TRUIST FINANCIAL CORP Q2 2026 earnings call

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.

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.

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.

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.

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.