Published on 19 Apr 2024 on Zacks via Yahoo Finance
Lower NII & Fee Income to Hurt Truist's (TFC) Q1 Earnings
Truist Financial TFC is scheduled to announce first-quarter 2024 results on Apr 22, before the opening bell. The overall lending scenario was decent in the quarter on the back of some certainty in the macroeconomic backdrop.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) was weak in the first quarter, while consumer loan (almost 40% of total loans and leases held for investment) demand was decent. We project total loans of $312.5 billion for the first quarter, indicating a 5.3% fall from the prior-year quarter.The Zacks Consensus Estimate for TFC’s average earning assets is pegged at $476.7 billion, suggesting a 4.5% fall from the prior-year quarter’s reported figure.While interest rates remained high in the first quarter, higher funding costs are expected to have put pressure on TFC’s net interest margin (NIM) and net interest income (NII) growth.The consensus estimate for NII (FTE) is pegged at $3.48 billion, which implies an 11.3% year-over-year decline. Our estimate for the metric is pinned at $3.55 billion.
Other Key Factors & Estimates for Q1
Non-Interest Income: The Zacks Consensus Estimate for service charges on deposits of $217.5 million indicates a decline of 12.7% from the prior-year quarter. Our estimate for the metric stands at $210.9 million.Though capital markets business rebounded in the to-be-reported quarter, weakness still prevailed. Thus, the consensus estimate for TFC’s investment banking and trading income of $209.6 million indicates a 19.7% decline. We project the metric to be $189.1 million, suggesting a year-over-year fall of 27.6%.A somewhat decent lending scenario is expected to have supported TFC’s lending-related fees. The Zacks Consensus Estimate for the same of $117.2 million indicates growth of 10.6%. We anticipate the metric to be $109.4 million.The Zacks Consensus Estimate for card and payment-related fees of $223.7 million suggests a fall of 2.7%. Our estimate for the metric is $228.3 million.The benefits of business streamlining undertaken are expected to have supported Truist’s insurance income. The consensus estimate for insurance income of $859.6 million suggests a 5.7% rise. Our estimate for the metric is pegged at $816.4 million.Overall, the Zacks Consensus Estimate for total non-interest income is pegged at $2.13 billion, which indicates a 1% fall from the prior-year quarter. We project the metric to be $2.14 billion.Expenses: Truist has been witnessing a continued rise in overall expenses over the past several quarters because of investments in technology upgrades, inflationary pressure and strategic expansion efforts. A similar trend is expected to have continued in the first quarter.Our estimate for total adjusted non-interest expenses is pegged at $3.54 billion, suggesting an increase of 1.5% from the prior-year quarter.Management expects adjusted expenses (excluding expenses associated with TIH independence readiness) to be up 4% on a sequential basis.Asset Quality: Truist is expected to have set aside a substantial amount of money for potential bad loans (mainly commercial loan defaults), given the expectations of an economic slowdown. Our estimate for provision for credit losses is pegged at $508.3 million, indicating a rise of 1.3% on a year-over-year basis.The Zacks Consensus Estimate for non-performing assets (NPAs) is pegged at $1.61 billion, indicating a rise of 27.9%. The consensus estimate for total non-accrual loans and leases of $1.56 billion suggests a 31.2% increase. Our estimates for NPAs and total non-accrual loans and leases are $1.56 billion and $1.43 billion, respectively.