Truist Financial Corporation

Q4 2021 Earnings Conference Call


spk_0: reading ladies and gentlemen and welcome to the truth financial corp fourth quarter two thousand and twenty one earnings conference call firmly all participants are no listen only mode a brief question and answer session will follow the formal presentation as reminder this event is being recorded is now my pleasure to introduce your host mr on her by his head of investor relations for truth financial corp please go ahead
spk_1: thank you jake and good morning everyone welcome to truth fourth quarter two thousand and twenty one earnings call with us today are or ceo bill rogers and c of o darryl bible during this morning call they will discuss true was fourth quarter results and also share perspective how we continue to act of a truce purpose or progress on the merger and current business conditions clark stars are cheaper scoffs are both comments or vice chair and john howard are cheap insurance officer are also in attendance and are available to participate in the queue and a portion of the call the accompanying presentation as walls or earnings release and supplemental financial information are available on the truest i our site i are that for with dot com or presentation to they 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 the appendix for the appropriate reconciliations the gap in addition truth is not responsible for and does not it nor guarantee the accuracy of our earnings teleconference transcript photo by third parties the only authorized live in archived webcast are located on our website with that on out from the call over the bill like soccer or good morning everyone and thanks for your help
spk_2: all out but your new years after a good start and that you and your families are doing well
spk_1: i'm very pleased with through a strong for quarter results the income was solid flexing our diverse business mix of favorable conditions and investment banking and insurance
spk_2: editor's than as started to improve exceeding expectations credit quality was outstanding was open another provision benefit with delivered on our expense goals as adjusted non interest expense decreased almost four percent and drove three percent sequential bother of operate leverage low growth excluding ppp a strengthening we have momentum going into this year
spk_1: share more details on these topics during the presentation
spk_2: atari the slide for as always i'm going to begin with purpose which is to inspire and build better lives and communities
spk_1: we believe our purpose driven culture as the foundation for our success of the company or purpose defines how we do business everyday and it serves as a framework for how we make decisions or purpose driven culture is also the foundation for our we attract and retain top talent people simply want to work for do business with companies that stand for so
spk_3: something meaningful
spk_2: this culture comply with our copperheads of compensation of benefit packages significant and ongoing training development and career mobility and are more flexible approach to work will be our formula for attracting and retaining the best on a true as and competing and winning in the ongoing war for talent clever i like some always are putting our purpose and action the slot is organized around the same major themes contained in our sales are energy areas to report says they were topics are most relevant all of our stakeholders including our sir owners i could not be more proud of both the quantity and most importantly the quality of the work being done across all these dimensions and a tremendous and back where haven't in our communities okay cover every porn on the slot let me highlight of you on the technology fraught we were excited to welcome our teammates to the recently completed innovation technology center in charlotte i look forward to our external grand opening the first half a year as you know truest as an unwavering commitment to diversity equity and inclusion and i'm very pleased report that we recently achieve our goal to increase ethnically diverse representation and senior leadership roles to at least fifteen percent this was a year earlier than originally from them
spk_1: while we're proud of chivas milestone with knowledge that this is actually the beginning and rpm
spk_2: we've also intentionally implemented a flexible work strategy for our teammates which includes onsite remote and hybrid options habit a more flexible works here to stay and i've learned the meaning and the power of intentional flexibility the concept of people coming together the team whether the officer lot and intentionally deciding what works best for them their team our clients and the company while remaining highly engaged and most importantly purposeful finally we released our inaugural t v of the report and mid december which adds further context and disclosures our previous the authority has to reports a truce with you all the elements of bsg as an opportunity to improve our company and operationalize our purpose including climate change for instance we're adding a new teammates within see i'd be on our commercial community back for going to help our clients transition to a lower carbon economy attorney the flood seven this quarter we had a hundred and sixty three million of after tax murder related a restructuring charges and one hundred sixty five million of after tax incremental operating expenses related to the merger a total he be of impact of murder related cost was twenty five cents shared
spk_1: while our decision to create a best of both model of integration has resulted in increase up front cost i firmly believe it creates the best platform for future investment in growth the good news is a total merger cause will be cut approximately in half and two thousand twenty two compared to last year and then fall out of our expense base entirely after
spk_2: this year
spk_1: attorney our fourth quarter performance on friday
spk_2: as i indicated the fourth quarter was a strong finish to a solid year at most areas were generally inline are somewhat out of our expectations we are in one f billion or a dollar thirteen earnings per share for the quarter on a reported basis excluding the merger impacts on the purse lied we earned one point nine billion or a dollar thirty eight per share palmer driver changes and dps relative about the pro corner and a year ago with a low loss provision given a rapidly evolving economic environment of the past two years we generate strong returns including a twenty two point six adjusted rotc he which was unchanged from last quarter excluding the reserve or lace adjusted a gc was still a very strong nineteen point six percent as a quality continues to be an excellent story a net charges were in line with our guidance capital deployment was robots during the fourth quarter as we funded strong organic long road close the service finance acquisition in early december and repurchased five hundred million dollars worth of common stock will provide more details about longer momentarily
spk_1: on the merger integration fraud we completed the first part of the core bank conversion in mid october i might reading our heritage bb into clients' to the truest ecosystem
spk_2: as part of the conversion we launched the newest the new truth dot com as well as our digital commerce account opening platform and spanner integration teams have completed to successful dress rehearsals for a final conversion one in mid december one just this past weekend
spk_1: want to personally thank our teammates for their hard work and dedication to this effort because of them were on track for the final four conversion of february their work during which our heritage suntrust class will be migrated to the true as ecosystem
spk_2: what can a full year two thousand and twenty one true as had a productive your across multiple dimensions
spk_1: from a financial perspective regenerated significant adjusted net income of seven and a half billion dollars or five point five three dollars per share and added a just an rotc of twenty two percent
spk_2: while our earnings undoubtedly benefited from a three billion dollar lower lowlifes provision do the improving economy we also demonstrate the strength of our diverse business max fee income excluding security gains increased a very strong ten percent as we're firing on multiple cylinders this performance help offset a forty five percent decline and mortgage for your income as six percent decrease and net interest income well that the digital deliver on our costs a programs evidence been adjusted expenses increasing only one percent dirt a year with some much larger increases and fee income we also experts a reduction or risk profile did improving economy and merger integration program which enabled us to reduce the c d one target but twenty five basis points to not and three quarters and deploy significantly more capital overall we were able to make great progress on multiple fronts despite continued and went from the pandemic while delivering improve financial performance for our shareholders a sorry tournedos slide ten i knew true as digital experience reflects to of our core digital and technology principles procreation with our clients and moving fast and order to learn fast
spk_1: are more modern and agile platform allows us to incorporate this feedback quickly the results of which can be seen in the significant improvements in our overall client satisfaction scores as well as an hour apple app store and google play store ratings and just a few short months from now migrated approximately nine million we detail wealth and small business clients to the true as digital experience through december or than eighty five percent of act of clients have begun to use the new digital platform and lieu of their heritage app
spk_2: if lotta love and you'll a visual of our new corporate and commercial digital platform which will call truest one view this platform will provide our clients with a comprehensive view of their existing treasury management in london solutions be a streamlined and client specific experience designed to reduce the time required to prefer on routine financial task
spk_4: including launch of to is one dude are marshall commercial plants truth is introduced new web and mobile platforms for for each of our client segments cross retail welp business and corporate for the two thousand features were released across these platforms and two thousand twenty one and we've done this at a pace that neither heritage comic of achieve
spk_2: don around more broadly as you can see from the charts on the left we continue to position yourself to serve the robust demands for digital services digital lending mobile check the plot deposits and zell transactions all exhibited double digit growth during the year
spk_1: we feel good about our current digital performance and we believe that our progress will accelerate after the final or bank conversion
spk_2: in part due to the advantage of the advantages and efficiencies associate with having one website one search engine optimization process of one brand one system and one digital application but also part due the new capabilities it will be able to introduce this year including our new ai driven insights to a new truest
spk_1: bethesda virtual assistant and the jurors developers center which will position us to innovate and collaborate with the dup developer community
spk_2: evernote games focus on the new truest experience forces managing three separate experiences will provide a significant productivity left as we move forward
spk_1: lastly we have plans to make strong digital progress and other areas this year or my new partnership and integration with auto fi enhancing are unsure tech capabilities via integrating insurance directly into our mortgage process and launching a new deposit product would like stream on a real time cloud based core
spk_2: attorney the loans and leases on slide twelve average one stabilized after decreasing for five consecutive quarters and given back the onion revealed positive and improving underlying trends
spk_1: excluding ppp average loans increased fact my one percent sequentially an end of period loans loans great rocks my two percent of the momentum late in the corner the most notable a broom it wasn't for you and i were and a period balances excluding ppp those six point three billion or five percent reflecting broad base growth across corporate and commercial lines of business
spk_2: this was the strongest point to point seen i love growth since the first quarter of two thousand and twenty most i be industry and product groups demonstrated growth most notably within our as a finance group broad brainscope was also evident within our commercial community bag or twelve the twenty one regions are you seen islands excluded ppp during the quarter and we continue to see the most most growth and markets that a relatively more open every single one of our industry special to grips with ncc be group a strong reflection of our clients value industry expertise and advice revolver utilization also picked up after six straight quarters of declines and equally important total of overexposure continues to grow evidence of our relevance and that our clients are building capacity for investments an expansion residential mortgage continues to grow reflecting slower prepayment speeds are decision to balance sheet certain correspond of production and increase capacity posts conversions and carbon excluding mortgage consumer balances decreased slightly primarily due to seasonality and our sheffield business and continued declines in our government guaranteed student loan portfolio divers finance closed on december sex and with feel great about their trajectory heading into two thousand and twenty two
spk_1: in addition some of the areas that have been headwinds like dealer for plan and theory are beginning to stabilise overall corporate commercial clients remain optimistic despite ongoing labor shortages supply chain disruptions and inflationary pressures were encouraged by the momentum we observed in the fourth quarter but also not pipeline which are the highest been in some time we continue believe there's meaningful upside of the sea and i grow story of the economy
spk_2: continues to improve although the time in remains imprecise we also do you feel confident and our consumer trajectory as were well possession with respect to faster growing segments there are digital and point of sale businesses which will offset headwinds in other areas now turning to deposit fans slide thirteen average deposits increased a point two billion or two percent compared to the third quarter largely due to the continue and effects of recent government stimulus and seasonality related to public funds well for the able to help our clients alone their financial journey or industry leading child tax credit aware enough initiative to this initiative which promotes savings and financial components clients and communities most in need were able to grow their savings and i are a balances by nine and fifteen percent respectively from made to through december i guess is a great example of what we call purposeful growth
spk_1: what we know we can do more and as gutted by or purpose we have been reinventing a new checking account experience that aligns with our client needs which we believe will provide them more flexibility lower cost and more financial conflicts
spk_2: truest one banking will be our new flagship differentiated and disrupted suite of checking solutions that redefine everyday banking and accelerate our journey towards purpose for growth tourist one will have zero overdraft fees the capability to provide qualifying client for liquidity they need the a simple hundred dollar negative balance popper as well as a deposit base credit line limit of up to seven or fifty dollars these features will help quite manage their liquidity needs far more cost effectively than alternative products you're gonna learn more about these details right after this call these solutions will be available for all clients the summer given our need to first finish the conversion
spk_1: in addition shows will discontinue overdraft protection negative account balance and return item fees and the coming months for all existing accounts
spk_2: long term this is a win win for all of our stakeholders as will increase klein acquisition particular next jen clients and hands upon the group and simply improve the overall plan experience and the near term our weather's will be a financial cost both both as a result of the introduction of true as one and the reduction of other fees weeks black we expect these changes collectively to result in an approximate approximately three hundred million dollars or almost sixty percent reduction in overdraft related revenue by two thousand and twenty four the impact will begin in a few months and build over time as more clients benefits from
spk_1: the truest one experience i'm not going to turn over to darryl to review our financial performance and more detail thank you bail on good morning everyone trying to fight for claim that interest and come with up slightly versus the prior quarter and ahead of our guy guidance of down one percent the increase is primarily driven by larger securities portfolio as a result of ongoing deposit for else
spk_2: which offset the expected decline and purchase accounting accretion
spk_1: managers heart and and corner park and performed in line with our guidance reported managers hard decline five basis points to basis points due to purchase accounting accretion three basis points from course
spk_5: the main drivers as three bases point decline and court and of is barging where the impact of lower ppp revenue and higher levels of liquidity
spk_2: a p p p continues to wind down and we expect to earn an additional sixty million a ppp revenue or coming to quarters
spk_1: moving to five fifteen overall true with intentionally maintained about approach to manning managing interest rate risk and having current earnings i'll be in position to take advantage of higher rates both at the short and long and to the curve
spk_5: we estimate a hundred paces point ramp increase and raids would increase and i buy five percent a hundred basis points shock would increase and i buy ten percent approximately seventy five percent of this report it as at sensitivity is from the short end of the curve
spk_1: as a rule of thumb one twenty five basis points that hike with her twenty five percent beta would increase nine interest income by twenty five million per month
spk_5: and increase editors margin six basis points all else being equal moving to fight sixteen reported fees were down to percent from last quarter largely due to changes and are non qualified fire
spk_1: absent the impacts of a non qualified plan feeds perform well and were consistent with our guidance of rook relatively stable a driving factors have a stable performance quarter over quarter were investment banking and trading increase sixty one million versus a prior quarter he to hire syndication fees structured real estate and record am a results the church income increased twenty one million primarily due to organic growth and feasible improvement from the third to fourth quarter
spk_5: his quarterly increases are offset by a decline and other income of one hundred and seven million for seventy million excluding changes in an unqualified plan largely driven by the valuation adjustment for the visa related derivative and lower revenue from our as the i see thanks
spk_1: for the four year twenty twenty one excluding security gains fees were up ten percent versus the prior year or more than eight hundred million propelled by our diverse business model favorable market conditions and true it's increasing five scale and relevance across multiple businesses we're also making good progress
spk_5: early and are erm initiative particularly between the connectivity between phoebe wealth and see i be church income increased twenty percent year over year primarily driven by a very strong organic growth of eleven percent and acquisitions this was our ninety nine here have insurance business or best one yet
spk_1: and we believe that twenty twenty two or hundred here can be even better investment banking and trading was also up over a hundred four hundred million partly due to record performances a syndicated finance every day equity structured real estate and effort securitization am in a row revenue doubled relative to twenty twenty and the lead syndication
spk_5: rose and and syndicated for an answer up twenty six percent year over year both reflecting our strategic relevant to our clients on the flipside residential mortgage and found was down year over year four hundred and forty five million or forty five percent primarily due to the sharp decline on game on sale margins and lower refinance activity
spk_1: turn into flight seventeen reported expenses were three point seven billion for the quarter including two hundred and twelve million of merger related costs and two hundred fifteen million of incremental operating expenses related to the merger
spk_5: adjusted expenses decrease three point nine percent sequentially at the evergrande of our guidance of down three to four percent drivers for the decline include decrease personnel costs which result of lower salary expenses lower and fan of cause lower medical claims and changes in a non qualified plan average f t a decline three percent including service finance from the prior quarter adjusted expenses are
spk_1: so decline due the elevated equipment and marketing spencer's in the third quarter oh year adjusted expenses are up only one percent despite the adjusted fee income growing ten percent year over year
spk_2: this limited increase demonstrates the cost saving success we have achieved throughout the year and our overall discipline and expense management
spk_1: moving to fight eighteen f equality remains accent excellent reflect been are prudent risk culture diverse portfolio favorable economic conditions and the effects of stimulus or net charge off ratio increased to twenty five basis points from making basis points in the third quarter do to
spk_5: seasonality and the consumer losses and lesser commercial recoveries or a triple our coverage ratio decreased to one point five three percent which is just below or see so they one levels resulting in a provision benefit of a hundred and three million in the fourth quarter as the economic scenarios continue you to improve continuing on side nineteen capital and liquidity levels remain very strong or see eg one ratio declined from ten point one percent and nine point six percent driven by organic well growth share repurchases and the service finance acquisition or stably near term target for see eg one of nine point seven five percent has not changed or though the race or declined and nine point six percent in the fourth quarter
spk_1: we anticipate being somewhat lower nine point seven five percent see eg one target in the near term given the improving low growth outlook and the c a t and the sea so phase and for the first quarter
spk_5: we also do not anticipate repurchasing seen any share for the first half of twenty twenty two moving to slide twenty one
spk_1: we achieved major milestone in october with as cassettes oh migration of our bv anti retail commercial clients to the truest ecosystem
spk_5: we have three significant integration milestones remaining completing the truest digital first migration
spk_1: finalizing the remaining branch consolidations the first quarter and the migration of our centrist retail a commercial clients for the truth ecosystem which will occur in february the visual combination of this process will be six thousand or true signs across our market said branches a t m's reach our corporate offices finally allowing us to serve as one brand for our clients what's the integration is complete and all the systems have been converted true us will be a much so for a company to operate allowing us to provide even better
spk_5: service to our clients turn into slight twenty two we continue to be committed to achieving our one point six billion of net cost saving continue to make progress
spk_1: and each other five categories
spk_5: third party span is down eleven a half percent from be fine levels exceeding our target a reduction of ten percent or sourcing team continues made great strides in achieving savings despite the impacts of inflation and a good news is they were fewer contract and to get renegotiate and twenty twenty two feet of a higher volume contracts renegotiated during true first two years we're on track to deliver over eight hundred total branch closures by the first quarter of twenty twenty two and we're about ninety percent of the way towards or nine brands for hillary reduction target average f keys are down eleven percent since the merger excluding acquisitions additionally technology savings were materialize after redundant systems are decommissioned the second half of twenty twenty two turning decide twenty three or not interest expense was two point nine four billion and the fourth quarter mean our target for the quarter as a reminder for non at expense is more comparable to our be fine expenses at the time the merger closed going forward we will focus primarily on adjusted expenses and not core as adjusted expenses represent what we believe will be the runway going forward i will now provide guidance for the four year twenty twenty two and for the first quarter and twenty twenty two weeks by total revenue to grow two to four percent from twenty twenty one as a result of hired an interest income combined with solid growth and fees the lower end of the range reflects to fare hikes was one in june and the second in december or the upper and reflects three to four rate hikes throughout the year this guidance includes the initial financial impact from the neutralist one account and related fee reductions and twenty twenty two adjusted non issues expense and expected to only increase one to two percent and twenty twenty two as a result of inflation increased investment and expenses from acquisitions and twenty twenty one partially offset by the ongoing cost savings including achieve
spk_2: during our final cost save target in the fourth quarter of twenty twenty two merger related and restructuring costs and incremental operating expenses related to the merger are anticipated to be approximately eight hundred million and twenty twenty two with these expenses going away and twenty twenty three
spk_1: given these factors we anticipate positive operating leverage are both a gap and adjusted basis and twenty twenty two this is the primary metric we were hold ourselves accountable to this year
spk_5: we also expect next match charge offs ratio to be between thirty and forty basis points and twenty twenty two given favorable economic conditions and the assumptions for normalization throughout the year or some quarter to quarter variability excluding discreet items we expect our effective tax rate to be
spk_1: approximately twenty percent and twenty one percent if you're model us on attacks with for went basis
spk_5: looking into the first quarter of weeks back total revenues to decline approximately one to two percent from fourth quarter levels given to fewer days lower purchase accounting creation and ppp revenue continue pressures on mortgage and the typical seasonal patterns and certain see categories like famous payments and service charges this will be partially offset by seasonality and insurance
spk_1: reporting managers margin should be down a couple of basis points to the lower purchase counting accretion allow expect core to be relatively flat respect adjusted expenses to increase one to two percent next quarter from the fourth quarter levels partially due to the seasonality and personnel expanse given fica and four one k and partially due to higher marketing expanse as we continue to roll out a true as brand post conversions now turn it back to build to conclude like darryl
spk_2: twenty four as our investment thesis which is built on four pillars or themed we believe truly differentiate truest and i was tends bar and build better lives and communities as well as deliver purpose for growth for all of our stakeholders alphabet for same reason i've got the best job in banking
spk_1: i shared color on those refreshed investment thesis with many of you and december so on slide twenty five and in summary and conclusion truest at a very good two thousand and twenty one highlighted by improve financial performance strong fee income for my diverse business model significant capital deployment and strong risk management as evidenced by are excellent as a quality metrics
spk_2: we also made substantial integration progress taking many significant steps towards becoming one truest as we look into two thousand twenty two are for know it's going to be simple first will complete the merger in the first quarter eliminate merger related caused by year end and achieve our call says all of which will help us produce positive operate leverage duquette will begin to pivot from an integration focus to an operating focus on execution acts one up a momentum we've got have gone into two thousand and twenty two combined with been one true as cross all dimensions technology digital brand products process give a great cop and it's our performance a potential as we make and complete as pivot
spk_1: lastly will have the capacity deploy more capital behalf of our clients and shareholders as integration rift subside and economy stays unsound flooding some of that let me try to back over to arm author procure neck
spk_0: thanks bill or jake at this time if you'll explain how our listeners can participate in the queue and a session or as you do that i'd like to ask the participants to please limit yourself to one primary question in one fall on so that we can accommodate had many views possible today yes ladies and gentlemen if you would like to ask a question please press star one on your telephone keypad if you're using a speakerphone please make sure your meat function is relieved to lie years in outreach or kliman once again as a reminder please limit yourself to one question and one follow up question once again star one for questions will pause for a moment hello everyone or opportunity to signal
spk_6: and we will begin with can used in with jeffries
spk_7: kennedy their i'm and kenny
spk_0: you might be needed
spk_8: when i hear anything from ken will move to the next color in the queue a matt o'connor with deutsche bank ah hi good morning i happen to follow up on your expense guide and of i wanted to print or one of the percent growth i got the benefit is obviously a compartment take out the coffin and with her finance and at what do you think about on your live and grow
spk_9: dalia talk about three percent back in november
spk_1: and that's still true or how do we think about that yeah man i think the to where we were at the comforts of the fourth quarter and we said we would have around three percent inflation at about four hundred million solar ballpark came here for us for for next year ago we had the benefit obviously of having our for tragic have faith coming through and twenty twenty two which
spk_8: really makes the adjusted expense growth pretty moderate vs not having a car safe
spk_1: okay and an odd that reminded me out with from a finance on the car five or anyone here
spk_9: twenty a quarter that twenty million a quarter
spk_0: arkham or i thank you
spk_10: tom paine car with evercore i if i have the next question
spk_5: morning
spk_1: i'm i'm that on the on the revenue guidance tune to the four percent of maybe could you just opposed to the how that would break down and you can impact that by managers income cumbersome feed me begins to been a color how the how the how we should think about grunting twenty twenty two and his france thanks a few look at that might prepared remarks we talk about and editors and come here we we really right now have in are based forecast only to fed increases one in june and one in december that's the lower end of the revenue guide obviously if you look at the forwards markets are they are today it's a three point eight percent or three point eight times selma for fed is factored in here that would get us to the higher end of the curve iraq we gave you a couple metric see were you than a twenty five percent beta and are rate sensitivity and that twenty five percent beta equates about twenty five million per month for every fed increase that we have their he look back historically and look back at that the recession or that had that we had it when feds started to raise rates in two thousand and fifteen and sixteen a betas for the first hundred basis points were fifteen percent and we're borrowing twenty five percent said paper a little bit conservative on that side will see how things play out we are model a higher beta when you go up over one hundred basis points to the next hundred worth thirty five and anything over thirty five were at a fifty percent beta kennedy the assumptions were years him
spk_2: and the fee fi we feel pretty help growth on the fifa we had momentum there were a tremendous year and twenty one i still think we'll continue pretty good portrayal of revenue but exception of mortgages because of lower spread and volume
spk_10: if sir john and simplest way think about it is
spk_11: you know that the two percent sort of assumes a flattish kind of and i and the upside of air of the two to four isn't is in the and i and then the balance of the for the growth as expected sob non interesting him
spk_10: it thanks color purple on down thanks for that and separately on the no longer
spk_2: side one city give us his expectations how we should think about the pace of growth in twenty twenty two
spk_1: and maybe also for them well how that when and gum know in terms of commercial vs consumer drones thanks
spk_2: yeah john maybe i'll do a little subtle where we are and what the jumping off point is to but little on a pillow context but on the context around that you know we we as as you will no longer other such a function of reduction utilization paid out that pipelines is a way that like to think about that but the formula it's most most simple way and as we you know finish the fourth quarter we really saw the production i you know they start to increase or utilization was up about two and a half points which was that the first time we've seen a swing and the utilization fraud and that was pretty universal so we felt bad felt good about that from on that momentum standpoint a downs were up a little bad but maybe most importantly as that pipelines were at really really high levels so our p be pipeline are see i be pipeline and r c r e pipeline for work at a store of a high levels compared to the quarter and compared to this time last year in a usually does tom year you're starting to clean out pipelines and sort of you know kind to refresh and live in the first quarter so we know we enter the swift thought you know a little more confidence and momentum
spk_1: you know then then that maybe we have in the past on the consumer side you know we have some headwinds from student loan but that was really just left purchases available something i think that's no sort of a little bit of a conscious kind of decision and then home equity which makes us as a symbol of sort of how people want a bar on the future
spk_12: but remember things like service finance or coming on know so that we can play that purchase and in december or early december so will sort of get the benefit of that on the consumer side as we as we caught has become through so the terms of it
spk_0: think it about thinking about the whole year at thinking about puts it takes i think sort of amid single digit from here kind of growth rate in a basement everything we know now nothing else changing you oh so and so forth either guess are eminently achievable an epic reflective of the momentum we have right now
spk_13: great belt and from and colored are helpful turkey
spk_1: and we have can using the jeffries back in the queue clinton oh thanks good morning guys of hades one the come back on the a that expense trajectory and and how you gonna take us from here to there heard that the point about that the one or two percent or underlying growth are off the end of the year on the app you sell said you're on track to get the full posses can kind of talk is through an app do the conversion of when you get to that that family numbers is still the fourth quarter in any update that you might have in terms of just that gross vs net and if you're doing any better on either side vs your resume expectations thanks yeah so can you know as i said before or trajectory on expenses and arches down every quarter a those up and down obviously we got some seasonal factors phone from fort the first i was like and four one k and then we are building our marketing budget and ethically wrong out our true a spray
spk_2: double footprint a pretty aggressively to build brand awareness i think as as that quarter and years play out i think you're going to see fences maybe pick up a little bit and then as we get through all the technology decommissioning has probably the biggest car safe to still come through at really back and loaded right now we still have a foreigner branches apple go away early in the quarterback for the most part
spk_13: other real estate and technology savings are probably the biggest savings which will be toward the end of of a quarter and be feel really good about still hitting our target every originally said i will we announced the merger
spk_1: yet in one other point out at a girl was making this earlier know this also covers the investments that were making so you we have this unique opportunity and that we got call saves and of us but for ability to cover not only the inflation pressures but also i investments and towel on our investment in technology ah the ability to grow our businesses that all factored into this into this guidance if you look at the investment for making this quarter versatile last year you know it's probably double life what it was so we're actually investing more in the company instill a cheating our classes
spk_14: understood thanks and just a second a question i get talked about insurance being better this year the other we get the jan one renewals were ten eleven percent of us when we can help us understand what the growth outlook is for for the insurance business given the as the mid your acquisition jihad in addition to the organic growth outlook thanks
spk_15: yeah i thought benefits okay multiple a john surratt that it that directly thanks phil i'd say that the environment for insurance continues to be favorable sony think about it from uprising standpoint you mention the jan one renewals those were largely around reinsurance pricing and they vary by class of business but it remains a favorable and by are meant for insurance pricing we continue to see exposure growth we continue to see very strong statistics and new business and retention so we expect strong performance and insurance and twenty twenty two on i'll hear from her i have any with rbc
spk_2: thank you the money build mooning darryl wyoming and can you know share with this are you obviously you're see to one ratio you lowered the near term target ratio to nine and three quarters percent from ten percent what is the longer term once the in the deal he the integration is completed were in twenty twenty three heading hill out further moodiness think is and long term cg one ratio for you folks
spk_15: yeah you know drawn with gothic of which that before i may we're going to continue to look at sort of where we or and you know our merger integration where the economy as ah you know that health of our business and make those adjustments on a on an ongoing basis at this will be a quarterly kind of bang but just as we see you know significant chefs and and in those and those criteria evidenced by the fact we went from chanda nine three quarters and also that back or got flexibility and in the good news was we had you no longer grow better at the end of the quarter that public seed expectations and that chick god took rct want a little below that target which with eggs great power that's sort of up you know a high class way to go to go go below go below that target
spk_1: so me as we go through the process this year we go to the seek are process look at all the stress testing results i think sometimes you know toward the middle or the and far this year will take another harder look and and be more communicative about about where another goal my day very good thank you and then is a follow up i'm trying to figure out on the fourth quarter call for twenty twenty two next january what's going to be the real subject of discussions for you folks and maybe your peers obviously we're not going to be talking about restructuring costs and things like that consider be finally over for you folks like credit isn't thing then i'm wondering about because it's so good today we all know that and and of car can come in on this but i'm curious when you look at your underwriting standards today and and if you want to use a scale of one to ten ten being very conservative one being very aggressive where and a stand vs where it was that the started the pandemic and where it was versus nineteen and then second one what's going on with your competition are they being really aggressive of you guys seem really aggressive and running from some of your peers thank you
spk_16: a gerard as great question are i would say of for true as you we've we've route removed all are covert related overlays that we have added in on the from their underwriting standpoint
spk_14: as the pandemic hit so i would say we're underwriting more or less at a normal through the cycle rate so yeah right the middle the field we're not on the aggressor the and we're not on the conservative in i think we're we're meeting the market with who our long term
spk_17: approach obviously it's very competitive out there there are it aggressive structures and pricing considerations that we have to deal with everyday but i think our view is that because of our diverse business model and pickling are leaning segments we can get responsible growth that through the cycle approach
spk_18: i would say for us we're in a pretty normal approach at l it watching those areas that might have been impacted structurally by the pandemic you know c r e office things like that but otherwise for us is more normal underwriting
spk_13: great thank you mike male with wells fargo securities has next question
spk_1: i am or by
spk_2: i just a specific question as relates to competition
spk_19: less than the retention rate of your employees customers deposits i'm when the merger with announced three years ago and there was a lot of talk about
spk_2: competitors gaining share arm and and it's wondering what specific metric you have around that sure my cup of take a crack at that the it know to say that some extremely high focus area for a serve we start with
spk_1: deposit and client side i would say it's been exceptional
spk_19: and exceeded our expectations
spk_2: ah the branch closures retention numbers have done it on the real in the high nineties i think just a reflection of in our clients confidence in us you know our presence and the market and our ability to handle their needs whether it's digital or whether it's physical so they gun and a had so that that part has been exceptional exceeded exceeded probably all expectations and the same thing on the receipt and the deposit growth some epic where i you know that those a hard numbers look at me
spk_1: market share but i i feel like we're taking share in that sense cousin that and that retention a lap tension model
spk_20: as it dies it moves to teammates and you and i thought about as you know right into that first year the merger our attention numbers were actually higher for true as than they were with the
spk_2: bed each heritage company so are you know our teammates or die at at voted for the merger i wanted to be be part of that a we look at not only overall read you know retention we look at are hyper former to ensure we do you retention we divided up on a lot of different ways of see that attrition as picked up on as picked up across the across across the industry
spk_1: i still think on in on a relative basis we look really strong from ah from that standpoint and
spk_2: if you think about what's gonna happen to us you know we also changed that denominator bat when we close lot of branches and we're still consolidating saw ability that back to stay ahead of the attrition game are they were really really well well positioned from from from that standpoint but also and and may be equally importantly as our attractiveness style hard talent i've never been better i'm a we we are bringing and some fantastic people that wanna be part of our company that bought and our purpose
spk_13: i love the idea of been on a strong legacy company to feel like a start up such got sort of a nice in okay
spk_18: in a combination to it our combat medic capacity to innovate make investments has been really attractive so i retention number of mean archers numbers are up there's no doubt about that unless your body elses i think on a relative basis where where okay we manage it to an absolute though that's the way i think about it in our ability to track talents really really strong rob never been stronger i and as far the follow up and going to have a wind up my second question here or it's been almost three years and she announced the merger your stocks have thirty nine percent the bank to decks that thirty two percent yes and piece of seventy one percent do you have woefully under performed from the stock standpoint and that coincides with a period where
spk_1: when you've found some negative offering leverage snazzy last year and gives talked about this the pandemic slow down the merger conversions and i have been depressed you've had a cautious approach wanted us to breed and to we have all that ansell really i'm getting to positive offering leverage this year your doubling the investment
spk_2: but i i just want can help we can add additional reassurance ah that op leverage will be of more positive and say one data point that he say to the four percent revenue growth wanted to present expense growth that the anywhere from one basis point the three hundred basis points and i'm gonna this merger with predicated on now overlapping footprints benefits technology that seems like you're spending a lot of the savings that investors aren't thing that the bottom line so can you give any assurance or maybe not as far as the positive opera below this year i and add that the pay back from these investments love as you say that the the hooded open yeah mean i think that their remember deposit of opera let operate leverages queer and our guy up in a related to how much we achieve i think you know given we got a pretty conservative forecast on the rate increases if we get additional rate increases this was bred predicated the one percent in your lineup was predicated on to rate increases as if we get more those sort of follow straight through to the bottom line three create more operating leverage ah but also they view point the point i made earlier we're we're continue to invest in this business and my we're not gonna achieve operating leverage in basra college and starve our business i'm in the ability to achieve the caught saves redeploy
spk_1: roy them into the appropriate investments for a long term that wasn't the vision of truest i'm a that was the premise upon which we establish this merger and i take arguably and i've been out be hard to dispute it's taken a little bit longer some of those were decisions we made the best of both with a little more expensive than we had anticipated at the the at the outset but i think you're really starting to see and i can feel you could feel and in the pivot in the fourth quarter you can feel it in the pivot and are guidance of the of the promise of true as is manifesting itself
spk_5: and you know not only positive operate leverage but purposeful growth and ability invest in the business for the long term cyber the yes we're committed a positive operate leverage underlined you know exclamation point in all the other comments but but in a way that were continued and does to grab as has been a long term a might be a family thing else i'll add to that if
spk_18: you look at our neck trust and come in are just remind you a we have run off of purchase accounting accretion about four hundred million plan for year over year
spk_0: and we have about three hundred twenty five million run off at ptp your plan to be lower year over year so for us just to be flat and and i six and a half percent your the guidance that we gave if her revenue growth and i'll add has ill nurses it can be an hour maybe a little bit maybe one percent on a gap basis but that's really
spk_21: eight percent if you look at the road true operations of the company and potentially up to maybe ten percent you know if we get rate increases and maybe some more low rosso a company is really performing at high levels are from our production for basis are on the matter volume that were putting true on that on the assets i the equation
spk_19: the thanks that clarification thank you
spk_2: one i'll hear from john mcdonald with autonomy research
spk_1: i morning on the bill wanted to ask you on lil bit more the car industry question with alone demand ah and longer numbers looking better across the industry and on what's happening in the psychology the bar or here it feels like there's no lot a liquidity out there but there's a change going on is it is it the more coffins about the economy are folks just i haven't run into need to build inventories why we seeing this increase in alone demand across the industry
spk_2: yeah i think it's a combination of things john i'm in when
spk_1: i'm magazine busy with clients or demand is never the issue you know for business some and they all have demand and that cuts across actually have a wide swath of industries and and geographic location so the ability to do business i think i think a seen a couple things one as i think what
spk_19: the what your premise was in your question people building the by building a little inventory set of anticipating trying to get ahead some of the supply chain effect you see that then you just see stuff happening like and the dealer side cars are showing up a lot you know that may be shown up a lot needing a chipper whatever baby but they're but they're showing up so that
spk_1: ability to you know borrow against the that the those capacities and then i think people just making the decisions to move for ah
spk_21: you know deploying capital they've had plans you know if they've delayed plans or continued to you know look at you know the current on a cron as but potentially a short term you know situation that reverses self and they don't want to get behind you know they are they've they're all in competitive situation so think they're deploying capital against the opportunities that they've had planned for the several years so i think it's a combination of lot of things are just resiliency of
spk_1: the economy
spk_5: and and a little bit of you know positioning to get one step ahead of both supply chains wage pressure whatever it may be and the competition
spk_1: thank god it of intense followed for down on the revenue outlook for this year on first how much of that three hundred million impact of from the truest one and overdraft come to that kids felt and twenty two down and in also just on the overall revenue guide could you give us the base
spk_22: for the twenty one revenues or that twenty two and a half until i got for this year that you're growing to the four percent off of thank you
spk_14: of or to your ladder question first so the base for twenty one revenue is twenty two point three
spk_23: that billy okay of it's kind of the knife but yeah i would throw off of and then for the truest one i recall in bills remarks you know it's probably going to start in the second quarter and it's probably anywhere from a third to forty percent of the impact would be a him and twenty two and the probably spread out evenly over seconds third and fourth quarter and they kind of builds up and twenty three and then a full run right and twenty four three hundred million okay ty thank you next up we have abraham put along with a big of america
spk_2: good morning because so many wonderful lot of been on your comments at all and are operating levitating the promise of the be partly wants to benefit of scheme as we look beyond year destruction leave and to could be efficiency the setting about fifty five fifty six percent right now do you see to thank actually being a north is good efficiency these your send chinese over the next two to four years or
spk_5: given the investments than that you've talked about it's gonna be hard to make that move apps and the meaningfully hide in to see up
spk_23: yeah scare question at and it and to a lot of pretty question dearth of rape dependency normalization of rate dependency to get to that to that lower efficiency ratio and we won't make as much move a that and the next year you know but our efficiency race on a relative basis i think will continue to be industry leading so i think make the ability to invest in our business do it in a way that it to your points of scale achieved so much more efficient company i could be other continue that progress and that if we get some sort of normalization of rates i think's at looking out over a two and three year period i think the low fifties is a he knows a reasonable target and up and up
spk_2: normalize kind of right environment
spk_24: is it the thing i would add abraham they have what i said on mice call your that the run off of the purchase accounting creation gets easier year after year so the ability to drive positive operating leverage will get easier as we go out two three four years
spk_1: nodded and i guess on seven living inside the distance conversion done my sense would be given your skin given your his seen these markets you should be paying all sense where you gain market share out of the new systems attention numbers but talk to us about your ability to go head to head with these knows smaller banks and
spk_2: really good marketed as you think about the next few years and will be a outperform a new england maybe just to clarify the first part of your question we've been on offense the orders
spk_1: they just ability to be further on off ads and to you know accentuate that that capability if you look at you know virtually all of our categories if you think about insurance as an example relative to insurance if you think about our investment banking relative investment banking if you think about deposit growth loan growth
spk_0: fine acquisition digital adoption you know whatever measures you want to choose auto on a are on a relative basis summon up the like we're we're already gaining share and i think your point our capacity to gauge share our our competitiveness you know our of the breadth and depth of our product capability
spk_25: a talent that we have on the field the training that they are receiving the way they worked together and integrated relationship management the way that pay you don't allow all cylinders of the company the benefit the client ah we just which has never been more competitive and i am against get small against regional against law george i think all the things that we wanted to see and feel from truest are absolutely come into bear and on the field every day
spk_1: and you
spk_25: take with got time for one more question and we will take that last question from erica najarian with you bs
spk_26: i am thanks for taking my class and i'll be quick i'm darryl you're an hour for adjusted expense am just expense
spk_5: i presume that from the tall six eight seven be of and if so what is the outlook for alization expense in two thousand twenty two please as sell you debate the correct what you said was right erica and then if you look and our on tables in the back in the appendix we actually gave guidance around that out there for your you be able to easily kind of filling your models with all that information to make it easy for you
spk_27: the you and your put the
spk_0: the positive operating leverage guy does that include
spk_1: the amortization
spk_0: yeah we are we've explored amortization

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