TRUIST FINANCIAL CORP Q4 2025 earnings call

Thank you, Betsy, and good morning, everyone. Welcome to Truist's Fourth Quarter 2025 Earnings Call. With us today are our Chairman and CEO, Bill Rogers, our CFO, Mike Maguire, 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 Fourth Quarter and 2025 results, share their perspectives on current business conditions, and provide an updated outlook for 2026. 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.

Good morning, and thank you for joining our call today. Before we discuss our Fourth Quarter and 2025 results, let's begin like we always do at Truist with purpose on slide four. At Truist, our purpose to inspire and build better lives and communities remains at the heart of everything we do. It drives our strategy and fuels our commitment to our clients and the communities we serve. Despite market volatility early in 2025, we stayed focused on supporting our clients and executing our growth and profitability agenda. This discipline drove higher earnings, stronger client relationships, and attracted new business. A key to delivering on our purpose and performance is the investment in our business, markets, and teammates.

Some of these significant investments include enhancing our tech and digital capabilities in areas like AI and improving the client experience, recruiting and developing talented teammates to advise and serve clients with more complex and industry-specific financial needs, announcing plans to open 100 new insight-driven branches in high-growth markets, as well as enhancements to more than 300 branch locations in all markets. These investments underscore our commitment to the communities we serve and position us to deliver more personalized advice and create opportunities for outsized growth. As we enter 2026, our purpose continues to guide our focus on growth, profitability, and deeper client relationships. We're expanding our presence and delivering more differentiated, advice-driven experiences. I look forward to sharing more of these priorities during today's call. Now, let's turn to slide five. We closed 2025 with strong results and clear momentum heading into 2026.

We delivered net income available to common shareholders of $1.3 billion, or $1 per diluted share for the fourth quarter, and $5 billion, or $0.0382 per diluted share for the full year 2025. These results include certain charges such as severance and an accrual related to a specific legal matter that was settled in the first quarter of 2026, which totaled $0.12 per share for the quarter and $0.18 per share for the year. At the start of last year, we outlined five strategic priorities aimed at accelerating our performance and improving our profitability in 2025 and beyond. While there's more to accomplish, I'm proud of the progress we made as a company in 2025 and excited about the momentum we have entering this year.

First, we continue to generate strong, broad-based loan growth in both Wholesale Banking and Consumer and Small Business Banking, driven by new loan production and increased client acquisition. Second, strong loan growth, better second-half results in investment banking, trading, and wealth, along with continued expense discipline, drove 100 basis points of positive adjusted operating leverage in 2025. Third, we made significant investments across our business in talent and technology, laying the foundation for future growth, which we expect to accelerate in 2026. Fourth, we maintained strong asset quality metrics as net charge-offs declined versus 2024, and non-performing loans remained relatively stable. Finally, we returned $5.2 billion of capital to shareholders through our common stock dividend and the repurchase of 2.5 billion of our common stock. Our total capital return in 2025 reflects a 37% increase over 2024.

Looking ahead, our strategic priorities remain unchanged and our focus clear: accelerate revenue growth, drive greater positive operating leverage, continue to invest while maintaining our expense and risk discipline, and return capital to shareholders at an accelerated rate. Executing on these strategic priorities is central to improving profitability and achieving our long-term goals, including our commitment to deliver a 15% return on tangible common equity in 2027. In summary, we closed 2025 on a strong note and entered 2026 with significant momentum and confidence in our ability to deliver revenue growth at least twice the pace of 2025, greater positive operating leverage, higher levels of capital return, and improved profitability. Before I hand the call over to Mike to discuss our quarterly results, I want to spend some time discussing the positive momentum we're seeing within our business segments and with our digital strategy on slides six and seven.

First, let me start with consumer and small business banking. CSBB delivered consistent, strong performance throughout 2025. As shown on the slide, we generated 5% growth in average consumer and small business loans and 1% growth in average deposits. This momentum was fueled by our market-leading consumer lending businesses, another year of net new checking account growth, and deeper relationships with our Premier Banking clients. Loan growth was broad-based across the portfolio, with especially strong contributions from Indirect Auto and our specialty niche lending platforms, Sheffield, Service Finance, and LightStream. These businesses continue to produce market-leading growth with attractive risk-adjusted returns. As part of advancing our consumer lending strategy, we fully integrated our digital end-to-end lending platform, LightStream, into our Truist mobile app experience and our branch banking account opening experience. This expanded scale is improving efficiency, broadening distribution, accelerating growth, and meaningfully enhancing the client lending experience.

Beyond our national consumer lending platforms, Premier Banking also delivered strong results, with 2025 production of 22% in deposits, 32% in lending, and 12% in financial plans. This performance was driven by higher advisor productivity and strong branded mortgage and branch-led lending. We continue to see strong outcomes from our strategic investments in digital, delivering year-over-year growth across all core metrics. In the fourth quarter of 2025, we added 77,000 digital new-to-bank clients, up 10% from the prior year quarter, capping a solid full-year performance with digital production of 9%. We also took meaningful steps to deepen self-service adoption, expanding capabilities within our AI-powered Truist Assist mobile experience. The launch of Ask Truist Assist, our universal search capability, now delivers client quick, intuitive access from any screen.

This drove a 97% increase in digital chat engagement in 2025 and is helping us improve efficiency and strengthen client connectivity as more activity naturally shifts to digital. Well, let's turn to wholesale on page seven. In wholesale, we delivered a strong finish to 2025, driven by meaningful improvement in the second half of the year in both loan and deposit growth, investment banking and trading revenue, and continued progress in strategic focus areas such as payment and wealth. We onboarded twice as many new corporate and commercial clients versus last year, spanning a diverse range of industries and markets. Building on these new client relationships and our focus on deepening existing ones, we saw our loan and deposit momentum strengthen as the year progressed. Average wholesale loans increased 3% in 2025, with momentum accelerating in the second half.

Fourth quarter average loans were up 8% compared to the fourth quarter of 2024, fueled by new client acquisition and supported by focused talent investments as our strategy continues to gain traction. End-of-period wholesale deposit balances rose 6% late quarter. While seasonal public funds contributed to this growth, we saw growth from all of our industry banking teams and geographies. Full-year investment banking and trading income declined 6% versus 2024 due to first-half market volatility. However, activity rebounded strongly in the second half, with fourth quarter revenues up 28% versus fourth quarter of 2024, driven by increased M&A, trading, equity, and debt capital markets activity. In wealth, net asset flows remained positive, supported by an 8.5% increase in new clients last year, with almost 30% being generated by CSBB. Wholesale payment fees, which include merchant services, commercial card, and treasury management fees, rose 8% in 2025.

Treasury management fees, a key strategic focus, grew 13% on the strength of new client acquisition and deeper relationships within our existing base. Importantly, our payments pipeline is up significantly year-over-year, positioning us for continued growth in 2026. So now let me turn it over to Mike to discuss the financial results in a little more detail.

Thank you, Bill, and good morning, everyone. So before I start with our performance highlights on slide eight, I do want to briefly mention certain changes to the presentation of our earnings materials today and on a go-forward basis. On January 12th, we filed an 8-K detailing changes to the presentation of certain non-interest income and non-interest expense items. Effective December 31st, 2025, we changed the reporting line labeled Card and Payment Fees to a new reporting line called Card and Treasury Management Fees. This line includes debit card, retail card, and commercial card fees, merchant discount fees, and treasury management fees. Previously, treasury management fees were included in the Service Charges on Deposits line, which we renamed Other Deposit Revenue. Other deposit revenue includes NSF and overdraft fees and other service charges.

We believe these changes more accurately reflect how we're managing our business and will give investors more insights into how we're progressing with important fee income-generating initiatives. In terms of expenses, we will no longer disclose adjusted expense in our earnings materials. Instead, we will provide context on material items impacting results. For today's discussion, I'll provide you with adjusted expense for comparison purposes, but going forward, our expense commentary and guidance will be based on GAAP expense. As a result of this change, we moved restructuring charges, which typically included expenses related to severance and facility charges, back to their respective reporting lines, such as personnel and occupancy expense. Okay, with that said, I'll now turn to the full year 2025 and fourth quarter results, which starts on slide eight.

We reported 2025 GAAP net income available to common shareholders of $5 billion, or $3.82 per diluted share. In fourth quarter 2025 net income available to common shareholders of $1.3 billion, or $1 per diluted share. Our fourth quarter 2025 results included a charge of $130 million, or $0.08 per share after tax, due to an incremental accrual related to Truist executing a settlement agreement on January 20th, 2026, in the matter of Bickerstaff versus SunTrust Bank. In addition, our fourth quarter results included $0.04 per share of charges primarily related to severance. Revenue increased 1.1% linked quarter due to 1.9% growth in net interest income, partially offset by a modest decrease in non-interest income. GAAP non-interest expense increased 5.2% linked quarter, primarily due to the legal accrual and higher personnel expense. Excluding the legal accrual and severance, non-interest expense declined approximately 0.3% on a linked quarter basis.

Net charge-offs increased 9 basis points on a linked quarter basis, reflecting normal seasonality in our consumer portfolio. Non-performing loans remained relatively stable on a linked quarter basis. Our CET1 capital ratio declined 20 basis points to 10.8%, and our CET1 ratio, including AOCI, increased 10 basis points linked quarter to 9.5%. During the quarter, we repurchased $750 million of common stock and announced a new share repurchase authorization of up to $10 billion with no expiration date. Next, I'll cover loans and leases on slide nine. Average loans held for investment increased $4.3 billion, or 1.3% on a linked quarter basis, to $325 billion due to growth in both commercial and consumer loans. For the full year, average loans held for investment increased 3.6% to $316 billion due to 5.4% growth in average consumer and card loans and 2.4% growth in average commercial loans.

Based on our current pipeline and economic outlook, we expect 3%-4% average loan growth in 2026. However, average loan growth in 2026 will primarily be driven by growth in commercial loans, and other consumer loans will have relatively slower growth in residential mortgage and indirect auto compared with 2025. Other consumer loans, which include our specialty lending businesses, Sheffield, Service Finance, and LightStream, are expected to grow at a similar pace as these businesses continue to offer attractive risk-adjusted returns. Moving to deposit trends on slide 10. Driving client deposit growth is a key priority for Truist, and we are seeing improved momentum with clients in both consumer and wholesale. Average deposits were relatively stable on a linked quarter basis as a decline in higher-cost broker deposits was offset by growth in lower-cost client deposits.

This improving mix, along with recent reductions in the federal funds rate, resulted in a 27 basis points decline in average interest-bearing deposit costs to 2.23% and a 20 basis points reduction in our total cost of deposits to 1.64%. As shown in the chart on the bottom right hand of the slide, our cumulative interest-bearing deposit beta improved from 38% to 45%, and our total deposit beta improved from 24% to 30% on a linked quarter basis. These improvements reflect stronger client deposit growth and disciplined efforts to reduce rate paid. Moving out on net interest income and net interest margin on slide 11. Taxable equivalent net interest income increased 1.9% linked quarter, or $69 million, primarily due to loan and client deposit growth in fixed-rate asset repricing. Our net interest margin increased 6 basis points linked quarter to 3.07%.

For full year 2026, we expect net interest income to increase by 3%-4%. This outlook is based on 3%-4% average loan growth, which implies low single-digit end-of-period loan growth. We also expect low single-digit end-of-period deposit growth. Average earning assets will grow at a slower rate in 2026 than average loans, as average investment securities and other earning assets are expected to decline by 4%-5% on an annual basis. Lastly, we expect two 25 basis point reductions in the Fed funds rate, one in April and one in July, and we will continue to benefit from fixed-rate asset repricing. Although we expect modest net interest margin compression in the first quarter, we anticipate full year 2026 average net interest margin will exceed the 2025 average of 303 due to the benefits of fixed-rate asset repricing and improved earning asset mix and lower deposit costs.

As you can see on the right-hand side of the slide, we've also updated our fixed-rate asset repricing outlook and our swap disclosure. Turning now to non-interest income on slide 12. Non-interest income decreased $12 million, or 0.8%, versus the third quarter of 2025, reflecting modest declines across several fee income categories, partially offset by higher investment banking and trading income. Investment banking and trading increased $12 million, or 3.7%, linked quarter and $335 million, reflecting stronger M&A-related fees, partially offset by lower trading activity. Our new reporting line for card and treasury management fees was down slightly linked quarter due to seasonality, but grew 3.7% year-over-year as double-digit growth in treasury management fees was partially offset by lower merchant and corporate credit card fees. Next, I'll cover non-interest expense on slide 13.

On a linked quarter basis, non-interest expense increased 5.2%, driven by higher other expense related to the legal accrual previously mentioned, higher personnel expenses due to increased incentives and severance. These increases were partially offset by lower regulatory costs due to an FDIC special assessment credit. Excluding the impact of the legal accrual and severance costs, non-interest expense declined by 0.3% linked quarter. Adjusted non-interest expense increased 1% in 2025, reflecting our commitment to expense discipline and to driving positive operating leverage during the year. Moving to asset quality on slide 14. Our asset quality metrics remained strong on both a linked and year-over-year quarter basis, reflecting our strong credit risk culture and proactive approach to quickly resolving problem loans. Non-performing loans held for investment remained stable at 48 basis points of total loans, while the ALLL declined 1 basis point to 1.53% of total loans.

Net charge-offs increased 9 basis points linked quarter to 57 basis points and were down 2 basis points versus the fourth quarter of 2024. The linked quarter increase in net charge-offs reflects higher C&I and seasonally higher consumer losses, partially offset by lower CRE losses. For the full year 2025, net charge-offs declined 5 basis points to 54 basis points. And now I'll turn to guidance for 2026 on slide 15. For full year 2026, we expect revenue to increase 4% to 5% relative to 2025 revenue of $20.5 billion, driven by 3% to 4% growth in net interest income and mid to high single-digit growth in non-interest income. We expect full year 2026 GAAP non-interest expense to increase by 1.25% to 2.25% in 2026 versus GAAP 2025 non-interest expense of $12.1 billion. Our 2026 GAAP revenue and expense outlook implies positive operating leverage of 275 basis points in 2026.

As I mentioned earlier, our non-interest expense guide will be based on GAAP non-interest expense, as we will no longer provide guidance on adjusted non-interest expense going forward. For comparison purposes, 2026 non-interest expense growth would be approximately 2.35%-3.35%, and operating leverage would be approximately 165 basis points if you were to exclude the impact of the fourth quarter 2025 legal accrual that I discussed earlier in the call. In terms of asset quality, we expect net charge-offs of about 55 basis points in 2026, which is relatively stable compared with net charge-offs of 54 basis points in 2025. Finally, we expect our effective tax rate to approximate 16.5% or 18.5% on a taxable equivalent basis in 2026 versus 16.4% and 18.9% in 2025. As it relates to buybacks, we're targeting approximately $4 billion of share repurchases during the year.

Looking into the first quarter of 2026, we expect revenue to decrease approximately 2%-3% relative to fourth quarter revenue of $5.3 billion. We expect net interest income to decrease approximately 2%-3% in the first quarter, primarily driven by two fewer days in the first quarter relative to the fourth quarter and a seasonal decline in public funds deposits. We expect non-interest income to decline 2%-3% linked quarter due to lower other income. GAAP non-interest expense of $3.2 billion in the fourth quarter is expected to decrease by 4%-5% linked quarter due to lower other expense and personnel costs, partially offset by higher regulatory costs. If you were to exclude the impact of the fourth quarter 2025 legal accrual, non-interest expense would be flat to down 1% linked quarter. Finally, we're targeting $1 billion of share repurchases in the first quarter of 2026.

Great. Thanks, Mike. As we close, I want to emphasize the confidence I have in Truist Direction. We're seeing tangible results across key businesses with strong momentum and client engagement and revenue growth. As shown on slide 16, our goal of achieving a 15% ROTCE in 2027 is locked in and reflects our confidence in Truist's long-term earnings power and strategic direction. We see and have invested in multiple paths to stronger revenue and profitability, and with disciplined execution, we expect meaningful improvement over the next 2 years. Much of this progress will come from deepening client relationships in consumer and wholesale, especially in wealth, payments, premier banking, investment banking and trading, small business, and corporate and commercial banking, where momentum is already strong. This is highly accretive to our ROTCE commitment.

Our expectation is that our revenue growth will double in 2026, and when combined with our expense discipline, should lead to even greater operating leverage and profitability improvement this year. Like 2025, we enter 2026 in a strong capital position, enabling us to support client growth and accelerate capital return through increased share repurchases. As Mike mentioned, we're targeting $4 billion of share repurchase this year, which represents a 60% increase versus last year. In summary, I am confident in our future. I'm encouraged by the results and momentum we're seeing across our company and remain focused on executing with discipline, delivering for our clients, and creating value for our shareholders. Thank you to our teammates for their incredible focus, productivity, and purpose-driven commitment to moving Truist forward.

As always, we appreciate your continued interest and support, and we look forward to updating you on our progress and the quarters ahead. With that, Brad, let me turn it back over to you.

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 yourself to one primary question and one follow-up in order to accommodate as many of you as possible today.