Truist Financial Corporation

Operator: Greetings, ladies and gentlemen, and welcome to the Truist Financial Corporation Q2 2026 Earnings Conference Call. Currently, all participants are in 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 Milsaps. Brad Milsaps: Thank you, Rocco. Good morning, everyone. Welcome to Truist's Q2 2026 Earnings Call. With us today are Chairman and CEO, Bill Rogers, our CFO, Mike Maguire, our Chief Risk Officer, Brad Binder, as well as other members of the Truist senior management team. During this morning's call, they will discuss Truist's Q2 2026 results, share their perspectives on current business conditions, and provide an update on our outlook for 2026. The company 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 2 and 3 of the presentation regarding these statements and measures, as well as the appendix for required reconciliations to GAAP. With that, I will turn it over to Bill. Bill Rogers: Great. Thanks, Brad. Good morning, everyone, and thank you for joining our call today. Before we discuss our Q2 2026 results, let's begin, as we always do, with purpose on slide 4. At Truist, our purpose is to inspire and build better lives and communities. That purpose continues to guide how we serve our clients, support our teammates, and create value for our stakeholders. We also want to recognize that purpose is fueled by performance and committed leadership. During the Q2, we announced that Mike Lyons will become Truist's next president and chief executive officer on September 1st. At that time, I'll transition to an executive chair role until my planned retirement in April of next year. As a founder of Truist, I am really excited about this important next chapter in our success journey. Mike's an accomplished and respected financial services leader with a proven ability to drive growth, improve performance, and create long-term shareholder value. Throughout the selection process, it was clear to our board that he's the right leader for Truist's future. He'll be leading a strong and experienced senior team that's helped build our momentum and position the company for continued success. Mike recognizes the strength of our franchise and the significant opportunities ahead. He shares our commitment to building a high-performing company by serving our clients and teammates, improving profitability and returns, and delivering superior outcomes for our shareholders. I look forward to supporting Mike and our leadership team over the coming months to ensure a smooth transition and build on our momentum. Now let's turn to the results on slide 5. I want to step back and highlight what these results say about the progress we're making across Truist. Over the last several quarters, we've been clear about the actions we're taking to drive stronger returns, improve efficiency, and allocate capital to the highest value opportunities across the company. We continue to make deliberate choices about where we grow, where we invest, and how we optimize our balance sheet. While some of these choices may create near-term trade-offs in individual growth metrics, they're producing the outcomes we intended and are driving stronger profitability and improved financial performance. Importantly, these results demonstrate that we're making meaningful progress in building a more earnings-efficient and more capital-efficient growth company. As you can see on slide 5, our results show significant improvement in our profitability and returns. For the Q2, we delivered net income available to common shareholders of $1.5 billion, or $1.23 per diluted share, representing a 37% increase over the Q2 of 2025. During the quarter, we added new clients, deepened existing relationships, and grew profitably in the businesses and products where we've chosen to focus. Along with our expense discipline, this contributed to more than 300 basis points of year-over-year positive operating leverage. In addition, combined with disciplined capital deployment, our return on tangible common equity improved 310 basis points year-over-year to 15.4%. These results reinforce that we remain on track to deliver our full-year profitability and return objectives and provide confidence in our ability to sustain this level of performance over time. Before I hand the call over to Mike, I'd like to highlight how our strategy is translating into tangible results across our business segments and our digital strategy, and we have that on slides 6 and 7. Let me start with consumer and small business banking. CSBB delivered another solid quarter that was consistent with our expectations and strategy to drive profitability improvement across the enterprise. Consumer behavior remained resilient during the quarter, with stable liquidity, spending, and credit trends that remain within our expectations. Average consumer and small business loans were up 2% versus the Q2 of 2025 as we slowed production in certain less strategic and less profitable consumer categories, which Mike will discuss in more detail later in the call. Average non-maturity consumer and small business deposits increased 2% versus the Q2, driven by a 39% increase in new to bank deposit production. Average deposits per client were higher across all income segments, we did see continued client demand for higher yielding deposit categories. Premier Banking, which serves clients with $100,000-$1 million in combined deposits and investments and represents more than half of CSBB deposits, was again a source of strength. This business delivered a 20% year-over-year increase in new deposit production balances, a 23% increase in advisor productivity. A 9% increase in financial planning activity. Our investments in Premier are also creating meaningful opportunities across the company, with referrals from CSBB to wealth management increasing 15% over the first half of 2025. As you can see on the slide, digital also continues to be a key growth engine. Active mobile users increased 4% year-over-year to 5.4 million, while digital transaction volume increased 7% to 93 million transactions. Approximately 85% of client logins now occur through mobile, underscoring the increasing central role our mobile capabilities play in serving clients. Increasing digital engagement is not only improving the client experience but also strengthening client economics. Digital active clients generate more revenue and higher profitability than non-digital clients, while greater self-service adoption continues to improve efficiency across the franchise. During the quarter, clients engaged with Truist Assist nearly 2 million times, up 60% year-over-year, reflecting growing adoption of self-service capabilities and our continued investment in the digital client experience. Taken together, these results demonstrate our strategy to improve profitability, strengthen returns, and allocate capital towards the highest value opportunities across consumer and small business banking. Turning to wholesale on slide 7. In wholesale, we also delivered another strong quarter with continued momentum across loans, deposits, and fees while maintaining a disciplined focus on relationship returns and capital efficiency. Over the past year, we've significantly expanded our client base and strengthened existing relationships across the wholesale franchise, driving broader adoption of our lending, deposit, payments, wealth management, and capital markets capabilities. This deeper engagement is translating into higher revenue per client, a more attractive revenue mix, and improved relationship profitability driven by an increase in share of revenue coming from non-credit sources. Average wholesale deposits increased 6%, excluding the impact of certain large M&A-related deposits in the Q2 of last year, driven by broad-based deposit growth across client segments heavily tied to our focus on driving payments and liquidity solutions. Middle market deposits, an area where we're invested heavily, grew 12% year-over-year, driven by 9% growth in our legacy markets and 27% growth in expansion markets, such as Texas, Pennsylvania, and Ohio. Average wholesale loans increased 8% compared with the Q2 of 2025, reflecting broad-based momentum across our industry banking, middle market, and commercial real estate teams as we continue to prioritize high-quality, relationship-driven growth. Wholesale fee income continues to outpace balance sheet growth, led by investment banking and trading and wealth management reflecting strong client activity, improved deal economics, and continued momentum in our wealth franchise. Advisory revenue increased 27% year-to-date, including strong growth across equity capital markets, M&A advisory, and financial risk management. Overall, we remain encouraged by the breadth of growth across the franchise and the continued progress in building a more profitable and capital-efficient wholesale business. With that, let me turn it over to Mike to discuss our financial results in more detail. Mike Maguire: Thank you, Bill, and good morning, everyone. As Bill mentioned, we reported Q2 2026 GAAP net income available to common shareholders of $1.5 billion or $1.23 per diluted share. Earnings per share increased 37% versus the Q2 of 2025 and 13% versus the Q1 of 2026. Revenue increased 2.2% linked-quarter, due primarily to higher non-interest income. Revenue increased by 5.5% versus the Q2 of 2025, due primarily to higher non-interest income, led by growth in investment banking and trading and wealth management income. GAAP non-interest expense increased 2.4% versus the Q1 of 2026, primarily due to higher personnel expense in professional and outside processing expenses. Non-interest expense increased 2.3% versus the Q2 of 2025, which helped drive 320 basis points of year-over-year positive operating leverage. Asset quality metrics remained strong. Our CET1 ratio increased by 10 basis points linked-quarter to 10.9%. Next, I'll cover loans and leases on slide 9. Average loans held for investment increased $2.1 billion, or 0.7%, linked-quarter to $329 billion, driven by 1.3% growth in average commercial loans, partially offset by a decline in average consumer loans. End-of-period loans increased modestly linked-quarter, reflecting slight growth in both commercial and consumer. As a reminder, we expected 2026 loan growth to be driven primarily by commercial and other consumer categories with slower loan growth in residential mortgage and indirect auto. Moving to deposit trends on slide 10. Average deposits increased 1.5% linked-quarter, driven by growth in all deposit categories, while year-over-year growth was 1.1%, driven primarily by growth in interest checking. We continue to see healthy client deposit activity. However, deposit mix trends are being pressured by elevated rate-seeking behavior and migration into higher rate products. Average interest-bearing deposit costs increased by 1 basis point linked-quarter to 2.10%, and average total deposit costs increased 1 basis point to 1.56%. As shown in the chart on the bottom right-hand side of the slide, our cumulative interest-bearing deposit beta decreased from 46%-45%, and our total deposit beta decreased from 31%-30% on a linked-quarter basis. Moving to net interest income and net interest margin on slide 11. Taxable equivalent net interest income increased 0.6% linked-quarter, or $23 million, primarily due to the impact of one additional day in the Q2 and higher earning assets, partially offset by lower loan spreads. Our net interest margin decreased 4 basis points linked-quarter to 2.98%, driven by slightly higher deposit costs, lower loan spreads, and a slightly larger balance sheet. As shown on the right-hand side of the slide, we now expect net interest income to increase approximately 1%-1.5%. Our updated outlook reflects actions we have taken to improve profitability as well as certain market dynamics. First, we are continuing to optimize less strategic and lower return lending portfolios that offer limited relationship potential, which has the effect of reducing NII and net interest margin but improves ROTCE. Second, we now expect lower loan spreads than we anticipated based on two factors. One, we are reallocating capital from higher-yielding consumer loans into higher quality but lower yielding commercial loans where we expect to drive attractive relationship returns over time. Two, we're seeing continued broad-based market-driven compression of loan spreads. The third headwind is our outlook for a less favorable deposit mix and therefore higher rate paid than we previously expected. These headwinds are partially offset by the benefits we expect to get from higher medium and long-term interest rates. As Bill discussed earlier, some of the actions that we are taking to improve profitability and returns involve trade-offs across individual metrics. For example, during the Q2 we discontinued the origination of marine and recreational vehicle loans, and we significantly reduced originations in several other less strategic and less profitable consumer lending units such as prime and non-prime auto. These actions are expected to reduce 2026 loan production across these portfolios by approximately 40% relative to 2025 production levels. Many of these portfolios are accretive to net interest income and net interest margin, but significantly dilutive to our long-term ROTCE objectives and less strategic to our client-focused business model. While these actions may reduce near-term net interest income growth, they improve the overall profitability and the capital efficiency of our balance sheet, which was evident in the Q2. We'll continue to evaluate similar actions that will enhance returns and improve capital efficiency, including further optimization of lower return and less strategic portfolios. Finally, as you can see on the right-hand side of the slide, we did update our fixed asset repricing outlook and our swap disclosure. While expected runoff in our fixed rate loan portfolio remains largely unchanged, we do expect lower replacement volume due to the actions I just described, which is reflected in our updated NII outlook. Turning now to non-interest income on slide 12. Non-interest income increased 5.9% compared with the Q1, reflecting strong growth in other income, primarily driven by higher income from certain equity investments. Compared with the Q2 of 2025, non-interest income increased 17%, driven by strong performance across several of our fee-based businesses. Investment banking and trading revenue increased 72%, benefiting from stronger client activity, improved deal economics, and continued momentum across our capital markets platform. Wealth management income increased 8%, supported by continued growth in client assets, advisor productivity, and financial planning activity. While card and treasury management fees grew only modestly, underlying business trends remain encouraging as we see healthy client pipelines and we continue to make investments in both products and talent. Consistent with the trends Bill discussed earlier, fee income growth continues to outpace balance sheet growth, reflecting deeper client relationships and a more capital-efficient revenue mix across our company. Next, I'll cover non-interest expense on slide 13. Expense discipline remained a key focus during the quarter as we continued balancing investment in the business with our commitment to improving profitability. On a linked-quarter basis, non-interest expense increased 2.4%, primarily reflecting higher incentive compensation associated with stronger business performance. Compared with the Q2 of 2025, non-interest expense increased 2.3%, driven largely by higher personnel expense, partially offset by lower professional fees and outside processing costs. Importantly, year-over-year expense growth remained well below revenue growth, contributing to our positive operating leverage. We continue to identify efficiencies across the company that can be redeployed into growth initiatives and the highest return opportunities, such as growth in revenue-producing teammates, new products, and capabilities that can improve the client experience. In addition, AI is becoming an increasingly important contributor, helping improve productivity, enhance client experience, and create additional capacity that can be invested in high-value business opportunities across our franchise. Next, I'll discuss asset quality on slide 14. Asset quality remained a source of strength this quarter, with stable credit performance and continued improvement in several key portfolios. Net charge-offs declined 11 basis points linked-quarter to 50 basis points, reflecting lower losses across most portfolios. Compared with the Q2 of 2025, net charge-offs were relatively stable. Our provision for credit losses totaled $395 million, modestly below net charge-offs of $414 million, resulting in a two basis point linked-quarter decline in allowance for loan losses to 1.51% of total loans. The modest reduction in our ALL was primarily driven by the resolution of several commercial and commercial real estate credits during the quarter and continued improvement in sectors like office and multifamily. Non-performing loans held for investment increased one basis point linked-quarter to 51 basis points of total loans. Higher indirect auto problem loans were partially offset by improvement in the commercial portfolio. The increase in indirect auto non-performing loans was primarily due to a change to the non-accrual criteria in our Regional Acceptance non-prime auto business, as we discussed last quarter. This does not reflect deterioration in underlying credit trends as lifetime cash flows are not expected to change. However, as these loans move to non-accrual status, subsequent payments are applied to principal and no longer recognized as interest income. Turning to capital now on slide 15. Our CET1 ratio increased 10 basis points linked-quarter to 10.9%, despite returning more than 100% of earnings to shareholders through share repurchases and through our common dividend. The increase in our CET1 ratio reflects strong capital generation and the benefits of balance sheet optimization efforts that are improving our RWA density. During the Q2, we repurchased $1.2 billion of common stock compared with $1.1 billion in the prior quarter and $750 million in the Q2 of 2025. We continue to target approximately $5 billion of share buybacks in 2026. I'll now review our guidance for the Q3 and for full year 2026 on the following page. Looking into the Q3 of 2026, we expect revenue to increase 1% relative to Q2 revenue of $5.3 billion. We expect net interest income to increase by approximately 1.5% in the Q3, primarily driven by an additional day and higher client deposit balances. We expect non-interest income to remain relatively stable on a linked-quarter basis. Non-interest expense of $3.1 billion in the Q2 is expected to increase by about 2% linked-quarter in the Q3. Turning to our outlook for 2026, we now expect revenue to increase 3.5%-4% compared with our previous outlook for 4% revenue growth. This change primarily reflects the factors discussed earlier, which reduced our expected net interest income growth to 1%-1.5% from our previous outlook of 2%-3%. However, we are increasing our outlook for non-interest income growth to approximately 10% versus our previous estimate of high single digits, reflecting continued momentum across our fee businesses. We continue to expect GAAP non-interest expense growth of 1.75%, net charge-offs of 55 basis points, and an effective tax rate of 14.5%, as well as share buybacks of $5 billion for the year. Although we modestly reduced our revenue guidance, we remain confident in the EPS trajectory that we expressed earlier this year and our ability to drive ROTCE for 2026 above 14%. Now I'll hand it back to Bill for some final remarks. Bill Rogers: Thanks, Mike. As we close, I want to reiterate the message I shared at the beginning of today's call. Across our company, we're making strategic decisions about where we grow, where we invest, and how we allocate capital to improve performance and strengthen returns. The results reported today demonstrate that those decisions are producing the outcomes we intended. We're seeing stronger profitability and continued momentum across many of our key businesses. Just as importantly, the progress we're making reinforces our confidence in our ability to achieve and sustain the profitability trajectory outlined on slide 17. As Mike mentioned, reflecting on that progress and our confidence in the path ahead, we now expect to deliver ROTCE of greater than 14% in 2026. While we remain focused on delivering the commitments we've made, we believe those objectives represent milestones along a longer-term path of continuously improving our performance. One of the things that gives me confidence in that path is the strong alignment between our board and incoming CEO, Mike Lyons, about the opportunities ahead. Together, we share a common vision of building a company that consistently delivers stronger profitability, improved returns, and long-term value for our shareholders. I want to thank our teammates for their incredible purposeful commitment, focus, and dedication to serving our clients. I want to thank our shareholders for their continued trust and support. Given this will be my last call as CEO, I want to thank all of you who follow us for your focus and professionalism. With that, Brad, let me turn it back over to you for Q&A. Brad Milsaps: Thank you, Bill. Rocco, 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 short follow-up question in order to accommodate as many of you as possible on today's call. Operator: Thank you. To ask a question, please press *1 on your telephone keypad. If your question has already been addressed and you'd like to remove yourself from queue, please press *2. As a reminder, we do ask that you please limit yourself to one question and a single short follow-up. Our first question today comes from Ryan Nash at Goldman Sachs. Please go ahead. Ryan Nash: Morning, everyone. Bill Rogers: Morning. Ryan Nash: Bill, just wanted to say congrats on your retirement. It's been great working with you and learned a ton from you over the years, particularly on our trips, so you'll definitely be missed. Maybe to kick it off, Bill, you talked about some of the trade-offs that you're making right now to grow the business, it's clear you could see commercial loan growth, end of period balances are down. On the flip side, you added a plus to the return target for the year. Can you maybe just expand on what's happening under the hood incrementally, maybe talk about each loan category, and how do you think about the focus on returns versus actually growing the company at this point? Bill Rogers: Yeah. Ryan, thanks. Also miss working with you. If we break down the loan categories, C&I, if you look sort of year-on-year on quarter, is up just under 8%. The places where we've continued to focus and have intentionality have good growth characteristics. Then if you break out consumer and you look at the areas like HELOC, then you look at other consumer areas like Sheffield and Service Finance, those have also continued to grow. We have good production in those capabilities. The other places, like indirect auto we're down actually quite significantly, and now down significantly in production. Our focus is on relationship-based things that also clear our profitability hurdles. Establishing these targets has really sort of come all the way through in the company. I'm really, really proud of the team, that they've embraced where we want to go from a profitability standpoint, clarity around strategy, sort of full alignment in the things that are important to us. Within those categories, within the commercial book, highly diversified. Really good focus, really good growth in the middle market area, for example, where we've had a focus. Good production, good pipelines in those areas. If we think about just as the loan component of that, I think our team's doing a good job staying focused on the things that are accreted over time. To your other question, it's also setting the stage and setting the platform for growth. Every incremental dollar that we add to the company on a growth platform, that just has a higher return and higher earnings efficiency and capital efficiency going forward. I would say we're not conceding long-term growth in terms of repositioning, I think we're setting the table for the efficient growth that comes forward. That help? Ryan Nash: That's great. Maybe if I can ask a follow-up from Mike. Mike, you took down full year NII expectations. Maybe just unpack a little bit what's including for loan growth, the exit margin, and what are the updated thoughts on deposit costs from here? Thank you. Mike Maguire: Sure. Good morning, Ryan. Maybe just to reiterate some of what we said already in our prepared remarks. The good news is, while we do see some pressure on NII for the year, we do feel quite good about fees being in sort of the 10% area year-over-year. Credit this quarter looked great, and we feel good about from an expense perspective, feel good too. I think from a bottom-line perspective, feel like we've got really nice momentum. Obviously, Bill just talked about some of the progress that we're proud of in terms of the ROTCE. The NII piece, we mentioned there's sort of three main headwinds. Bill mentioned, I mentioned the marine and wrecked vehicle business we actually exited during the quarter. Prime autos down. We mentioned across those portfolios and in a few others, we're down on a production basis, call it 40% year-over-year. That's $7 billion-$8 billion of annual production that's come out of the business in 2026 versus 2025. From our perspective, not regrettable, right? Those are trade-offs we're making to improve profitability. As you think about the spreads piece, there's sort of two components there as well, right? There's the piece that we're doing that's not necessarily happening to us. We have been remixing and reallocating capital from some of these less strategic, less profitable portfolios into C&I. That's going to result in a lower yield typically, but we believe a higher return longer term and be the right thing for the company over time. Even within wholesale, we're seeing some remixing into more high-grade sort of investment grade type credits. That's also having an effect. Loan spreads being pressured perhaps by some conscious choices we're making. We do see broad-based market compression. We came into the year with an expectation that we might see some kind of a bounce off the bottom on credit spreads, maybe to the tune of 10-15 basis points. Which would have perhaps felt a little bit conservative relative to some of what was being discussed in the industry at the time. If we hold spreads just constant from here, that would result in spreads for us at least, year-over-year being down 5-10 basis points versus the upside of 10-15 basis points. That's been a pretty important headwind for us. We've incorporated that into our outlook. We do reprice quite a few loans, as you can imagine. It's beyond the fixed rate loans, we reprice a pretty sizable portion of our floaters every quarter as well. That's been an important factor. Then, of course, deposits. We learn a lot about deposits in the Q2 of every year. There's just seasonality around taxes and bonuses. As we got deeper into the quarter and closed out June and looked forward, it just became clear to us that there is just much more client preference, inertia around higher rate products. We're seeing that remix. We've seen some of it year-to-date, and we have an expectation that that's going to continue. We've incorporated that into our outlook as well. Of course, all those three factors are offset in part by a higher belly of the curve, which does help us on the fixed rate asset repricing side. That's the headwind on NII. Again, maybe just to finish where I started, the good news is, while the components have moved around a touch, we still feel quite good about the bottom line. I think you asked about margins. I'll touch that quickly. We did see a touch of pressure on net interest margin linked-quarter. About half of that was just the composition of the earning asset growth. We saw bonds and cash maybe $3 billion higher. That's obviously dilutive to our net interest margin. Then on the loan and deposit-funded growth, you saw a basis point higher on deposits and three basis points worse on loan yields. Some of that's the swaps coming on as well, impacting loan yields. That's what took us down the four basis points. We would expect that to modestly improve throughout the course of the year. Modestly improve. As we get the benefit of fixed rate asset repricing. We still actually feel quite good about deposit balances both in wholesale and consumer. We're seeing nice production. It's really just mix. We actually do think that NIM will improve in the Q3, in part based on higher client deposit balances, but not to the same degree that we would have expected a quarter ago, or certainly back in January when we had a different rate environment. There's a lot of other factors that go into it. I think I got your questions there, Ryan. Ryan Nash: Yep, got them all. Thanks, Mike. Appreciate it. Mike Maguire: Yeah. Ryan Nash: Thanks again, Bill. Bill Rogers: Thanks. Operator: Our next question today comes from John Pancari at Evercore. Please go ahead. John Pancari: Morning. Bill, it's been a pleasure, and all the best in retirement. First, on the balance sheet optimization and NII. In your lowered outlook around NII, how much of that loan book rationalization that you cited is reflected in that guidance? Is there more that could impact next year's expectation as this continues to play out? Maybe also, what other rationalization is possible? I know you mentioned in your prepared remarks that you're continuing to evaluate the portfolio. Thanks. Mike Maguire: Yeah. Good morning, John. The changes, the retrending that we've made around production balances that we mentioned, as well as the exit of Marine and Recreation are in our outlook for this year. We haven't provided and don't plan to provide guidance for 2027 at this point. In terms of what else, I would just say it's a continuous search and opportunity to make sure that we're allocating capital in the absolute most efficient way. By the way, it's not entirely in consumer, right? There are things that we've done and will continue to do in wholesale around client selection, around pricing, around product design, rebalancing, that are all intended to create more profitability and efficiency. There's nothing else to say on that for now other than it's a really important initiative of ours to continue to deliver against this ROTCE improvement. We're going to make smart choices, and we're going to be guided by A, what fits our strategic eye and our business model, and then 2, profitability. John Pancari: Okay, thanks, Mike. Now I know you talked about the ROTCE improvement, and you mentioned confidence and above the 14% level for 2026. How do these actions and your updated thoughts and updated trends in general impact your 2027 15% expectation and the long-term 16%-18%? Just one other thing, kind of back to Ryan's question. If you could just update us on your loan growth and deposit growth expectations, your balance sheet assumptions underneath the NII outlook for this year, that'd be helpful. Thanks. Bill Rogers: Yeah. Mike, I'll take the first part, John. On the ROTCE expectations for the future. This quarter had some unique characteristics. Keep in mind, this track's not linear. Right? Quarter-to-quarter, it might change. Obviously, we have a lot more confidence in this year as we get to more than half the year through to say we'll be at 14+. I just don't think it's the time to change the established targets going forward. That being said, I think we certainly feel more confident in our path to a higher performing company. Today, change the guidance for where we are for this year, but stay on that path to higher performance and want to retain the right level of flexibility to achieve those numbers. Mike Maguire: I'll just add to that a little, John. Obviously, we are really pleased to be in the 15% area for the quarter. It's not a linear path. We do have some factors. As an example, you guys know this, you model it well. We have some preferreds that are semi- versus quarter payers. You do have heavier preferred in two of the quarters and lighter in two others. That's not to say that we don't feel like we're going to be on an upward trajectory, but it's not going to be a linear path, and you guys know that. In terms of deposits and loans, we still expect to see loan growth this year. Obviously, we've delivered deposit growth this year. What we're seeing is low single digit deposit growth. Call it 3% area. This is an annual view. Just mix is what we're keeping a really close eye on. You've seen DDA, for example, remix down from maybe call it 27-ish% at the beginning of the year. Maybe that resembles something closer to 25% by the end of the year, and hopefully stabilizing from there. From a loans perspective, I think we said 3%-4% earlier this year. We're still on track for that, probably high side of that. The bulk of that, and Bill mentioned that, is going to be on the C&I side, whereas consumer will be closer to flat, maybe +1%. That's what's in our outlook, John. Bill Rogers: Mike, to add to that. Mike Maguire: Sure. Bill Rogers: I mean, Mike mentioned this, the production engines are working. Mike Maguire: Right. Bill Rogers: The upfront side's working. On the consumer side, our Premier production for advisors up 15% on the deposit side. I talked about the loan side on the Service Finance. The quality of the production's really, really high. The quality of the wholesale deposit production is relationship-based. It's not sort of just rate-based. These are clients in which we've expanded our relationship with. We have payments related discussions with those in terms of increasing for the future. We do have a mixed opportunity, but the good news is the production engine's working, and we're adding high quality, relationship-oriented sort of operating type deposits. John Pancari: Got it. Thanks so much, Bill. Bill Rogers: Yep, John. Operator: Thank you. Our next question today comes from Ken Usdin with Autonomous Research. Please go ahead. Ken Usdin: Hi, good morning. Bill, once again, best of luck to you in the future. I was wondering if you could touch a little bit more on the deposit competition and the rate chasing that you mentioned in your prepared remarks. Can you talk about where that's coming from? Is it any different than what we've seen? Is it just the burden of a little bit from the higher for longer environment? Thanks. Bill Rogers: Yeah. I think what we've seen in the deposit migration to higher yielding is more client behavior than competitive pressure, in fairness. I think this is a trend that we've seen that's continued. We're in a rate cycle where I don't think that's particularly unusual. Competitive environment still is highly competitive. We're the most competitive we've ever been in terms of product and capability. That was my comment earlier is the production engines are working well, and the client expansion and the opportunities that we see are working well. I think this is a function of client behavior. Ken Usdin: Okay. Maybe one for Mike. Mike, would you mind walking us through that lingering amount of swaps that has to come on in terms of the book that's not active and the timing of kind of when the rest of that should be in the run rate? Thanks. Mike Maguire: Yeah. No problem, Ken. Maybe I'll take you back to the beginning of the year and just walk you through the year, because as you know, this can change. In the Q1, we had. I'll give you the receivers and maybe give you the payers, too, for the offset. We were $50 billion effective in Q1, with $24 billion of payers. Call it net receive, $26 billion. In this most recent quarter, we were $63 billion effective, call it +13 from Q1. Payers, relatively constant. Net effective $40 billion or so. That steps up on an effective basis for Q3 to about $80 billion, up to $85 billion in Q4. The payers are pretty much call it $23 billion for the rest of the year. As those come on, obviously depending on where we are from a SOFR perspective, that will add some pressure, and that's incorporated. You'll see that in the loan yields. The receive rate there. Call it 3.40. Ken Usdin: By the end of the year, are we kind of there? I know you'll continue to rework the portfolio just depending on where the rates go. Mike Maguire: It wasn't a very active quarter for us in terms of any swap activity we did. Just like we did in the Q1, we took a small handful and deferred the effective start dates. I think we peak in Q1 of 2027, and that's call it high nineties. Then I think from there would begin to decline. Ken Usdin: Okay. Got it. Thanks, Mike. Mike Maguire: You got it. Operator: Thank you. Our next question today comes from Erika Najarian with UBS. Please go ahead. Erika Najarian: Hi. Good morning. Congratulations, Bill. I hope you enjoy your retirement. I still remember meeting you at SunTrust. You've been great. I hope you enjoy your retirement. Bill Rogers: Thanks, Erika. Erika Najarian: You're welcome. You were our chairman of the board when you decided to name Mike Lyons as your successor. Obviously, he was inside of PNC for some time and then had a brief stint at Fiserv. You mentioned what you found in him in terms of his focus on growth. What other characteristics did you particularly, you and the board, like about Mike in terms of taking this company to this future that you see? Maybe speak a little bit about sort of how you think he's going to frame the technology investments and potential challenges at the firm. Does he believe that this is a 16%-18% ROTCE company over the medium term? Bill Rogers: Yeah. Thanks, Erika. Succession planning is the most important work that a board does. Put that in context. We've been at this for well over a year, thinking about my timeline, but more importantly, thinking about what's the right time for the company, and are we hitting on cylinders, and is this a right time for a transition? We spent a lot of time thinking about what is the future leader of this not only company, but this industry look like. We did a lot of profile work against that, and I think that future leader not only has a lot of understanding about sort of the core businesses and business that we're in, but even as you noted, much more knowledge about technology and payment systems and where the proverbial puck is going, or maybe where the ball's going now that we're in World Cup time. Those were the criteria upon which we evaluated how we wanted to think about things. I think Mike fits that perfectly. Strong commitment to performance, great track record, really strong knowledge of the payments business. Probably PhD course in the technology side at Fiserv as well. Having a chance to look across a lot of spectrum and see what others are doing. Experience as a CEO. Being a purposeful leader. Remember, that's an important part of our context as well, as someone who really cares about the communities we serve and cares about the teammates and focuses on our purpose. As it relates to the specific targets, I can speak for Mike and the board, I think as I did in my prepared comments. Our goal is to be a high-performing company. I think 16%-18% reflects that journey. Mike came in here to lead and run a high-performing company. I don't think there'll be any doubt about that. Relative to the investments that need to be made and the journey and the place that we go, he'll have the requisite flexibility to think about how to achieve efficiencies and how to invest. I think today we've got a really good platform of discovery. Give a lot of credit to Mike Maguire of building a platform such that the dashboard will be very clear to Mike. It won't be confusing in terms of where the opportunities are and where to invest for the long term. Look, he's got a lot of incredible, strong qualities. Look, also, he's got a great team. You can see the results and a team that's deep. The succession planning is not only at the CEO level, but it runs all the way through the company. We've got a deep team sort of ready to go, fired up. Everyone's committed running a high-performing company and achieving what we all see as not only the potential, but the opportunity for Truist. Erika Najarian: Just as a follow-up, I think the other investors would agree with you, Bill, that you do have a deep team. What have the conversations been like sort of underneath the surface in terms of top producers, the producers that we don't meet on the street? Obviously having an outsider CEO announcement can be a little bit jarring, but has there been sort of outreach? What are those conversations like with the top talent in terms of reassuring them that they're going to be part of this deep team going forward? Bill Rogers: Erika, my philosophy and our leadership team philosophy is we re-recruit everyone every day. That's the mindset that we have in our company. We're on that journey. Look, I think they see what we see. They feel the opportunity. They see the future. They see what we're building that allows them to not only be successful in their jobs, but to be successful in their careers because we're building great opportunities. That's a key value for our teammates is build meaningful careers. Are we re-recruiting? Yes. We recruit every day. Are people excited? Yes. They see the potential of where we're going in the future. I think also certainty helps, and so probably a little uncertainty as to my timeline, and now we have a lot of certainty and people leaning in and leaning forward. I think the best thing for top performers is an incredible platform, career opportunity, and a lot of certainty, and I think that's what we're delivering. Erika Najarian: Thank you for your answers, also just congratulations again. I just want to give you a shout-out, Bill, that not only you have a good reputation as a leader, but a great reputation for being a top-notch human being. You will be missed. Bill Rogers: Well, Erika, thank you for that. Operator: Thank you. Our next question today comes from Manan Gosalia with Morgan Stanley. Please go ahead. Manan Gosalia: Hey, good morning. Bill, I'll echo the best wishes for your retirement. Congratulations. For my question, I apologize if this is a little repetitive, but you spoke about full-year loan spreads down 5-10 basis points year-on-year if you keep spreads where they are today. You spoke about the mix shift in loans, the mix shift in DDA balances, yield-seeking behavior from deposit holders. Can you put it all together for us and go through the assumptions baked into the new NII guide on the incremental changes to each of these components from here? I'm just trying to assess the comfort level on the new guide and what the risk will be. Mike Maguire: Hey, Manan, it's Mike. I'll take that one. I think I've given you some of it. I'd say maybe I'll give it to you in terms of relative proportions. I think the most impactful component of the three headwinds we discussed is the unfavorable deposit mix, right? I think that as we still feel quite good about the fact that we're onboarding a lot of new clients. We're defending the right clients and the right opportunities. We're going to be growing client deposits this year, but the mix is going to be not as favorable as we expected at the beginning of the year or even last quarter. DDA is a good example. I think I mentioned we remixed closer to 25% by the end of the year. Loan spreads, again, I think coming into the year, and throughout a lot of the first half, we did have an expectation that we would see some widening. We did see it bounce around a little bit. Based on what we've seen so far, and based on our new outlook, we do expect on a full year basis to have spreads down, call it 5-10 basis points. We reprice about $30 billion of loans a quarter, 10 of it's fixed, 20 floating. If that gives you some sense for magnitude. That's probably the second most important factor. The reducing volume on the consumer stuff is important too, but it's not as important as those other two factors. Manan Gosalia: Got it. Thank you. I guess on the capital side, just given some of the changes in loan mix, and moving some loan production away from less profitable loans, I guess why not do more than $5 billion in buybacks in the year? Clearly, you have a lot of excess capital right now. Mike Maguire: Yeah. We've talked about this a little bit in the past because this has been a question. Look, if you look at our buyback at $5 billion, we're pretty elevated, right? We've got a total net payout ratio above 100%. By the way, we think that's appropriate given our capital position. We think it's a prudent approach to be somewhat thoughtful in our glide path. We've said we want to be at 10% by the end of 2027. If you take that literally that implies that we're going to continue to return a significant amount of capital to shareholders throughout the rest of this year and next year. That gets us to that 10%. Look, we're conscious always of market factors. We're conscious including, by the way, opportunities to grow. If we see outsized profitable growth opportunities, that's our first priority when it comes to capital. We feel good about the $5 billion this year and really not ready to talk about next year at this point, but also do feel good about that 10% and that glide path. Bill Rogers: Yeah, I think to your point, Mike, this just allows us to have a more durable capital plan. I think that's so having really good capital, which has been a lot of our RWA efforts and things that we've done, I think just gives us a more durable flight path with a lot of flexibility. Manan Gosalia: Great. Thank you. Operator: Thank you. Due to time constraints, we do ask going forward that you please limit yourself to one question. Thank you. Our next question comes from Mike Mayo with Wells Fargo Securities. Please go ahead. Mike Mayo: Hey, Bill. From other comments, I do think you're a great human being, but as you know, I've been extremely disappointed about the results this decade where the stock has been kind of dead money when the stock banks are up almost half and the S&P is almost double. I've been very frustrated over time. We're not here to relitigate what happened in the last decade, but as you look going forward, what do you think can be done better? What's your advice? What have you learned about investing for better growth than you've seen? Especially with population growth in your footprint, almost as you've said, 50% better than average. Thank you. Bill Rogers: Yeah, Mike, look, we also want to have and are positioned to have a high-performing company. We're aligned in terms of that objective. I think all the things that we've talked about here are the things that we're doing to position our company for growth. We've made a lot of significant investments in technology, a lot of significant investments in talent. I think most importantly, we're strategically aligned. People have clear goals about what it means to be a high-performing company. We've established those with a lot of clarity, and quarter by quarter, we're making progress against those objectives. What my advice would be is to stay on that track. I think what Mike will be able to do is to provide some acceleration, some assurance, some, in fairness, intensity against that long-term objective. I think we're just really extremely well-positioned. I feel really good about the baton passing, but also feel really good about, you think about the 4x100 relay. When we're passing the baton with somebody can run the last lap at a lot of speed against a really common objective. I think we're well-positioned. I think the decisions we've made, particularly over the last year, providing a lot of clarity for shareholders about the direction is the exact path, now it's just more foot on the accelerator. Mike Mayo: All right. Hopefully, no one drops the baton. Thank you. Operator: Thank you. Our next question today comes from Ebrahim Poonawala with Bank of America. Please go ahead. Ebrahim Poonawala: Good morning, Bill. Congratulations and all the best in retirement. As a follow-up to your response in terms of Mike Lyons would do the acceleration part. Maybe spend a few minutes talking about that. As shareholders, we all think about is Mike going to be a change agent, do things differently? Should we expect him to lay out a plan, maybe tied to the acceleration you mentioned? Level set those expectations for us as you've gone about recruiting him and going through that process of what that acceleration means, what's not being done today that Mike will be able to do? Or is thinking about Mike bringing a meaningful change misguided? Thanks. Bill Rogers: Yeah, look, I want to be careful about laying out Mike's plan in today's call. If you think about the strengths that he brings to our organization, think about his operating performance, his knowledge of the payments business, places where we're investing and want to grow our business, and a platform from which to operate. We want to set a fantastic table. Back to the earlier comments with capital flexibility and capacity to invest and getting the platform at such a place that every incremental dollar has a higher return profile from both an income and a capital standpoint. I think that's the setting the table component of this. I think let's let Mike come in and talk about what he wants to do. Back to my earlier comment. Mike came here to lead a high-performing company. That was the direction from the board. That's the clear mandate. By the way, that's the mandate all the way through every teammate at Truist in terms of what we're trying to accomplish. I don't think from a global, where we're going perspective, we're going to have any misalignment. How Mike wants to accomplish that, at what speed, and where he's going to place a particular emphasis, I think let's wait for Mike. Ebrahim Poonawala: Got it. All the best again. Thank you, Bill. Bill Rogers: Yeah, thanks. Operator: Our next question today comes from Matt O'Connor at Deutsche Bank. Please go ahead. Matt O'Connor: Good morning. I was hoping you could just aggregate how much loan runoff there is from what you mentioned, the RV marine book, and then the prime auto that going to zero. I realize it'll be over the course of a couple or few years, but how much loan runoff in aggregate from those areas you've already identified? Then I guess why make the decision now to exit or run down those books? Thank you. Mike Maguire: I'll start with the last question. Matt, good morning. It's not really a why now. I think what we've seen is we've been talking about de-emphasizing some of these portfolios for some time now perhaps to a lesser extent. As we've seen success, as we've become more assertive in how we're sort of managing some of that growth, we've simply accelerated it. I gave you a sense for the year-over-year production change. Call it $7 billion-$8 billion across those portfolios. That's just on a few of those that we identified. Our indirect auto business prime is around a $20 billion business. RAC's another $4 billion or $5 billion, so call it $25 billion of auto. Marine RV was a smaller portfolio. Call it $4 billion. That stuff, A, we'll be producing less of it, and B, it's generally pretty short weighted average life stuff, so call it two and a half, three years. I think you'll see us remix. Again, Bill mentioned, by the way, there are parts of the consumer loan portfolio that we are quite fond of that are more profitable, and you'll see continued production and growth there. Again, relative to the headwinds that we articulated around our updated outlook, this is the smallest component in-year, but an important one nonetheless, and one that we, again, no regrets. It just doesn't fit our eyes strategically and doesn't chin the bar from a profitability perspective. Matt O'Connor: Just to clarify, are you right-sizing auto? Or as of now, at least planning to fully exit it? It sounds like you're exiting all the RV marines. Mike Maguire: I think it's right-sizing. This is a business that does sort of ebb and flow depending on the competitiveness of the market and other factors. Something else that we've done, we didn't talk about it. Bill mentioned it, and I mentioned it in prepared remarks. Some of the work we're doing to improve our sort of the capital efficiency in some of these assets. We did complete two CLNs, and those were both in the prime auto portfolio. I think we have about an $11 billion reference pool. About half of those loans have been CLN. That significantly improves the ROTCE profile of those assets. Essentially selling some of the unexpected losses at a really low cost of capital. It's a long list of things we've been doing to try to get some of the drag off the wing, so to speak, and create capital flexibility for ideally good profitable growth, but also to return capital to shareholders. It's a lot of ingredients to the recipe. Matt O'Connor: Okay. That's helpful. Thank you. Mike Maguire: Yep. Operator: Thank you. Our next question comes from Gerard Cassidy at RBC Capital Markets. Please go ahead. Gerard Cassidy: Good morning, Bill. Good morning, Mike. Mike Maguire: Morning. Gerard Cassidy: Bill, obviously you and I have been through a few cycles, we remember the dot-com boom and the SPACs that we saw during the pandemic. Today with AI, this is not directed specifically for investment banking, but AI is just so big in this economy today, and it's hard to get our arms around the impact it's having other than it's positive on the economy. What are you guys looking at for the second derivatives that could impact Truist where at some point, AI will slow down in growth. Are you guys already starting to set in motion just protections about the second derivatives that could materialize over the next two, three, or four years? Bill Rogers: Yeah, Gerard, good question. We have been through a lot. Coming out of the last crisis, I coined an acronym, which is DVD, which is diversity, velocity, and discipline, and that's what we're employing. We want to make sure that our portfolio has a ton of diversity, so don't over-concentrate in any one area. That's where we've seen the challenges are. Velocity, just make sure that we're trading loans and trading activity and know price discovery and know where things are because it can change fast and on a dime. The final is just have a lot of discipline. If you establish these targets and these limits, you have to live within them. Right now, there's a siren song of wanting to do more and being able to expand different places. You could certainly put your foot on the accelerator and probably grow faster. We're very conscious of the discipline nature of this. As you point, we look at secondary and tertiary impacts in any particular market, particularly related to the investments in AI. Today, that's been a lot of opportunity. We want to make sure that that's back to the DVD is very diverse. I would say, today, as you pointed, probably more in the category of opportunity. We're eyes wide open in terms of how we want to manage this and portfolio over time and think about the impacts that it can have on our business, and be very conscious of the risk as well. Gerard Cassidy: Very good. Like the others, good luck in your future endeavors. Thank you. Bill Rogers: Thanks so much. Operator: Thank you. That concludes the question-and-answer session. I'd like to turn the conference back over to Brad Milsaps for any closing remarks. Brad Milsaps: Okay. Thank you, Rocco. 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 in Truist, and we hope you have a great day. Rocco, you may now disconnect the call.