Interest fee

Truist (TFC) Q4 revenue outpaces fee income and lower expenses

Financial truistTFC’s fourth-quarter 2021 adjusted earnings of $1.38 per share easily beat Zacks’ consensus estimate of $1.26. Net income increased by 16.9% over the prior year quarter.

Results were helped by higher fee income, lower operating expenses, modest growth in loans and provisions. However, lower interest rates and a decline in net interest income (NII) were the slowing factors.

Results for the reported quarter exclude restructuring and charges related to the BB&T-SunTrust Banks merger and additional merger-related operating expenses. After taking these items into account, net income available to common shareholders (GAAP basis) was $1.52 billion or $1.13 per share, compared to $1.23 billion or 90 cents per share in the quarter. of the previous year.

In 2021, adjusted earnings of $5.53 per share beat the consensus estimate of $5.41 and increased 45.5% year over year. Net income available to common shareholders (GAAP basis) was $6 billion or $4.47 per share, compared to $4.2 billion or $3.08 per share in 2020.

Lower income and expenses

Quarterly total revenue was $5.57 billion, down 1.5% year-over-year. The top line missed the Zacks consensus estimate of $5.60 billion.

In 2021, total revenue decreased 1.8% from the previous year to $22.30 billion. The top line lagged the Zacks consensus estimate of $22.34 billion.

The fiscal equivalent quarterly NII fell 3.7% from the year-ago quarter to $3.27 billion. The decline was due to lower purchase accounting accretion, lower rates on earning assets, lower fees on Payroll Protection Program (PPP) loans and lower loans. These were partly offset by growth in the securities portfolio and lower financing costs.

Net interest margin contracted 32 basis points (bps) year-over-year to 2.76%.

Non-interest revenue increased 1.7% to $2.32 billion.

Non-interest expense was $3.70 billion, down 3.5% from the prior year quarter. Adjusted expenses fell 1.4% to $3.10 billion.

The adjusted efficiency ratio was 56.0%, compared to 55.9% in the fourth quarter of 2020. An increase in the efficiency ratio indicates a deterioration in profitability.

As of December 31, 2021, total average deposits were $411 billion, up 2% sequentially. Average total loans and leases of $291.1 billion increased slightly.

Credit quality is improving

As of December 31, 2021, total non-performing assets (NPA) were $1.16 billion, down 16.1% year-over-year. As a percentage of total assets, NPAs were 0.21%, down 6 basis points.

Provision for losses on loans and leases was 1.53% of total loans and leases held for investment, which decreased by 42 basis points. Net write-offs were 0.25% of average loans and leases, down 2 basis points from the prior year quarter.

Provision for credit losses was a profit of $103 million compared to a provision of $177 in the year-ago quarter. The releases of reserves, due to the improvement in the economic outlook, led to increases in the provision.

Robust profitability and capital ratios

At the end of the quarter under review, the return on average assets was 1.19%, compared to 1.05% in the prior year quarter. The average common equity return was 9.8%, up from 7.9% in the fourth quarter of 2020.

As of December 31, 2021, the Tier 1 risk-based capital ratio was 11.3%, compared to 12.1% recorded in the prior year quarter. The Common Equity Tier 1 ratio was 9.6% as of December 31, 2021, compared to 10.0% as of December 31, 2020.

Share buyback update

During the quarter under review, Truist Financial repurchased shares worth $500 million.

Our opinion

Truist Financial’s efforts to capitalize on the investment banking and insurance businesses bode well and will further contribute to fee income growth. In addition, an increase in loan demand and robust economic growth will support financials. However, the low interest rate environment should hurt margin growth. Assembly expenses remain another major concern.

Truist Financial Corporation Price, Consensus, and EPS Surprise

Truist Financial Corporation price-consensus-eps-surprise-chart | Quote from Truist Financial Corporation

Truist Financial currently carries a Zacks rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of other major banks

Robust advisory business, the release of reserves and an increase in loan demand spurred JP MorganJPM’s fourth-quarter 2021 earnings of $3.33 per share. Net income was well above Zacks’ consensus estimate of $3.01. The results included net releases from credit reserves. Excluding that, earnings were $2.86 per share.

However, disappointing business performance, lower interest rates and increased operating expenses were the main headwinds for JPMorgan’s quarterly results. Additionally, the company’s mortgage costs and related income fell during the quarter.

Wells FargoWFC’s fourth-quarter 2021 earnings per share of $1.38 beat Zacks’ consensus estimate of 1.09. Additionally, net income improved 86% year over year. The results include certain non-recurring items.

Improved investment banking and other asset-based fees, along with strong capital gains in WFC-affiliated venture capital and private equity businesses, as well as lower costs, supported the bank’s performance. Still, a decline in the NII due to low returns on earning assets and declining lending were the undermining factors.

Citigroup C posted a surprise 5.04% profit in the fourth quarter of 2021. Income from continuing operations per share of $1.46 beat Zacks’ consensus estimate of $1.39. However, the reported figure was down 24% from the prior year quarter.

Citigroup’s investment banking revenue jumped, driven by equity underwriting and growth in advisory revenue. Weak retail banking activity and higher operating expenses were the main headwinds.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.