Truist Financial Corporation
Analysis
Truist has stopped chasing loan growth. It is selling the loan books that earned too little, shrinking the balance sheet on purpose and leaning on its fee businesses, betting that a smaller bank earning more beats a bigger one earning less. How much revenue does Truist give up from selling RAC and LightStream?
- Truist is shrinking its loan book on purpose.
Mike Lyons sold Regional Acceptance and LightStream and cut marine, RV and prime auto — loans that added interest income but missed his return bar. He says it "is not about shrinking to achieve higher returns," yet the revenue goes first.
- Fees, not lending, now carry the earnings.
Each quarter the interest-income outlook got worse: no Fed cuts, customers into higher-paying deposits, thinner loan spreads. Fees went the other way, to about 10% growth, so earnings beat estimates every quarter since. How much of the fee growth is investment banking versus wealth management?
- The return targets rest on spending Truist has not made yet.
Lyons says branches, ATMs, marketing, cards and tech were starved of money for years, and he will fund them by cutting other spending, not by growing total costs. Until it shows up in deposits, the 15% target is a plan. Where will Truist find the savings to pay for the branch rebuild?
- Strategy narrowed under new CEOThe bull case is that new leadership has narrowed the strategy to relationship businesses and is funding investment by exiting loan-only units with poor returns.
- Fee businesses outgrow balance sheetFees from investment banking, trading and wealth are growing faster than the balance sheet, so revenue grows without tying up more capital.
- Capital reallocation and buybacksCapital released by asset sales and large buybacks is being redeployed into shorter securities and better-return lending, which should lift returns.
- Net interest income shortfallsThe bear case is that net interest income keeps falling short as loan spreads compress and depositors move into higher-rate products, offsetting fee gains.
- Execution record and divestituresSelling loan portfolios lowers revenue now, so the promised return improvement depends on execution that has slipped repeatedly at Truist since the merger.
- Competition in Southeast marketsBranch, technology and talent investment takes years to pay off, and competitors in the same fast-growing Southeast markets are spending just as heavily.
| Politician | Transaction | Amount | Traded | Filed |
|---|---|---|---|---|
Donald Trump Republican · Executive | Purchase | ≥$100K | Jul 31 | Sep 22 |
Donald Trump Republican · Executive | Purchase | ≥$1K | Jul 17 | Sep 22 |
Donald Trump Republican · Executive | Purchase | ≥$1K | May 15 | Jul 1 |
Donald Trump Republican · Executive | Purchase | ≥$15K | Mar 23 | May 13 |
Donald Trump Republican · Executive | Purchase | ≥$1K | Mar 17 | May 13 |
Congressional trading data provided by QuiverQuant
How Truist Financial turned $10.8B of revenue into $3.5B of operating income.
| Revenue | ||
|---|---|---|
| Community Banking | $153.0M | ▲ 13.33% YoY |
| Financial Services | $23.0M | ▲ 4.55% YoY |
| Residential Mortgage Banking | $1.0M | ▼ 50.00% YoY |
| Total revenue | $10.8B | |
| Operating income | $3.5B | 32.4% |