency measures.
All right. Yeah, our time is up. Appreciate it, Mike. Please join me and give Mike a round of applause.
Thank you.
It was great.
Yeah, I enjoyed it.
Appreciate it.