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Truist Financial TFC is scheduled to announce its fourth-quarter and full-year 2024 results on Jan. 17 before the opening bell. Given the implementation of rate cuts, the overall lending scenario improved in the quarter.
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Per the Federal Reserve’s latest data, demand for commercial and industrial (C&I) loans (accounting for roughly 50% of TFC’s total loans and leases held for investment) rose during the fourth quarter. Likewise, consumer loan (almost 40% of total loans and leases held for investment) demand improved.
We project TFC’s average loan balance to be $300.1 billion, indicating a 4.4% fall from the prior-year quarter.
The Zacks Consensus Estimate for TFC’s average earning assets is pegged at $468.3 billion, which suggests a 2.7% decline from the prior-year quarter. We project the metric to be $472.8 billion.
While the Fed reduced the interest rates by 100 basis points since September 2024, higher funding costs are likely to weigh on net interest income (NII) due to slower deposit repricing alongside lower yields. Nonetheless, the yield curve steepened and then normalized during the fourth quarter. This is expected to have supported TFC’s net interest margin (NIM) and NII growth to some extent. The balance sheet repositioning actions undertaken during the second quarter of 2024 are likely to have aided NII and NIM too.
The consensus estimate for NII (fully tax equivalent or FTE) is pegged at $3.56 billion, which implies a marginal rise on a year-over-year basis. Our estimate for the metric is pegged at $3.66 billion.
The company expects NII to be down 1.5% sequentially, primarily due to a lower commercial loan balance and temporary lag in deposit beta. Further, the company anticipates NIM to be down to 3.05-3.06% by the fourth quarter of 2024.
Other Key Factors & Estimates for TFC’s Q4 Performance
Non-Interest Income: The Zacks Consensus Estimate for service charges on deposits of $221.7 million indicates a decline of 2.7% from the prior-year quarter. Our estimate for the metric stands at $227.7 million.
Higher client activity and volatility in the capital markets in the to-be-reported quarter are expected to have supported TFC’s corresponding fee income. Thus, the consensus estimate for the company’s investment banking and trading income of $299.7 million indicates an 81.6% jump. We project the metric to be $292.2 million.
An improved lending scenario is likely to have supported TFC’s lending-related fees. The Zacks Consensus Estimate for the same of $91.3 million indicates a decline of 40.3%. We anticipate the metric to be $92.1 million.
The Zacks Consensus Estimate for card and payment-related fees of $225.2 million suggests a fall of 2.9%. Our estimate for the metric is $228 million.
The wealth management business is expected to have gained from solid equity market performance during the quarter under review driven by optimism post-Donald Trump’s victory in the Presidential elections. Hence, the company’s income from the same is likely to have risen. The consensus estimate for wealth management income of $355.6 million suggests an increase of 2.8%. Our estimate for the metric is $354.7 million.
Overall, the Zacks Consensus Estimate for total non-interest income is pegged at $1.44 billion, which indicates a 33.2% decline from the prior-year quarter. We project the metric to be $1.41 billion.
Management anticipates non-interest income to decline 2% sequentially due to lower investment banking and trading revenues.
Expenses: Truist has been witnessing a continued rise in overall non-interest expenses over the past several quarters because of investments in technology, inflationary pressure and strategic expansion efforts. A similar trend is expected to have continued in the fourth quarter.
Our estimate for total adjusted non-interest expenses is pegged at $2.91 billion, suggesting an increase of 6.9% from the prior-year quarter.
Management expects adjusted expenses to be up 4% on a sequential basis due to higher professional fees, and software and marketing costs.
Asset Quality: Truist is expected to set aside a decent amount of money for potential bad loans (mainly commercial loan defaults), given the expectations of a higher for longer interest rate backdrop and rising delinquencies.
Our estimate for provision for credit losses is pegged at $455.3 million, signifying a 20.4% year-over-year decline.
The Zacks Consensus Estimate for non-performing assets (NPAs) is pegged at $1.53 billion, indicating a rise of 2.9%. The consensus estimate for total non-accrual loans and leases of $1.45 billion suggests a 1.6% increase. We project NPAs and total non-accrual loans and leases to be $1.43 billion and $1.31 billion, respectively.