Truist Financial Corporation

Greetings, ladies and gentlemen, and welcome to the Truist Financial Corporation Fourth 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. It is now my pleasure to introduce your host, Mr. Rich Batosh, Director of Investor Relations for Truist Financial Corporation.

Thank you, Lauren. And good morning, everyone. Thanks to all of our listeners for joining us today. On today's call, we have Kelly King, our Chairman and Chief Executive Officer, and Darrell Bible, our Chief Financial Officer, who will review the results for the fourth quarter and provide some thoughts for the first quarter and full year 2020. We also have Bill Rogers, our President and Chief Operating Officer, Chris Henson, our Head of Banking and Insurance, and 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 Truist Investor Relations website. Please note that Truist does not provide public earnings predictions or forecasts. However, there may be statements made during the course of this call that express management's intentions, beliefs, or expectations. These statements are subject to inherent risks and uncertainties and truest actual results may differ materially from those contemplated by these forward-looking statements. Please refer to the cautionary notes regarding forward-looking information in our presentation and our SEC filings. Please also note that our presentation includes certain non-GAAP financial measures. Please refer to page three and the appendix of our presentation for the appropriate reconciliations to GAAP.

And now, I'll turn it over to Kelly. Thanks, Rich. Good morning, everybody, and thank you for joining our first Truist Earnings Call. Thanks for your support. What you're going to see is overall fantastic progress in one year. And I would say to you, generally, if you liked our company a year ago, you should love us now. We're going to be completely transparent, but as you would expect, it's going to be messy. We don't know all that you want to know. But our pledge to you is that over the next quarter or two, we'll give you more and more as we go along. Some of the highlights, which you probably already know, but we did successfully close the bill on December 6th. And this is, interestingly, the largest financial transaction institution in a transaction in 15 years. And these two iconic companies have 275 plus combined years of service, which is huge. We are the sixth largest U.S. commercial bank. We have the number two weighted average deposit market share on our top 20 MSAs, and we're about $473 billion in assets. I think very, very importantly, before Legal Day 1, which was less than 60 days ago, we had all managers in place. Our entire organizational structure today is set and running. No confusion about who's doing what, so that's a really, really big deal. We've done a lot of work with regard to our culture. I'll talk about that in a moment, but it feels really, really good, and we've made much progress in other areas. I want to spend just a minute on culture because it is the most important consideration for all of us. Culture drives long-term performance. There's no question about that, and therefore, it is our number one priority. The way we think about culture is that culture is a function of our purpose, our mission, and our values. There are certain practices, you know, the kind of way we do things around here, and there's a whole process of embedding the culture into the organization. But the most important thing to think about is our purpose, our mission, and our values. Our purpose at Truist is to inspire and build better lives and communities. We really believe we can make the world better, and we think that is exactly what major corporations are called upon to do today. We execute our purpose through our mission. which is on taking care of our clients through a really good environment for our teammates and, of course, optimizing long-term value for all of our stakeholders. Most importantly, all of our mission efforts are guided by our longstanding deep beliefs, which we call values. Our values at Truist are about being trustworthy. We serve with integrity. It's about being caring. We know that everyone and every moment matters. It's about one team coming together. We can accomplish anything working together as a team. It's about success. We know that when our clients win, we all win. And for our teammates, it's about happiness. A sense of positive energy changes lives, and we ultimately want all of our teammates to be happy, because when you're happy, you don't have a job, you have a passion, and we want everybody to be passionately focused on accomplishing our purpose. We know that we are very, very closely aligned. Early on in this process, we got really good research from our 59,000 teammates. We, for example, early on, we gave them 16 words to describe their companies. We got over 10,000 responses from each side. They all picked exactly the same four words. A couple months later, we had scientific research where we asked, again, over 20,000 teammates divided between the companies to describe the company in terms of how we operate, and they described it almost exactly the same. Just week before last, we started a series of 39 town halls where Bill Rogers and I went around and started talking to our teammates and answering questions. Week before last, we did 11 of 39. Next week, we'll do another 11 or 12. And I will tell you that the responses are fantastic. Our teammates are excited. They love our culture. They love our purpose. They love our brand. They love our colors. They love our logo. So it is off to a really, really good start. But I want you to feel confident as investors that this is not two companies struggling trying to come together. This is two companies that were already deeply aligned in terms of our purpose, our mission, and our values. Everything we've seen over the last year affirms just that. And now there's a renewed level of excitement from everybody as we think about coming together as truest and going out and making the world a better place. Let's talk about some of the highlights. If you're following along on page six, our total taxable equivalent revenue was $3.6 billion. Adjusted net income available to common shareholders was $1.46 billion. That's up 29%. But like all these numbers, you're going to know that they're obviously inflated because of the SunTrust impact on the BBT numbers as we added 25 days towards the end of the fourth quarter. So we won't dwell so much on the specific changes, but we did make over a billion dollars. In terms of diluted earnings per share adjusted, it's $1.12, and we'll give you some detail in terms of how that adjustment was arrived at. Return on average assets adjusted 1.4%, very strong. Return on average tangible common equity, 18.6%, which right out of the chute is really, really good, again, on an adjusted basis. And adjusted efficiency ratio is 57.5. Both companies, to give you a sense of momentum, grew loans at a healthy pace when you exile some restructuring, which Daryl will talk about. But the underlying growth is very good. The pipelines are very strong. and we feel very, very good about momentum. Asset quality is great, and we've taken some action to optimize the portfolio from a credit perspective. Our capital levels are excellent. I'll give you detail about that. Our businesses, as I said, have good momentum. We've talked to bankers all across the footprint. Pipelines are strong. People are excited about doing business with Truist. The launching of the Truist brand colors logo could not have gone better. But I want you to know that we are primarily focused on serving our clients. We are laser focused on making sure our clients have a distinctive, outstanding service quality relationship with Truist. We're going to talk about call saves, and Darrell will give you a lot of detail that we have available for that. But I want you to know from my perspective, we have made a decision to slow the timing down just a few months. And we did that to improve client service quality. to ensure strong client retention, to improve the long-term value proposition. This is about really the digital investments that we're going to be making. We want to get some of those made before we, you know, actually roll out the conversion. And so the branch conversions are delayed some. Part of that was because of the agreement we reached with regulators. Part of that was because we wanted to delay it some to make sure, again, we have a digital investment value proposition in place. Still, we are very, very confident on our net $1.6 billion in savings, so this should not be viewed as a negative. This is a positive. It's the same number. We've simply taken just a little bit longer to make sure we do it and do it right. Our non-performing assets were fantastic at .14, and that charge-offs were right in the sweet spot of what we've always indicated, .40. and a very strong common equity tier one capital of 9.4%. So we feel really, really good about asset quality and capital. If you look at page seven, I'll just mention these selected items. They're really just three that are large. The merger-related restructuring charges are 223 million miles pre-tax, which is 19 cents negative impact on diluted EPS. We have security losses because of our balance sheet restructuring. That was 116 million, which translates into about 10 cents in terms of negative impact of EPS. And then we have some expenses that are not technically, from an accounting point of view, designated as merger-related, but they are incremental operating expenses that do have future benefits, but they're not part of our ongoing run rate. So you can kind of think about them the same. The main thing is they don't impact future run rates. So when you add all that together, you get a net negative impact on our ongoing run rate of 37 cents, which is substantially why you see the difference in GAAP and our adjusted numbers. If you look at Phase 8, just a few comments with regard to loans. We did have an end-to-period balance of about $300 billion. Really good mix. The mix of loan sales for investment consisted of 56%. Commercial, 40% consumer, about 2% credit card. So pretty balanced. Over time, you might expect to see the consumer grow a little faster than commercial to get a little closer to 50-50, but we feel really good about where we are starting out. We did take some actions, which I'll give you more color on with regard to the portfolios, but I would just point out that the year-end portfolio loans are a little inflated by about $4.5 billion because of the loans that have moved into loans held for sale, and they're sold but haven't closed yet. So they'll close very, very soon. So, you know, as we think about the overall market, just in talking to an awful lot of our regional presidents and market presidents, I would say that the overall market is pretty good. CEOs are confident in their businesses. But in fairness, they are nervous. They're worried about the macro issues, the trade war, you know, Iran, the coronavirus. You know, we are 10 plus years long into recovery. So while we do not expect a recession in the near term, I would say, in fairness, we could sort of talk ourselves into one. So it's a little bit of a nervous period right now. I think we need to be honest about that. But that's one of the reasons that Truist always remains strong in terms of capital and liquidity in the event these existential factors do create an interruption in terms of ongoing business, but we don't really predict one now. We really think this will settle down. We certainly hope and pray that this coronavirus does not get out of hand, but we all have to be really concerned about that. There are a lot of people around the world being hurt. A lot of people are dying, and we've got to really hope that that does not become a global systemic issue and I personally don't think it will, but we have to pay a lot of close attention to that. If you're looking at the slides on page 9, just a couple of comments with regard to deposits. We did end up with non-interest-bearing deposits of about $92 billion and total deposits of about $335 billion. If you exclude the purchase accounting non-interest deposits, declined just a little bit in the third quarter. Everybody, I believe, is seeing a continued shift out of non-interest into time, and we've seen the same thing. It's not any different than anybody else is facing, but our interest deposits did increase a strong 9%, so you can see what's going on. Our total deposit activity is very good. It's just a little shift going on. We have strong non-interest deposits that total 30.6%, one of the best in the so we feel good about that. Our total cost of average total deposits and average interest-bearing deposits respectively decreased 10 basis points and 17, so actually pretty good there given the relative yield curve. We're very happy to report that we are telegraphing to our clients that virtually all of our clients will not experience any change in their account numbers. Having been involved in lots and lots of mergers over my career, I can tell you that the big issue for the client is change. And the main thing about change is don't change my account number. So we've worked out a way, and I congratulate our people, for all of our clients not to have any changes in their account numbers. So we predict that it will go extraordinarily smoothly for our clients, which is certainly our goal. So overall, even though it's a little hard to see through the numbers, Our balance sheet is strong, strong earnings, tremendous progress in moving TruViz forward, and we are very excited and we're very confident. With that, let me turn to Darrell, and he'll give you a lot more detail and a lot more comment.