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Truist (TFC) Q4 Earnings Beat on Fee Income, Lower Expenses

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Truist Financial’s TFC fourth-quarter 2021 adjusted earnings of $1.38 per share easily surpassed the Zacks Consensus Estimate of $1.26. The bottom line grew 16.9% from the prior-year quarter.

Results were aided by higher fee income, a decline in operating expenses, modest loan growth and provision benefits. However, lower interest rates and a fall in net interest income (NII) were the undermining factors.

The reported quarter’s results excluded restructuring and BB&T-SunTrust Banks merger-related charges and incremental operating expenses related to the merger. After considering these, net income available to common shareholders (GAAP basis) was $1.52 billion or $1.13 per share, up from $1.23 billion or 90 cents per share in the prior-year quarter.

In 2021, adjusted earnings of $5.53 per share outpaced the consensus estimate of $5.41 and were up 45.5% year over year. Net income available to common shareholders (GAAP basis) was $6 billion or $4.47 per share, up from $4.2 billion or $3.08 per share in 2020.

Revenues & Expenses Down

Quarterly total revenues were $5.57 billion, down 1.5% year over year. The top line missed the Zacks Consensus Estimate of $5.60 billion.

In 2021, total revenues declined 1.8% from the prior year to $22.30 billion. The top line lagged the Zacks Consensus Estimate of $22.34 billion.

Tax-equivalent quarterly NII decreased 3.7% from the year-ago quarter to $3.27 billion. The decline was due to a fall in purchase accounting accretion, lower rates on earning assets, decrease in fees on Payroll Protection Program (PPP) loans and a fall in loans. These were partly offset by growth in the securities portfolio and lower funding costs.

Net interest margin contracted 32 basis points (bps) year over year to 2.76%.

Non-interest income increased 1.7% to $2.32 billion.

Non-interest expenses were $3.70 billion, down 3.5% from the prior-year quarter. Adjusted expenses fell 1.4% to $3.10 billion.

The adjusted efficiency ratio was 56.0%, up from 55.9% in fourth-quarter 2020. A rise in efficiency ratio indicates deterioration in profitability.

As of Dec 31, 2021, total average deposits were $411 billion, up 2% sequentially. Average total loans and leases of $291.1 billion grew slightly.

Credit Quality Improves

As of Dec 31, 2021, total non-performing assets (NPAs) were $1.16 billion, down 16.1% year over year. As a percentage of total assets, NPAs were 0.21%, decreasing 6 bps.

Allowance for loan and lease losses was 1.53% of total loans and leases held for investment, which decreased 42 bps. Net charge-offs were 0.25% of average loans and leases, down 2 bps from the year-ago quarter.

Provision for credit losses was a benefit of $103 million against a provision of $177 in the prior-year quarter. Reserve releases, owing to improving economic outlook, led to provision benefits.

Profitability & Capital Ratios Robust

At the end of the reported quarter, the return on average assets was 1.19%, up from 1.05% in the prior-year quarter. Return on average common equity was 9.8%, up from 7.9% in the fourth quarter of 2020.

As of Dec 31, 2021, Tier 1 risk-based capital ratio was 11.3% compared with 12.1% recorded in the prior-year quarter. Common equity Tier 1 ratio was 9.6% as of Dec 31, 2021, down from 10.0% as of Dec 31, 2020.

Share Repurchase Update

In the quarter under review, Truist Financial repurchases shares worth $500 million.

Our Take

Truist Financial’s efforts to capitalize on the investment banking and insurance businesses bode well and will further aid fee income growth. Also, a rise in demand for loans and robust economic growth will support financials. However, the low interest-rate environment is expected to hurt margin growth. Mounting expenses remain another major concern.

Truist Financial Corporation Price, Consensus and EPS Surprise

Truist Financial Corporation Price, Consensus and EPS Surprise
Truist Financial Corporation Price, Consensus and EPS Surprise

Truist Financial Corporation price-consensus-eps-surprise-chart | Truist Financial Corporation Quote

Truist Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Major Banks

Robust advisory business, reserve release and a rise in loan demand drove JPMorgan’s JPM fourth-quarter 2021 earnings of $3.33 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $3.01. Results included net credit reserve releases. Excluding this, earnings came in at $2.86 per share.

However, disappointing trading performance, lower interest rates and an increase in operating expenses were the major headwinds for JPMorgan’s quarterly results. Also, the company’s mortgage fees and related income plunged during the quarter.

Wells Fargo’s WFC fourth-quarter 2021 earnings per share of $1.38 surpassed the Zacks Consensus Estimate of 1.09. Also, the bottom line improved 86% year over year. Results included certain non-recurring items.

Improved investment banking and other asset-based fees, and strong equity gains in WFC’s affiliated venture capital and private equity businesses, as well as lower costs, supported the bank’s performance. Yet, a decline in NII due to low yields from earning assets and lower loans were the undermining factors.

Citigroup C delivered an earnings surprise of 5.04% in fourth-quarter 2021. Income from continuing operations per share of $1.46 beat the Zacks Consensus Estimate of $1.39. However, the reported figure declined 24% from the prior-year quarter.

Citigroup’s investment banking revenues jumped, driven by equity underwriting and growth in advisory revenues. The dismal consumer banking business and higher operating expenses were the major headwinds.

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