Truist Financial Corporation

Greetings, ladies and gentlemen, and welcome to the Truist Financial Corporation third quarter 2025 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. Brad Millsap.

Thank you, Betsy, and good morning, everyone. Welcome to Truist's Third Quarter 2025 Earnings Call. With us today are our Chairman and CEO, Bill Rogers, our CFO, Mike McGuire, our Chief Risk Officer, Brad Bender, as well as other members of Truist's Senior Management Team. During this morning's call, they will discuss Truist's Third Quarter results, share their perspectives on current business conditions, and provide an updated outlook for the remainder of 2025. 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. With that, I'll turn it over to Bill.

Thanks, Brad, and good morning, everybody, and thank you for joining our call today. Before we discuss our third quarter results, let's begin as we always do at Truist with purpose on slide four. At Truist, our purpose to inspire and build better lives and communities guides every decision. It's the foundation of our strategy and the reason our fantastic teammates show up every day with conviction and care. We believe purpose drives performance, which is why during the third quarter, we announced a strategic investment designed to accelerate our performance by building better lives, deepening relationships with existing clients, and attracting new clients in some of the strongest markets in the country. We're investing in our communities by building 100 new insight-driven branches in high-growth markets, renovating more than 300 locations, enhancing digital capabilities, elevating marketing, and hiring premier advisors to serve clients with more complex financial needs. These new branches are designed for smarter client engagement with advanced AI-driven technology and dedicated premier advisor spaces, all aimed at helping clients achieve financial success and further strengthening our presence in these dynamic communities. These investments are part of our overall strategy to improve our profitability, accelerate growth by deepening relationships, and delivering a more personalized, technology-enabled experience to new and existing clients, which I'll discuss throughout today's call. So now let's turn to our results on slide five. For the third quarter, we reported net income available common shareholders of $1.3 billion, or $1.04 a share, which included $0.02 a share of restructuring charges primarily related to severance. At a high level, our strong performance in the third quarter reflects the diversity of our business model and the execution of many of our strategic growth and profitability initiatives that we've been discussing for the last several quarters. These initiatives include accelerating growth with the addition of new clients and deepening existing relationships in areas like payments, wealth, and premier banking. We're executing our plan while maintaining our expense and credit discipline and returning capital to shareholders. During the third quarter, average loan balances increased 2.5% as we saw broad-based growth across our wholesale and consumer segments driven by increased loan production and new client acquisitions. Average deposit balances did decline link quarter due to two large M&A-related client deposits that were withdrawn in mid-July that we've discussed previously. Excluding the impact of these deposits, average client deposits increased during the quarter. Adjusted non-interest income increased 9.9% link quarter to more than $1.5 billion due to strong investment banking and trading income and strong wealth management income. The third quarter represented our best non-interest income quarter since the divestiture of TIH. Adjusted expenses remained well-controlled and were up just 1% linked quarter, which along with a strong revenue performance helped drive 270 basis points of linked quarter positive operating leverage. We also maintained strong asset quality metrics as net charge-offs declined both on a linked quarter and a year-over-year basis. Finally, we remain in a strong capital position, which allowed us to support our balance sheet growth and return capital to shareholders. During the quarter, we returned $1.2 billion of capital to shareholders through our common stock dividend and the repurchase of 500 million shares, $500 million of our common stock. We plan to target approximately $750 million of share repurchases during the fourth quarter. In summary, our third quarter results were strong as the combination of improved revenue, disciplined expense and credit management, a robust capital return drove 130 basis points sequential improvement in our OTC to 13.6%. We do still have a lot of work to do, but our recent performance and the momentum I see across the company every day gives me confidence in our ability to reach a 15% ROTCE in 2027. I'll share more on how we plan to get there later in the call. Before I hand the call over to Mike to discuss our quarterly results, I want to spend some time discussing the progress we're making on our strategic priorities and the positive momentum we're seeing within our business segments and with our digital strategy on slide six. Let me first start with consumer and small business banking. I'm encouraged by another solid quarter of consumer loan and deposit growth, net new checking account growth, and progress with our premier banking clients as we deepened relationships and acquired key new clients and households through digital and traditional channels. Net new checking account growth remained positive in the third quarter, with over 20,000 new consumer and small business accounts added, a key metric that reflects both the strength of our brand and the long-term growth potential of our company. We're attracting younger clients with greater median incomes, higher average balances, which aligns directly with our strategy to build enduring profitable relationships early in the client life cycle. Average consumer and small business deposit balances increased modestly late quarter and 1.9% versus the third quarter of 2024. Average loan balances increased 2% late quarter and 7% versus the third quarter of 2024, driven by a significant increase in production. Premier banking continues to be a strategic growth engine. we saw significant increases in loan and deposit production per banker, reflecting deeper client engagement and improved productivity. Our digital strategies also delivered results. We continue to accelerate our performance with enhancements, increased production, and accelerated client engagement, positioning us to scale efficiently and meet evolving client expectations, as seen with the success of our AI-enabled chat function, Truist Assist. Digital transactions rose 7% year-over-year, and digital channels accounted for 40% of new-to-buy clients. Notably, Gen Z and millennials represented 63% of this growth, a strong signal that our digital-first approach is resonating with the next generation of truest clients. In wholesale, I'm encouraged by this quarter's loan growth, improvement in investment banking and trading revenue, and progress in key focus areas like payments and wealth. Average wholesale loans increased 2.8% link quarter and 4.8% year-over-year, driven by growth from new and existing clients and increased production. CNI growth was broad-based across industry banking verticals as this strategy continues to gain traction. We've seen consistent quarterly growth in balances fueled by new client acquisition across diverse sectors supported by strategic talent investments. Year-to-date, we've onboarded twice as many new corporate and commercial clients compared to the same period last year, and we're seeing higher revenue per client, a clear sign of deepening relationships. In wealth, net asset flows remain positive, and year-to-date AUM from wholesale and premier clients is up 27% versus the prior year, reflecting strong advisor productivity and overall client trust. Our payments business continues to scale, launching new solutions that deliver speed, simplicity, and security to our clients. These enhancements, along with targeted talent investments, drove an 11% year-over-year increase in treasury management revenue. Now, let me turn it over to Mike to discuss our financial results in a little more detail. Mike?

Thank you, Bill, and good morning, everyone. I'm going to start with our performance highlights on slide seven. We reported third quarter 2025 gap net income available to common shareholders of $1.3 billion, or $1.04 per share. Included in our results are $0.02 per share of restructuring charges, which are primarily related to severance. Now moving to third quarter results. Adjusted revenue increased 3.7% linked quarter due to 9.9% growth in non-interest income and 1.2% growth in net interest income. Adjusted expenses increased 1% linked quarter primarily due to higher personnel expenses related to incentives and strategic hiring efforts. Our asset quality metrics remained solid as net charge-offs declined on a linked quarter basis and on a year-over-year basis. Our CET1 capital ratio remained stable at 11%, and our CET1 ratio, including AOCI, improved by 10 basis points to 9.4%. I'll now cover loans and leases on slide 8. Average loans held for investment increased by 2.5% on a linked quarter basis to $320 billion due to growth in both commercial and consumer loans. Average commercial loans increased by $4.8 billion or 2.6% due to $3.7 billion of growth in CNI loans and $1.5 billion of growth in CRE loans, partially offset by lower commercial construction loan balances. In our consumer portfolio, average loans increased $3 billion or 2.5% linked quarter due to growth in other consumer, residential mortgage, and indirect auto. The average loan yield remained relatively stable on a linked quarter basis. Moving now to deposit trends on slide 9. Average deposits decreased $3.9 billion sequentially, or 1%, due to the mid-July withdrawal of $10.9 billion of short-term M&A-related client deposits that we've discussed previously. These deposits impacted the second quarter average balance, by $10.9 billion, and the third quarter average balance by $1.7 billion. As Bill mentioned, many of our top business and growth initiatives are aimed at driving core client deposit growth. As a result, we're seeing accelerating momentum with clients in consumer and wholesale that will drive improved client deposit growth in the fourth quarter and in 2026. As shown in the chart on the bottom right-hand side of the slide, our cumulative interest-bearing deposit beta improved from 37% 38% on a linked quarter basis. Based on our outlook for stronger client deposit growth in the fourth quarter and our expectation for two additional 25 basis point reductions in the Fed funds rate in October and December, we remain on track and confident in our ability to drive our interest-bearing deposit beta to the mid-40% area in the fourth quarter. Moving to the interest income and interest margin on slide 10. Taxable equivalent net interest income increased 1.2% linked quarter, or $45 million, primarily due to one additional day in the third quarter, loan growth, and fixed rate asset repricing. Our net interest margin declined one basis point linked quarter to 3.01%. We expect net interest income to grow approximately 2% on a linked quarter basis in the fourth quarter due to continued loan growth, growth in client deposits, and a reduction in deposit costs following the September reduction in the Fed funds rate and our expectation for the additional two cuts during the fourth quarter. These positive factors should result in net interest margin expansion in the fourth quarter as well. As you can see on the top right-hand side of the slide, we updated our outlook for the fixed rate asset repricing. We expect to reprice approximately $11 billion of fixed rate loans and approximately $3 billion of investment securities during the fourth quarter. Based on our view of interest rates for the remainder of 2025, we anticipate that new fixed-rate loans will have a run-on rate of around 7% compared with a run-off rate of closer to 6.4%. We may allocate a portion of the cash flows from the investment portfolio to support loan growth in the fourth quarter versus securities. We also updated our swap portfolio disclosure on the bottom right-hand side of the slide. As of September 30th, we had $105 billion of notional received fixed swaps and $28 billion of notional pay fixed swaps, compared with $90 billion and $29 billion, respectively, at June 30. During the quarter, we increased our notional received fixed swap position by adding additional forward-starting received fixed swaps as part of our overall strategy to maintain a relatively neutral position to changes in rates relative to our baseline view. Turning now to non-interest income on slide 11. Adjusted non-interest income increased $140 million, or 9.9%, versus the second quarter of 2025 due to strong growth in investment banking and trading income and wealth management income, partially offset by lower other income. Investment banking and trading income increased $118 million or 58% linked quarter to $323 million. We saw improved performance across our platform with strength in debt capital markets and trading revenue. Based on our current pipeline and overall strong market activity, we remain optimistic about investment banking and trading income in the fourth quarter as well. Wealth management income also experienced a strong quarter with fees up 7.5% linked quarter due to higher market values, positive net asset flows, and new client acquisitions. On a like quarter basis, adjusted non-interest income increased to $75 million or 5.1% compared to the third quarter of 2024, primarily due to higher wealth management income and higher service charges on deposits, due to greater treasury management revenue. Next, I'll cover non-interest expense on slide 12. Adjusted non-interest expense, which excludes the impact of restructuring charges, increased 1% linked quarter due primarily to higher personnel expenses related to higher incentives and strategic hiring efforts. On a year-over-year basis, adjusted expenses remained well controlled and were up 2.4% due primarily to higher personnel expense. Moving now to asset quality on slide 13. Our asset quality metrics remain strong on both a linked and light quarter basis, reflecting our strong credit risk culture and the proactive approach we've taken to quickly resolve problem loans. Net charge-offs decreased three basis points linked quarter to 48 basis points, and we're down seven basis points versus the third quarter of 2024, as we benefit from lower CRE losses on both a linked and light quarter basis. Our loan loss provision exceeded net charge-offs by $51 million, and our A-triple-L ratio held steady at 1.54% of total loans. Non-performing loans held for investment increased 9 basis points, linked quarter to 48 basis points of total loans. Second-quarter non-performing loans of 39 basis points benefited from the resolution of several problem loans, resulting in NPLs declining to multi-quarter lows. As you can see on the slide, the third quarter of 2025 level remains stable compared with the third quarter of 2024, which reflects a return to a more recent level. The linked quarter increase was driven by higher non-performing C&I and construction loans partially offset by a decline in CRE non-performing loans. Over the last week, there have been a number of questions about exposures to certain borrowers, including tricolor and first brands. Just to address it, Truist does not have any exposure to Tricolor. However, we do have exposure to First Brands, but this exposure is fully reflected in our loan loss reserve and our updated and improved 2025 net charge-off guidance. Now I'll provide additional color on our guidance for the fourth quarter of 2025 and for the full year on slide 14. Looking into the fourth quarter of 2025, we expect revenue to increase by approximately 1% to 2% relative to third quarter revenue of $5.2 billion. We expect net interest income to increase approximately 2% in the fourth quarter, primarily driven by loan growth and lower deposit costs. We expect non-interest income to remain relatively stable linked quarter. Adjusted expenses of $3 billion in the third quarter are expected to remain relatively stable on a linked quarter basis. As it relates to buybacks, as Bill mentioned, we plan to target $750 million for the fourth quarter. For full year 2025, our outlook for revenue and expense growth is unchanged. Based on our current outlook for net interest income and non-interest income in the fourth quarter, we would expect annual revenue to come in around the midpoint of our 1.5% to 2.5% range. In terms of our outlook for adjusted expenses, we continue to expect full year 2025 adjusted expenses to increase by approximately 1% in 2025 versus 2024. On asset quality, we expect net charge-offs of 55 basis points in 2025 compared with our previous guide of 55 to 60 basis points. Finally, we expect our effective tax rate to approximate 17.5% or 20% on a taxable equivalent basis in 2025. I'll now hand it back to Bill for some final remarks.

Thanks, Mike. As I mentioned earlier in the call, our recent performance coupled with the strong momentum I see every day inside our company reinforces my confidence in our ability to accelerate growth and profitability over the near term. As you can see on slide 15, we expect to grow revenue in 2026 at a higher rate than we will grow revenue in 2025. Although it's a little too early to provide specifics on the 2026 outlook, I'll say at this point we expect the rate of revenue growth in 2026 to more than double versus our growth rate this year. We also expect to generate more operating leverage in 2026 than we will generate this year. In addition, we plan to increase our share repurchase program in 2026 to $3 to $4 billion, which is above the 2025 level, as we'll now target a 10% CG1 ratio by the end of 2027. Finally, these drivers and others should also accelerate our EPS growth rate beyond what we'll achieve in 2025. As I've discussed today, we're seeing solid progress in many of our key strategic focus areas, all of which I expect to accelerate over the near term and help us achieve our previously stated goal of a mid-teens ROTCE, which I'll discuss in more detail on slide 16. As shown on slide 16, we're targeting a 15% ROTCE in 2027. a goal that reflects our confidence and truest long-term earnings power and strategic direction. We see multiple paths to stronger revenue and profitability. With focused execution, we believe these initiatives will deliver meaningful improvement over the next two years. The key drivers outlined on the right side of the slide include continuing to execute against our top business growth and profitability initiatives that I discussed on slide six. continuing to drive positive operating leverage, realizing the ongoing benefit from fixed asset repricing, and accelerating share buybacks. Much of our profitability improvement and growth potential is rooted in deepening relationships with existing clients, particularly in wealth, payments, premier banking, investment banking and trading, and corporate and commercial banking, where we're already experiencing strong momentum. In summary, I'm as optimistic as ever about True's future. I'm encouraged by the momentum we're seeing across the businesses and remain focused on executing with discipline, delivering for our clients, and creating value for our shareholders. I want to pause and thank all of our teammates for their incredible focus, their productivity, and their purpose-driven commitment to move Truist forward. As always, we appreciate your continued interest and support, and we look forward to updating you on progress in the quarters ahead. With that, Brad, let me hand it back over to you for Q&A.

Thank you, Bill. Betsy, at this time, will you please explain how our listeners can participate in the Q&A session? As you do that, I'd like to ask the participants to please limit yourselves to one primary question and one brief follow-up in order to accommodate as many of you as possible today.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press stars and two. In the interest of time, we ask that you please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. The first question today comes from John Pencary with Evercore. Please go ahead.

Good morning. Good morning, John.

Just on your color that you gave around 2026, I appreciate all the detail there, particularly around the revenue expectations and the ROE. On the revenue front, for revenue growth to more than double, do you possibly help us break that out a little bit, how you're thinking about the spread revenue component versus the fee revenue side, and then maybe within the the spread revenue side, how you would think about the pace of balance sheet growth as you look at 2026 that would underlie that?

Yeah, John, I'll start with that. So, I mean, clearly it's a component of all of the cylinders hitting, you know. So, NII growth is a key part of our revenue. So, we have continued loan growth. We've got really good momentum on that side. I think we'll continue that at, you know, a pace that's not too far off from where we are today. As it relates to the deposit side, I think we're in a different part of the J curve there. So that's accelerate team. So you saw some of the activity on the client side and some of the momentum we see headed into the fourth quarter. There's some seasonality in that. So we'll have both loan and deposit growth. Deposit growth better than this year and loan growth probably a little more consistent. And then on the fee income side, I think also just continuing the You know, the fee income momentum that we've established in the last couple of quarters.

Okay, great.

And then how you think about the breakout of that revenue growth when you look at overall spread revenue versus the pace of revenue growth you would see on the fee side? How are you thinking about that?

You know, John, we're trying to avoid being, we're shaping more than guiding. I think we're 26 at this point, obviously still in the planning sort of cycle. I would say, you know, we wouldn't expect to remix, you know, spread versus the income next year. I think, you know, with that in mind, it's likely that fees are going to grow at a faster rate than I will, but both have strong momentum going into next year.

Okay, great. Thank you.

And then just lastly, I know you had talked about the degree of positive operating leverage accelerating over this year. Any way to help us frame that as well? I know you don't want to be too specific, but just trying to gauge how much of efficiency improvement is baked in, in terms of thinking about the momentum that you could see as you head into 26.

I'm afraid I'm going to let you down again. We don't want to be too specific, John, but I think the intention of the slide that Bill referenced was that, you know, we feel great about, you know, at least twice the revenue growth operating leverage. You know, this year, you know, we expect to be around 100 basis points. It should be higher than that next year based on what we see right now. You know, those factors, you know, combined should drive EPS growth higher as well. And the buyback is obviously helping, you know, with the ROTC journey. So I think that was the intent there. And Sorry not to be more specific at this point.

No, that's fine. We can go off the graphic, I guess, on page 15 and make a list based on that. But thank you. I appreciate the call.

Yeah, you got it.

The next question comes from Scott Seifert with Piper Sandler. Please go ahead.

Good morning, guys. Thank you for taking our questions. Let's see. So Mike was glad to see the interest bearing deposit costs come down a couple basis points. That was a nice sort of inflection. Sound optimistic on the outlook into the fourth quarter. And then, you know, Bill, your comments were all very constructive on to overall growth into next year. You know, just curious if you can expand upon sort of the options you see with deposit pricing now that the Fed is lowering rates again. And so what gives you confidence on that growth momentum into next year as well?

Mike, why don't you do the pricing and I'll do the growth. How about that?

Yeah, yeah, that's fine. Yeah, good morning, Scott. So I'd say on the pricing side, we feel pretty good about, you mentioned, you know, we saw a touch of momentum in the third quarter. We actually, you know, as you'll recall, back in the second quarter, we were actually hoping and maybe expected to be closer to 40% on the beta in the third quarter versus the 38 we got. So, but the good news is, is we're off to a pretty good start in the fourth quarter as well. I mentioned you know, we thought we could get to sort of the mid-40s, and that takes into consideration some of the momentum that we are seeing now based on the September cut as well as the October cut, which is going to be, you know, more important, of course, for the year than December. But that should drive some nice benefit for us in terms of both NII and our margin in the fourth quarter, and we would expect that to continue into 2026. And it's not just, you know, some of that's, you know, taking advantage of some of the psyche and getting some help on rates, but there's also some mix that we're focused on. And maybe that's a good segue to talk to Bill about some of the momentum we're seeing on the balances with core client deposits.

Yeah. So, you know, Mike, you talked a little bit about the pricing side and, you know, increasing betas and But on the momentum side, I mean, we saw some end-of-period growth in client deposits. We see existing momentum in some key markets. Think about Miami, D.C., and some others from us. And then really accelerated growth in markets like Pennsylvania and Texas, where we're growing at disproportionately faster rates. And then I look at sort of what are the leading indicators of deposit growth. And if you think about, for us, the leading indicators are things like net news. So we're bringing in a lot of new clients that we have a chance to deepen relationships with. Those balances are higher than they've historically been. We look at the premier production. We talked about that. Premier production is up almost 30%. So they've got the engine running there. And then look at treasury management pipelines. You know, their pipelines are up really significantly, treasury management up, you know, double digits. New clients and wholesale, you know, 60% of our new clients have awarded us a payments product, and some of those haven't funded yet. So I look at all these as sort of the leading indicators of deposits and enhanced marketing, onboarding. And then I talked about the branch commitment long-term, you know, so we're also building not only for the short-term within this cycle, but ensuring that we've got really good market presence and capacity to grow over the long-term and the deposit cycle. Hopefully that's helpful.

Yeah, no, that's great. And I appreciate all that. Maybe separately, Bill and Mike, I think you both have been pretty clear that you all are are focused organically. I'm just curious for any updated thoughts or if your thoughts on them may change at all now that the ground is sort of shifting a bit in the large regional space, given some of the transactions we've seen over the last 90 days or so.

Yeah, I mean, we think the best place for us to focus is Truist. And if we think about the opportunity to increase shareholder value and provide really great return is for us to really stay focused and highlighted on Truist. That being said, I mean, we're just like ultra competitive right now. I mean, we've never been more competitive. And we've got, you know, great teammates on the field. We've got product and capability. You know, we've outlined this growth pattern, you I am altruist all the time.

Perfect. Okay, good. Thank you guys very much. I appreciate it.

The next question comes from Erica Narjarian with UBS. Please go ahead. Hi. Good morning.

In terms of the walk bill to 15% ROTCE, What do you think is the appropriate efficiency ratio underneath the surface? I'm sure we could all do the math, but just wanted to hear from you in terms of where you want this efficiency ratio to go from the 55.7% as you think about the medium term. And you mentioned that you're being ultra competitive. There could be deal making if you're super focused on true risk could also lead to opportunities for you. So how do you balance optimizing efficiency with potentially being more aggressive at taking advantage of some of the consequences and fallout from the deal-making in your footprint?

Yeah, Erica, on the efficiency ratio side, I mean, that's not going to be the biggest driver of the walk. I mean, the biggest drive, we'll have some marginal improvement in the efficiency ratio, but quite frankly, we're not going to guide to that or manage to that. Because to your point, we have a lot of opportunity for growth. And that's where you're going to see us continuing to invest. You know, we outlined those opportunities in CSBB and wholesale, and I think they're significant. And we're not investing in response to, we're investing relative to opportunity. You know, so we've got a lot of opportunity. We want to be the most competitive, you know, player in our markets. And so we're going to continue to invest in that regard. And then we're going to be driven by Growth, we're going to be driven by operating leverage, and we're going to be driven by return.

Got it. And just a follow-up question for Mike. As we think about more than doubling your revenue growth in 26, so that's clearly better than 3% to 5%, which is the double of what the 25 revenue growth is, how should we think about the trajectory of the net interest margin in that context relative to the cuts in the curve.

Yeah, Erica, just to clean it up a little, if you look at our outlook, you know, we mentioned in our prepared remarks that we expect revenue to grow in the fourth quarter, you know, 1% to 2%, which puts us at the midpoint of our range, which is 2%. As it relates to the net interest margin, You know, we would expect progress in the fourth quarter with the cuts in October and December that I mentioned to Scott a moment ago. We would expect to see continued progress in 26 and in 27. Again, there's a lot of assumptions around the backdrop there, but with the operating environment that we see today and with the curve as we see it today, we'll make progress in 26 toward that kind of three-teens number that I've talked about a little bit. And I think we're there in 27. And that'll be an important driver, you know, as Bill mentioned, in terms of the business initiatives and the ROA profile that should continue to evolve and improve that net interest margin, which, again, is going to be driven by a number of things. You know, Erica, it's going to be the sort of structural under-earning on the balance sheet around fixed rate asset repricing. We expect, you know, a profitable loan and core client deposit growth to help, you and drive the margin. So, you know, we're hiring bankers, expanding businesses. So I think we've got a lot going for us as we think about NII and NIM trajectory over the next couple of years. And that's going to be a really important part of the ROA improvement story, which coupled with a touch of improvement on efficiency, as Bill mentioned, plus, you know, the fee business momentum we have, plus a little bit of buyback, we think is what gives us the confidence that 15 is going to be achievable in 27.

And just to clean up the message, just because it's a very crowded earnings day, I want to make sure we're taking away the right thing. When Bill said the rate of revenue growth to more than double in 26 versus 25, are we looking at the full year 25 outlook on slide 14? So it's more than double 1.5 to 2.5, not more than double 1 to 2. I know it sounds like teeny tiny, but it's important for investors to clarify.

Yeah, I think, Erica, what – and maybe take us, you know, directionally versus literally. I think Bill's looking at 2% for 25 and saying that literally it'll be more than twice that.

Got it. So call it 4+. Thank you. Yes, sir. Yep. Thank you.

The next question comes from Ken Aston with Autonomous Research. Please go ahead.

Hey, good morning, guys. I wanted to ask, you mentioned that you've got some fixed rate benefits into the medium term. And I'm just wondering if you could kind of flesh that out a little bit. We can see that the loans are getting about 60 basis points in the fourth quarter. But what's the benefit you have as you look further out in terms of the magnitude that you see rolling over the next couple of years that will help that NIM trajectory? Thanks. Yeah, good morning, Ken.

No, you've got it right. I mean, in the fourth quarter, we gave you sort of the 7% run on versus the 640. And the bonds may be a little bit better than that in the third, or pardon me, in the fourth quarter. You know, on the loan side, especially, you know, we would expect for that to begin to diminish. I mean, that's going to be, I think, a nice tailwind for us in 26, but a diminishing tailwind with perhaps a long tail. But the the overall magnitude of the improvement will diminish over time. And that's really driven by two factors. One, a lot of the loans that are repricing for us are in that sort of consumer lending platform. Those are generally pretty short assets with lives in the two and a half to three-ish years range. So you've got some churn that's been happening already over the last couple of years. And so to some extent, that's playing itself out. And then on the other hand, you've also got You know, most of our term exposure is in sort of the two to three year part of the curve, sort of the shorter end of the belly of the curve. And with that part lower, you know, you're starting to see and we'll begin to see, at least we assume, lower run on rates. So, you know, will it continue to be a benefit? It will. You know, it's and if you think about it more in terms of like the yield on that portfolio, you know, that's call it 135 ballpark billion dollars. a fixed rate loans that we think about, you know, you're going to get, you know, a few, a couple, maybe basis points, a quarter of improvement on the yield, and then that will diminish. Same thing on the bonds. You know, and we've got some different, you know, vintages, you know, based on different maturities and speeds there. But we would expect that benefit to diminish a touch as well throughout the course of next year, as you see the belly of the curve and maybe the longer end of the belly decrease. lower as well. The other thing to note just on the bonds, as you're looking at our yields on the securities, we do also have the phenomena that, you know, our payers, which receive SOFR, are going to feel some pressure as the funds rate gets lower. So, you might see the gross yield, which is what we show you on that NII disclosure page. The gross yield should continue to march up, but the yield, including the hedge, will actually show some pressure as those payers are less in the money.

Great. That's great, Collar. And just one quick one. It's great to see the IBN trading kind of get back to that level where it had been previously. Just wondering if you could flesh out like where the drivers were and just obviously market dependent, what kind of trajectory could we think about going forward? Thanks.

Yeah, and I think the way you characterize it is right. I mean, we're sort of back to that kind of level that we think is, you know, sustainable. And the good news, it was on, you know, a lot of cylinders. So we hit on a lot of the cylinders of our business. Pipelines, to your other comment, are actually quite strong. We have a lot of awarded business in the M&A side for the fourth quarter. So we're sort of overall confidence that this trend can continue. You know, this has been a business that has historically grown at low double-digit kind of CAGR over time, and I think over time that continues to be that opportunity. You know, we have a lot of new teammates that know how to leverage this capability, and that's what's fun to see. I mean, sort of what gives me more optimism for the future is, You just see how we're becoming more relevant to clients. In the early part of that, you see that in FX and derivatives. In the longer term, you see it in more of our advisory business and M&A and equity capital markets and other components, debt capital markets and the other components. So good quarter, all cylinders, good pipelines. and really good leading indicators in terms of how our team is utilizing these resources that we have.

Okay, thanks, Bill.

The next question comes from Ibrahim Poonawalla with Bank of America. Please go ahead. Hey, good morning.

Morning.

I just had maybe been, and I think we have... Brad on the call as well. We'd love to get sort of your views from a credit quality perspective, where things stand, both given kind of your businesses in terms of direct consumer lending, even on the subprime side. Just give us a health check on where you see credit quality on the consumer side. And then when we look at like non-accrual CNI loans, NDFI or non-NDFI, do you see credit at the precipice of material deterioration? Because that's how the market's been trading these stocks over the last couple of days. So would love your perspective on both of those. Thank you.

Yeah, let me go sort of like really high level. And then I'm staring at Brad. I'll bring it down a little lower level with Brad and try to sort of go around the horn because you asked a lot in your question. I can say overall credit quality is strong. So let me sort of start with that as a premise. We have seen in the markets, I would say today, sort of idiosyncratic and uncorrelated events. But that being said, just remember, I mean, the number one risk for a bank is credit risk. And just like we're vigilant about that. We have been in the past. We're hypervigilant today and we'll be hypervigilant tomorrow. So these are important things. important components. You talked a little bit about NDFI, and so maybe it's probably worth diving in there just a little bit. Our largest exposure on the NDFI side is REITs and asset securitization. That's 50% of our NDFI portfolio. So we know that they're different by institution. And then everything else that's in those categories, capital calls, leasing, BDCs, mortgage warehousing, they're all, you know, sort of single digit part of the overall portfolio. So highly, highly diversified, 20 plus asset classes, you know, low interconnectedness, which has sort of been the spirit of that portfolio and truest overall. Maybe with that, let me turn to you, Brad, and then if there's anything else you want to clean up, we can do that.

Yeah, thanks, Bill, and good morning, Ibrahim. So I'd say, you know, I'll hit your, I'll build on the NDFI really quickly. So I think, you know, for us, we take a very client-centric approach. It is, to Bill's point, highly, high-quality, diversified collateral with strong structural protections, and we take a dogmatic risk-adjusted return approach across the differentiation of those asset classes and I think in your consumer questions, particularly around the subprime, as a reminder, the majority of our subprime sits only in our auto portfolio. On the rest of the consumer portfolios, it's a very marginal amount. The majority of our consumer portfolios are high-quality superprime borrowers. We de-risked in 23 and 24 on the lower end of the consumer spectrum. And so that was an intentional change. decision that we made. It's also reflective in the results that you see this quarter. And that's really where we're going to continue to focus is how do we drive high quality assets, both in the wholesale and the consumer space.

Got it. I'll just leave it at that. Thank you both.

The next question comes from Matt O'Connor with Deutsche Bank. Please go ahead.

Good morning. Just wanted to come back to the capital levels and buyback commentary and just get a sense of if there's flexibility to kind of lean in on the buybacks. We're obviously seeing some fall off in the market here. Two days might not be enough to make you want to lean in, but if there's more pressure, broadly speaking, it seems like you've got the capital. You could do more if you wanted to.

Yeah. I mean, I think, Matt, we want to be on a We don't sort of want to, I think to your point, react to two days worth of market volatility. But that being said, this is a great time. We've got ample capital. I think we've got a really good flight path. We do have the flexibility. I think think about $750 million, sort of think about that as a floor, so to speak. And then we've got capacity to increase that as we go along. you know, all while keeping, we think, an appropriate and conservative capital structure. But we want to just define the speed and the slope to get to that 10% CT1.

Okay, that's helpful. And then just a little question here, just the loan growth, you had a lot in commercial real estate and You know, we've heard about some refinancing away from the banks there, but just wondering what drove that, you know, again, not huge, but $2 billion increase off of a $20 in the quarter. Thanks.

Yeah, and a lot of that is sort of we had a decrease to have an increase, so some of that was just an inflection point. And then in that theory, I think a lot of what we talked about earlier, we think about a lot of the you know, shorter duration, long-term relationships with a lot of capital markets business associated with them. So it's a little more of an inflection than an actual, you know, relative, you know, long-term increase.

Pre-payment slowed.

I'm sorry, yeah, pre-payment slowed, yeah.

Okay, thank you. The next question comes from Chris McGrady with KBW.

Please go ahead.

Oh, great. Good morning.

Good morning. Good morning. Just a quick clarifying question on the non-accrual loans in C&I, which went from 520 to 800. In your prepared remarks, you talked about the first brand's exposure. Is that contributing to that? I know you said you had reserved against it. I'm trying to see where this lies, if it's been charged off. Thank you.

Yeah, Chris, good morning. It's Brad. So I'll hit that really quickly. So as a reminder, we had outsized resolutions in the second quarter. And so what you're seeing is a return to recent levels. Yes, First Brands is captured within that. It was an appreciable amount of it. It wasn't the whole of the increase. But, you know, that 48 sort of matches what you saw, you know, 4Q, 1Q in previous periods.

Okay. And then the message is that that increase has been reserved for. Okay. Yeah, we've got it accounted for in the forward guide. Perfect. And then just clarifying slide 16, which, again, is the ROE target. You know, I think it's great to see the formalization of 15. Is the message you're sending on 27 we're going to get there on the full year or at some point? I know it's a little bit of a nuance.

Yeah, I think we're going to get there on a full year basis. So that's the message.

In any one quarter, you know, you're going to have some fluctuation, but, yeah, for the full year.

Okay. Thank you.

The next question comes from Betsy Krasick with Morgan Stanley. Please go ahead.

Hi.

Good morning.

Can you hear me okay?

Yeah. Good morning, Betsy.

Yeah. Okay. So, I just want to make sure I understand what we just said. which is that First Brand's estimated credit impact is in the forward guide, meaning it's not embedded in this quarter that's just reported.

No. Yeah, so Betsy's, Brad, it is accounted for in the quarter just reported and then the forward guide from an NCO if there are implications there that play out. But we're early in that process. Yeah. So accounted for in NPL and then forward guide on NCO. Okay.

Okay, got it. And then I just also wanted to understand how you're thinking about the underwriting in this environment. Does it change at all? And I'm asking with context to C&I's been doing better, obviously accelerating a little bit. And can we expect to have that kind of acceleration continue here? Or is there a change in underwriting style path due diligence that would perhaps slow it down a bit as we move into 26th?

Yeah, I mean, I'll start with that. I mean, we're vigilant and diligent in our underwriting. And as I said earlier, we have been, are, and will be. So maybe that doesn't change from that perspective. Brad highlighted, though, on the consumer side, I mean, we made some adjustments, quite frankly, in the last 18 months as it relates to that portfolio, just ensuring that our portfolio on the unsecured side particularly stays super prime and allowing for that. And you see that in some of our results. So that was a marginal change on that point as it relates to the wholesale side. The key for us is just to have a really diversified portfolio. So we have a lot of discipline around the diversity. So I don't think that changes, but it does accentuate the fact that we just want to have a really diversified portfolio and sort of every way that you can measure and define a diverse portfolio. We think that's inherently the strength of Truist. If you look at sort of any category, Betsy, that you might say, gosh, this is something I'm worried about or thinking about. And we index low on all of those. I mean, that was the advantage of creating Truist is creating this highly diversified portfolio. So if we have anything, it's going to be continued discipline around that diversity. And I don't think that lowers our growth opportunity. It actually increases the opportunity because we have so much diversity.

Okay. Thank you.

The next question comes from Steven Alexopoulos with TD Cowen. Please go ahead.

Good morning, everyone.

Good morning. Good morning, Steve.

I wanted to start, so I want to go back to Ibrahim's question on NDFI. So I know this has become the topic du jour on these banks' earnings calls. And generalists listening to this conversation are dumping out of regional banks on fears that that portfolio is loaded with cockroaches. When you guys look at the totality of your loan exposures, where do you rank the risk of the NDFI portfolio? Below average, average, or above average? And do you think the market is right at this point in time to be scrutinizing that portfolio?

Yeah, maybe I'll hit it really quickly for you. So today we sit at about 11% of our total lending portfolio. That ranks us as of 630 on the published data. That puts us ninth out of 11. So I think back to Bill's point, well diversified, granular, and then underweight relative. And so on how we think about this from a long-term standpoint, I think These are long-tenured relationships with global financial institutions across 20 asset classes for us. We have sublimits and top-of-the-house limits in place to ensure we maintain credit discipline, and we will continue that on a forward basis.

Yeah, and relative to where it fits, I mean, this is – if you think about the high percentage of ours being REITs and asset securitization, this is an investment-grade looking portfolio, which we have really good returns against and really good risk-adjusted returns. So we have the capacity and capability with our tools and things that we can do from a capital markets perspective that these are just long-tenured clients. We don't We don't think about this as an NDFI strategy. Maybe that's maybe the best framework to start. This is a client strategy that gets counted in an NDFI category. And so these are businesses that we've been in for a long time and, you know, have a lot of confidence in going forward.

Okay. But it sounds like because you're pointing out that you have lower exposure versus peers that you do think this is a problematic portfolio for the industry. Otherwise, you wouldn't be pointing out it's well below peers in terms of your exposure.

No, I think we're pointing out it's well below peers back to my diversity comment. So if you have a lot of diversity, you have a diversity from risk, but you also have diversity from opportunity. So we have an opportunity to grow things that have smaller percentages, and it also mitigates our risk. So diversity is a two-edged sword that I think we use wisely.

Got it. And finally, so if we go back to where we were three months ago, we've now had tricolor first brands in this Cantor loan called out by Zions. Do you guys, I'm curious, the way you look at your loan portfolio, do these represent an inflection point in the credit outlook for the industry compared to where we were three months ago?

Absolutely. I think it's early to call it at that level. I would say, you know, this is certainly an opportunity, and we'll go back and look at all as we do with any external events, what occurred, what are the implications, but it would be early to call it an inflection point. You know, our performance to date isn't demonstrating that across our portfolios, and we're not seeing that on a broad base.

Okay, perfect. Thanks for taking my questions.

The next question comes from Gerard Cassidy with RBC. Please go ahead.

Hi, Bill. Hi, Mike.

Morning.

Bill, I'd like to go back to your comments when you opened up about the new branches being AI, integrating AI into these branches. Can you share with us how are we going to be able to measure the success that this AI infiltration into the banking industry, and you guys in particular, As you tap the potential of these investments, how do you think it's going to manifest itself to us outsiders where we can say, wow, you know, Truist is way ahead of the curve compared to their peers?

Yeah, you know, it's a great question. And I think what, you know, today we talk about AI like it's something separate, you know, like we used to talk about the Internet, you know, as something separate. I think AI is just going to be the fuel, you know, so we're not going to talk about it being separate. And the way you're going to see, you know, the successful companies implementing AI is does it reflect in their business? You know, does it reflect in the more efficient? Does it reflect in that we're growing at a higher level? And, you know, I look at all the use cases that we have across the company and they're all in those categories. I mean, there are places that are going to make us, you know, incredibly more efficient. There are places that are going to make us really, really more client-centric, and you noted that as it relates to the branch police. There are places that are going to help our overall revenue growth and sales productivity. So it's all in those categories. I think we're not going to say this AI contributed this amount to the efficiency ratio or this amount to revenue growth. I think that's actually sort of hard to do. But if you're getting disproportional growth and disproportional efficiency and as a result of AI. I think that's where we're going to end up talking about this. So I'm really optimistic about what AI can do to help us accelerate everything that we talked about. So our OTCE walk, I'd say, is fueled by AI. It's maybe a good way to think about it.

Very good. And then just as a follow-up, I apologize, beaten up on credit, but you guys have demonstrated that you're one of the better underwriters out there. So coming back to the first brands, curious, Brad, you know, the size of that exposure, you know, how big was it? But second, just how did you guys get involved? If you could just give us some color on your thinking of that relationship.

Yeah, Gerard, happy to hit it. You know, look, it's early. As you know, we don't normally talk specifically about clients, so we are in it with a broader base. You know, overall, the exposure is, you know, less than 200 million for us, but it would be early for us to get into the details of that.

Understood. No, I appreciate that.

Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Brad Milsaps for any closing remarks.

Okay, thank you. That completes our earnings call. If you have any additional questions, please feel free to reach out to the investor relations team. Thank you for your interest and trust, and we hope you have a great day. Betsy, you may now disconnect the call.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.