Truist Financial (TFC -0.75%), a prominent U.S. commercial bank known for its strong market presence in the Southeast and mid-Atlantic regions, released its third-quarter 2024 earnings on Oct. 17. The report was largely positive, though there were a few challenges. Truist's earnings per share (EPS) of $0.99, reflected a strong performance compared to the same quarter the previous year, when it recorded EPS of $0.80. Total revenue for the quarter was $5.14 billion, up from $4.93 billion in Q3 2023 -- that growth was driven predominantly by a rise in net interest income. However, the quarter was marred by a decrease in loan demand. Overall, the results underscored Truist Financial's capacity to enhance its profitability, but raised concerns about softer loan and deposit growth.
| Metric | Q3 2024 | Q3 2023 | % Change |
|---|---|---|---|
| Earnings per share (EPS) | $0.99 | $0.80 | 23.8% |
| Total revenue | $5.14 billion | $4.93 billion | 4.3% |
| Net interest income | $3.66 billion | $3.59 billion | 1.9% |
| Average loans and leases balance | $305 billion | $320 billion | (4.7%) |
Understanding Truist Financial's Business Model
Truist Financial, which was formed through the merger of BB&T and SunTrust in 2019, is a top-10 U.S. commercial bank. It serves a broad customer base across a diverse range of financial services, including retail banking, investments, and insurance.
Recently, Truist has been focused on the digital banking transformation, strategic acquisitions, and cost management. It prioritizes maintaining a strong physical and digital presence to better serve its customer base, aiming for technological advancements as drivers of growth.
Quarterly Performance Insights
Truist Financial achieved solid year-over-year growth in revenue in Q3, with gains in both net interest income and non-interest income. Net interest income rose by 2.2%, bolstered by higher interest margins, while non-interest income saw a 3.1% uplift, primarily due to gains in investment banking and trading.
The bank's non-interest expenses fell by 5.4% from the second quarter, but that change was mostly due to a non-repeated $150 million charitable contribution in Q2, and also due to reduced headcount and declining medical claims by personnel. Meanwhile, investment in technological infrastructure increased. Truist spent $500 million on share buybacks in the quarter, which indicated capital management strength but highlighted pressures on expanding its loan portfolio.
Nonperforming assets increased by $52 million from the second quarter -- up 2 basis points (0.02%) as a percentage of its total loans and leases. On a year-over-year basis, nonperforming assets fell by $56 million. Average loans and average deposits both fell by 1.0%, signaling weaker demand, especially in commercial sectors.
Furthermore, the impact of the recent hurricanes in its core Southeast market led Truist to engage in community recovery efforts, which may influence short-term operational costs. The bank continues to reinforce its commitment to community support as an integral part of its operating strategy.
Looking Forward
Truist Financial's management remains focused on driving growth through technological investments and enhancing core customer relationships. CEO Bill Rogers emphasized ongoing digital transformation efforts with a notable increase in mobile and online users. This strategy aligns with wider industry trends favoring digital engagement and is likely to be a pillar of Truist's future growth strategies.
In the near term, Truist said it plans to strategically allocate resources to support its digital platforms while navigating economic challenges that include maintaining asset quality and stimulating loan demand. The bank anticipates continued pressure on loan portfolios and seeks to manage these challenges through disciplined credit management and expansion of digital services.
Heading into the final quarter of 2024, investors should watch how Truist balances capital returns with growth investments and the outcome of its digital transformation initiatives.
