Truist Financial Corporation

Greetings, ladies and gentlemen, and welcome to the BB&T Corporation First Quarter 2019 Earnings Conference. Currently, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this event is being recorded, and it is now my pleasure to introduce your host, Rich Batosh of Director Investor Relations for BB&T Corporation.

Thank you, Leanne, and good morning, everyone. Thanks to all our listeners for joining us today. And on today's call, we have Kelly King, our Chairman and Chief Executive Officer, Darrell Bible, our Chief Financial Officer, and Chris Henson, our President and Chief Operating Officer, who will review the results for the first quarter and provide some thoughts for the second quarter of 2019. We also have Clark Starnes, our Chief Risk Officer, to participate in the Q&A session. We will be referencing a slide presentation during the call. A copy of the presentation, as well as our earnings release, and supplemental financial information are available on the BB&T website. Before we begin, let me remind you, BB&T does not provide public earnings predictions or forecasts. However, there may be statements made during the course of this presentation that express management's intentions, beliefs or expectations. BB&T's actual results may differ materially from those contemplated by these forward-looking statements. In addition, in connection with the proposed merger with SunTrust, BB&T has filed with the SEC a registration statement on Form S-4 to register the shares of BB&T's capital stock to be issued in connection with the merger, which contains a joint proxy statement and prospectus that will be sent to shareholders of BB&T and SunTrust seeking their approval of the proposed transaction. Please refer to the cautionary statements on page 2 regarding forward-looking information in our presentation are SEC findings and the legends on page three that relate to additional information and participants in the solicitation. Please also note that our presentation includes certain non-GAAP disclosures. Please refer to page two and the appendix of our presentation for the appropriate reconciliations to GAAP. And now I'll turn it over to Kelly.

Good morning, everybody. Thanks for joining our call. So we think the first quarter was a great start to the year. We had record adjusted APS, strong returns, strategic loan growth, very good expense control, and excellent asset quality, and very importantly, a great strategic move in terms of our MOE with SunTrust, which I'll talk about in a bit. Our net income was $749 million, up 0.5% versus the first quarter of 2018. Our net income, excluding merger-related and restructuring charges, was a record $813 million, up 6% versus the first quarter of 2018. We did have diluted EPS. which was $0.97, up 3.2%. But we did wrap up our Disrupt the Thrive initiative which you know we've been working on for about a part of a year and a half. We wrapped that up this quarter and we did announce the SunTrust MOE so we had some substantial charges related to that. As a result, our first quarter adjusted diluted EPS was a record $1.05 which was up 8.2% versus the first quarter of 2018. Adjusted ROA, ROCE, and ROTCE respectively were 1.55, 12.01, and a very strong 19.86. I'm on slide four. Following the highlights, our taxable equivalent revenue was 2.9%, which was down 5.7% annualized versus fourth quarter. Of course, remember some seasonality there, but I think a very good 3% increase versus the first quarter of 18. Loans held for investment averaged $148 billion at 1.4% annualized versus the fourth quarter. I reported NEM increased two basis points to 3.51, and a core NEM increased four basis points. Insurance income was very strong, a record $510 million of 19.2% annualized versus fourth quarter, and Kristin will give you some specific information on that in just a bit. Adjusted efficiency was essentially flat at 56.6 versus 56.5, which as you know is very strong from an industry point of view. and our adjusted non-interest expenses totaled $1.7 billion, which was down 4.7% annualized versus the fourth quarter. So we're doing exactly what we said in terms of maintaining extremely strong expense control. Our credit quality was great. Non-performing asset ratio was 0.26, flat versus fourth quarter, and a decrease of four basis points versus the first quarter of 18. Charge also 40 basis points versus 38 in the fourth quarter, with some seasonality impact there, but lower than the 41 basis points in the first quarter of 18. We did announce strategically our combination with SunTrust, which we're very excited about. We'll talk about that in just a little bit. And related to the merger, we did suspend share repurchases in anticipation of that combination. On slide five, you'll see the merger-related restructuring charges I referred to. It was $80 million on a pre-tax, $64 million after tax, so an $0.08 negative impact on EPS from a GAAP point of view. If you follow along on slide six, we'll look at loan growth. It's kind of interesting what's going on in loan growth. So our total loan growth was 1.4%, which is not super strong, but remember, we focus on the categories more than we do the aggregate. and our CLI was a strong 5.5%. Our CRE was down 7.5% but that's really because of our focus on conservative underwriting and so we actually feel good about that as we move through the quarter. We had strong performance in corporate banking, community banking, equipment finance and equipment capital finance. We did... Thank you for joining us today. Our direct was down 3.7, but we are finally seeing the bottom that we have been projecting. We've been doing a lot of things in terms of restructuring our direct offerings and our processes. Volumes are increasing, so we see that bottoming kind of as we expected. And then indirect was soft this quarter, but as you know, we always have that, particularly driven by Sheffield. So overall, we were pleased with loan growth for the quarter. You look at page 7, slide 7, on deposits. Total deposits were up 5.7%. Now, we are seeing a shift here that we just want to mention. Our non-interest-bearing deposits were down 10.9% first to fourth annualized. Now, on a year-over-year, it was 2.1, so the 2.1 is the meaningful number to look at. And that's really not a function of losses to BB&T as much as it is movement. between DDA to interest-bearing accounts, the market finally got insensitive to interest rates. And so as we expected, we would see some internal and external disintermediation, and that's occurring, although we're pleased most buyers are just internal shifting. We think that will continue to occur, but probably at a decelerating pace. That remains the same that we're in a and a whole new world in terms of how people are responding to this still relatively low interest rate environment. So we'll see how that works out. The percentage of non-new spring deposits, total deposits, was 32.7 versus 34, so that reflects that softness in that. Overall, I would just say that our cost was a little higher. Betas was a little higher this quarter. Darrell will give you some detail on that, but it was mostly because Thank you, Kelly, and good morning, everyone.