Truist Financial Corporation

Greetings, ladies and gentlemen, and welcome to the Truist Corporation second quarter 2021 earnings conference call. 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. Ankur Vyas, Truist Financial Corporation.

Thank you, Shannon, and good morning, everyone. Welcome to Truist Second Quarter 2021 Earnings Call. With us today are our Chairman and CEO, Kelly King, President and COO, Bill Rogers, and our CFO, Darrell Bible. During this morning's call, they will discuss Truist Second Quarter results and also share perspectives on how we continue to activate upon our purpose, our progress on our merger, and current business conditions. Chris Henson, Head of Banking and Insurance, and Clark Starnes, our Chief Risk Officer, are also in attendance and will participate in the Q&A portion of our call. The accompanying presentation, as well as our earnings release and supplemental financial information, are available on the Truist Investor Relations website, ir.truist.com. Our presentation today will include forward-looking statements and certain non-GAAP financial measures. Please review the disclosures on slides two and three of the presentation regarding these statements and measures, as well as the appendix for appropriate reconciliations to GAAP. In addition, Truist is not responsible for and does not edit nor guarantee the accuracy of our earnings teleconference transcripts provided by third parties. The only authorized live and archived webcasts are located on our website. With that, I'll now turn it over to Kelly.

Thanks, Ankur, and thanks to all of you for joining us. We really, really appreciate your support. So it's a really strong quarter, which reflects our diverse business mix, our consistent risk management. We did have a negative provision. And importantly, I would point out investments that we have made in insurance, investment banking, wealth, and digital capabilities, and excellent progress in our conversion. As you've heard us say before, we believe culture continues to be the primary driver of our success. I will point out that today, in these times, our purpose really resonates with teammates and others as our purpose of inspiring and building better lives and communities is motivational and satisfying to our teammates being involved in helping make the world a better place. We're now focused, you may be interested in knowing, in helping each of our teammates align with our culture on a personal basis because we find that engagement really excels when people are aligned with the personal purpose and the culture purpose. Our EO team is highly focused on cultural integration and activation and is the primary focus for all of us. If you're following the slides, if you look on slide five, I just want to point out that for us, purpose is not just a banner. It's the way we live. It's truly trying to inspire and build better lives and communities. We focused a lot of attention, especially now and increasing on DEI. I would point out some of the major investments we're making in our communities. For example, this quarter we contributed a combined $200 million to the Truist Foundation and the Truist Charitable Fund to support important work of our organizations across our diverse markets and communities. We're very excited that we were able to invest $22 million in Atlanta's Mercy Care, which is a fantastic federally qualified health care for homeless program. We expanded our partnership with Operation Hope with a $20 million investment to help provide more education, insights, and tools to help more people build better lives. And we invest a $2.5 million in a grant to the National Institute for Student Success to improve the financial education and graduation rates for underserved students. This is a fantastic program. But it's not just about philanthropy. It's about the way we live around here every day. So I'm very proud that we released our inaugural Supplier Diversity Impact Report, which outlined a $1 billion total economic impact through supplier diversity relationships in 2020. We're at 114% prorated on our goal for our three-year $60 billion community benefit plan, which is really helping our communities. And through second quarter 21, we've originated about $17 billion of PPP loans, which really have supported our business clients and employees and our communities. We're very active and increasing our engagement with regard to ESG, very focused on energy and sustainable related financing. where in the second quarter and continuing from 2020, we've invested $2.4 billion in clean energy and sustainable related financing. Look forward soon in the next few weeks for the second Truist CSR and ESG report, which I think you will enjoy. So now if you'll flip with us to slide seven, I just want to point out some of the key performance highlights. The very strong quarter, we had taxable equivalent revenue of $5.6 billion, which was up a strong 4% sequentially from the first quarter. We had $5.6 billion in taxable equivalent. We had the revenue and net income was $2.1 billion, which was up 30% linked. Very proud of our $1.55 diluted EPS, which was up 31% sequentially. and a strong 89% over last year. Return on average tangible common equity adjusted was a very strong 24.7. But even if you take out the reserve at least, it's still a really, really strong 20.9%, which is driven by strong performance in insurance, investment banking, wealth, card and payment fees, and commercial real estate related income. We had strong performance in terms of revenue As I said, it did drive a 2% increase in adjusted non-interest expenses due to incentives, but frankly, this is exactly the kind of expense increase we like to have. When you put that together, revenue and expenses, we had a solid adjusted operating leverage of 2%, and our adjusted PPNR was $2.5 billion, up 6% compared to the last quarter. Our asset quality is great. We performed well in CCAR, which allowed us to be in a position to propose a 7% increase in our dividend to a record 48 cents per quarter. Our merger integration is going very, very well, and top performance and improved economic conditions give us confidence to reduce our CET1 target to 9.75%, and Darrell will talk more about that. Our total performance for the quarter, we think, was very, very strong and very comprehensive, which we feel very, very good about. If you'll flip with us to slide eight, I just want to point out a few of the selected items that impacted adjusted income. First, we had merger-related and restructuring charges of $297,228,000 after tax, which was a diluted impact of $0.17. Incremental operating expenses related to the merger. I'll point out again, these are merger-related expenses but don't meet the technical definition of merger-related and restructuring charges, but they're not in our run rate going forward. That's $190,146,000,000 out to tax and 11 cents diluted negative impact. As I mentioned, we did have a $200 million contribution to our Truist Foundation and Truist Charitable Fund, which had an 11 cents impact. I would point out in the merger-related and restructuring charges included in that is a $111 million after-tax accrual related to our voluntary separation and retirement program, which was a program that we offered in June. We had approximately 2,000 teammates that elected to participate. These were totally voluntary decisions on their part, and I want to really thank and appreciate those teammates for their commitment and support to help us build the foundation of Truist. This program does help us reduce costs and create capacity to invest in needed services for our clients. It's really part of our overall intense focus on reconceptualizing our businesses. You know, to thrive in today's world requires a deep commitment to continuously reevaluating yesterday's activities and the expenses associated with that so that we can afford to invest in new activities for today's demands. With that, let me turn it to Bill to talk about some other key trends.