Truist Financial Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
July 18, 2025

Key Takeaways

  • Positive Sentiment: Net loans grew 3.3% sequentially and 2.0% on average, driven by broad-based consumer and wholesale production and new client acquisition in key markets.
  • Positive Sentiment: CET1 capital ratio was 11.0% at quarter-end, stress capital buffer will floor at 2.5%, and the firm returned $1.4 billion in dividends plus $750 million of buybacks while planning another $500 million in Q3.
  • Positive Sentiment: Nonperforming loans and net charge-offs both declined by nine basis points linked quarter, reaching multi-quarter lows and reflecting ongoing credit discipline.
  • Negative Sentiment: Investment banking and trading revenue fell 25% quarter-over-quarter due to early-quarter market volatility, though trading improved in May and June with expectations for a second-half recovery.
  • Positive Sentiment: Digital account production rose 17% year-over-year with 43% of new clients onboarded online, while new RTP alias payment functionality and other innovations helped boost treasury management revenue by 14%.
AI Generated. May Contain Errors.
Earnings Conference Call
Truist Financial Q2 2025
00:00 / 00:00

Transcript Sections

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Operator

Greetings, ladies and gentlemen, and welcome to the Truist Financial Corporation Second Quarter twenty twenty five Earnings Conference Call. Currently, all participants are in a 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 Milsoff.

Brad Milsaps
Brad Milsaps
Head - IR at Truist Financial

Thank you, Betsy, and good morning, everyone. Welcome to Truist's second quarter twenty twenty five earnings call. With us today are our Chairman and CEO, Bill Rogers our CFO, Mike Maguire and Chief Risk Officer, Brad Bender as well as other members of Truist's senior management team. During this morning's call, they will discuss Truist's second quarter results, share their perspectives on current business conditions and provide an outlook for 2025. The company presentation as well as our earnings release and supplemental financial information are available on the Truist Investor Relations website, ir.truest.com.

Brad Milsaps
Brad Milsaps
Head - IR at Truist Financial

Our presentation today will include forward looking statements and certain non GAAP financial measures. Please review the disclosures on Slides two and three of the presentation regarding these statements and measures as well as the appendix for appropriate reconciliations to GAAP. With that, I'll turn it over to Bill.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Great. Thanks, Brad, and good morning, everyone, and thanks for joining our call this morning. Before we discuss the second quarter results, let's begin like we always do at with purpose on slide four. At Truist, our purpose to inspire and build better lives and communities, it's more than a statement. It's the foundation of our strategy.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

It's the lens through which we make decisions and the reasons teammates show up every day with conviction and care. In the second quarter, we continue to bring this purpose to life in meaningful ways. We welcomed a dynamic slate of new leaders across our company, reinforcing our commitment to attracting top talent to our already highly experienced and very capable teams. These leaders were attracted to our purpose driven culture and are already making meaningful impact, strengthening our presence in key growth markets and expanding our capabilities across high potential verticals. From sector specific coverage to commercial and middle market banking, to small business wealth, premier banking and payments, our teams are deepening client relationships, driving new business and positioning Truist for the long term sustainable growth, all which were evident in these second quarter results.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

On slide five, for the second quarter, we reported net income available to common shareholders of $1,200,000,000 or $0.90 a share, which included $02 of restructuring charges related to severance and $01 of losses from the sale of certain investment securities. At a high level, our solid performance in the second quarter reflects the diversity of our business model and the execution of many of our strategic growth initiatives that we've been discussing now for several quarters. These initiatives include accelerating growth through the addition of new clients and deepening existing client relationships in areas like payments, wealth and premier banking. We're executing our plan while maintaining our expense and credit discipline and returning capital to shareholders. During the second quarter, loan balances increased 2% and end of period loans increased 3.3% linked quarter.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Growth was broad based across our consumer and wholesale segments and driven by increased loan production and new client acquisition. Our lending pipelines remain strong and overall loan production is up significantly year over year. Growth should also benefit from our expansion efforts in markets where we have smaller but growing share and from many of the new teammates that have joined our company. This quarter's loan growth helped offset the equity and debt market volatility that occurred early in the quarter. This volatility impacted trading, capital markets and M activity for the industry resulting in lower revenue for investment banking and trading businesses.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

As you've heard me discuss previously, I'm confident that our advice driven business model is well suited to help our clients navigate current market conditions and continue to grow our share given the ongoing investments we are making in talent, products and industry verticals. We believe that our investment banking and trading business is well positioned for a second half recovery as we saw steady improvement in overall banking revenue in each month during the quarter. Adjusted expenses did come at the high end of the expected range, but remain confident in our ability to deliver our 1% expense growth target and positive operating leverage in this year. That includes the impact of ongoing investments in talent and technology. We also maintained strong asset quality metrics as both non performing loans and net charge offs were down nine basis points linked quarter.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

In addition, we also received favorable results from the Federal Reserve's annual stress test. We expect that our stress capital buffer will decline and be floored at 2.5% effective October 1. Finally, we remain in a strong capital position, which allows us to support our balance sheet growth and return capital to shareholders. During the quarter, we returned $1,400,000,000 of capital to shareholders through our common stock dividend and the repurchase of $750,000,000 of our common stock. Our share repurchase activity in the second quarter included $250,000,000 of repurchases above our recent $500,000,000 quarterly target as we opportunistically took advantage of market volatility and weakness in our share price early in the quarter.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

We do plan to target approximately $500,000,000 of share repurchases during the third quarter. Before I hand the call over to Mike to discuss the quarterly results, I want to spend some time discussing the progress we're already making on our strategic priorities and the positive momentum we're seeing within our business segments and with our digital initiatives on slides six and seven. In consumer and small business banking, I'm encouraged by another solid quarter of consumer loan and deposit growth, net new checking account growth and progress with our premier banking clients as we deepened relationships and acquired key new clients and households through digital and traditional channels. Net new checking account growth, which is a key measure for the growth potential and health of our company, was once again positive in the second quarter as we added nearly 37,000 new customers, new consumer and small business accounts. Importantly, we're attracting younger clients with higher average balances and greater median income, which aligns with our strategy to engage clients early and build enduring relationships over time.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Average consumer and small business loan balances increased 2.8% linked quarter and end of period balances increased 3.8% due to growth in residential mortgage, indirect auto and other consumer with production up significantly year over year. Over the last year, we've added significant numbers of new partners and dealers to our service finance and Sheffield platforms, which is helping drive the growth in other consumer loan balances. We also saw a significant increase in loan and deposit production per banker in our premier banking segment, which is a key area of strategic focus. We're growing while also maintaining our credit and pricing discipline. Consumer net charge offs of 71 basis points reached their lowest level since 2023 and new production spreads remained accretive to the overall portfolio.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

In wholesale, I'm encouraged by this quarter's loan growth, improved production and progress in key focus areas like payments and wealth. During the quarter, we saw 1.5% growth in average wholesale loans and 2.9% growth in end of period loans, driven by growth from new and existing clients and increased production. Average C and I growth was driven by all of our industry banking groups with particular strength in FIG and energy, middle market lending and structured credit. As I've mentioned previously, we have a specific focus on capturing more of the middle market. We've seen these balances increase in each quarter this year, driven by new clients in a wide variety of industries and a targeted select geographies where we continue to expand.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Year to date, we've attracted twice as many new corporate and commercial clients to our platform compared with the same period a year ago, while we're also seeing a 40% increase in revenue per client. In wealth, net asset flows were positive despite volatile equity and fixed income markets, as we saw a 27% increase in year to date AUM from wholesale and premier clients compared with the same period a year ago. Our payments team continues to launch new services that meet our clients' needs for solutions that provide them with speed, simplicity, and safety. During the second quarter, we also experienced more digital innovation. Truist became the first financial institution to prove request for payment over the RTP network via an alias such as a cell phone or an email address.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

This innovation is designed to unlock meaningful value for both commercial and consumer clients, accelerating cash flow, improving reconciliation and delivering real time confirmations. These enhancements along with continued investments in our team have driven a meaningful increase in treasury management penetration rates with our existing clients and helped drive a 14% increase in treasury management revenue versus the second quarter of last year. Enhancing the client experience and growing our digital capabilities are also important parts of our strategy. Let me discuss that in detail on slide seven. We continue to see strong momentum in our digital strategy with meaningful progress, platform integration, engagement and production.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

In the second quarter, digital account production rose 17% year over year with 43% of new to bank clients joining us through digital channels, a 900 basis point increase versus the second quarter of last year. This momentum reflects investments we've made in our digital platform and improvements we've made to the digital onboarding experience. A key milestone this quarter was fully integrating LightStream lending products into our digital platform under the new LightStream by Truist brand. This integration expands access to lending solutions for all Truist clients and further strengthens our digital offering. We're also seeing deeper engagement across our digital platform.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

More than 1,800,000 clients are now using our digital financial management tools, and that's a 40% increase from last year. Together, these results highlight the strength of our digital foundation and our continued focus on delivering value, operating efficiently, and deepening client relationships. We expect to continue growing our digital presence with clients as we further leverage our modern and scalable technology platform. Now, me turn it over to Mike to discuss our financial results in more detail. Mike?

Mike Maguire
Mike Maguire
CFO at Truist Financial

Thank you, Bill, good morning, everyone. I'll start with our financial performance highlights on slide eight. We reported second quarter twenty twenty five GAAP net income available to common shareholders of $1,200,000,000 or $0.90 per share. As Bill mentioned, included in our results are $02 per share of restructuring charges, which are primarily related to severance. In addition, our results included an $18,000,000 pre tax loss or a penny per share after tax related to the sale of three ninety eight million dollars of lower yielding investment securities.

Mike Maguire
Mike Maguire
CFO at Truist Financial

We invested the proceeds from the sale into higher yielding investment securities and anticipate an earn back of approximately two years. Moving now to 2Q 'twenty five results. Adjusted revenue increased 2.1% linked quarter due to 2.3 growth in net interest income and 1.8% growth in non interest income. Adjusted expenses increased 3.1% linked quarter, primarily due to higher personnel expenses related to annual merit increases and strategic hiring efforts. As Bill mentioned, our asset quality metrics showed improvement as both non performing loans and net charge offs declined on a linked quarter basis and year over year basis.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Next, I'll cover loans and leases on slide nine. Average loans held for investment increased 2% on a linked quarter basis due to growth in both average commercial and average consumer loans. End of period loans increased $10,200,000,000 or 3.3%, split evenly between commercial and consumer loans. Average commercial loans increased $3,000,000,000 or 1.6% due to $3,300,000,000 of growth in C and I loans, partially offset by modest declines in CRE and commercial construction loan balances. In our consumer portfolio, average loans increased $3,200,000,000 or 2.7% linked quarter due to growth in residential mortgage, indirect auto and other consumer.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Other consumer loans, which primarily include Sheffield and Service Finance, are typically seasonally strongest in the second and third quarters of the year, but are also benefiting from new partners and dealers added to the platforms throughout the course of the year. Moving to deposit trends on slide 10. Average deposits increased $8,300,000,000 sequentially, or 2.1%, driven by growth in interest checking, time deposits and non interest bearing demand. Average deposit balances were impacted by $10,900,000,000 of short term client deposits that we discussed on last quarter's earnings call. These deposits remained on our balance sheet for the entire quarter, but have since been withdrawn.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Excluding the impact of these deposits, average deposit balances would have been down slightly on a linked quarter basis. As shown in the chart on the bottom right hand side of slide 10, our cumulative interest bearing deposit beta declined from 43% to 37% on a linked quarter basis. If you were to exclude the impact of the two larger short term deposits, the rate paid on interest bearing deposits and our cumulative interest bearing deposit beta would have been relatively stable. Moving to net interest income and net interest margin on slide 11. Factable equivalent net interest income increased 2.3% linked quarter or $80,000,000 primarily due to the impact of loan growth, fixed rate asset repricing and one additional day in the second quarter.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Our net interest income or margin increased one basis point on a linked quarter basis to 3.02%. As you can see on the top right hand side of the slide, we updated our outlook for fixed rate asset repricing. We expect to reprice approximately $27,000,000,000 of fixed rate loans and investment securities over the remainder of 2025. Depending on the level of loan and deposit growth in the second half of twenty twenty five, we may opt to use cash flow from the investment portfolio to fund a portion of our loan growth for the remainder of the year. Based on our current view of interest rates for the remainder of 2025, we anticipate that new fixed rate loans will have a run on rate of around 7%, compared with a run off rate of approximately 6.4%.

Mike Maguire
Mike Maguire
CFO at Truist Financial

We also updated our swap portfolio disclosure in the bottom right hand corner of the slide. This reflects a small increase in our received fixed swap program from the prior quarter. Turning to non interest income on slide 12. Adjusted non interest income increased $25,000,000 or 1.8% versus the first quarter of twenty twenty five, as growth in our other income was partially offset by lower investment banking and trading revenue. The linked quarter increase in non interest income was primarily attributable to an $83,000,000 increase in other income related to higher NQ DCP income, which is offset by personnel expense, and income from certain equity investments and other investments that were lower in the first quarter of twenty twenty five.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Investment banking and trading income declined $68,000,000 or 25% linked quarter, reflecting weaker trading results, lower capital markets activity and lower M and A volumes during the first half of the second quarter. Early in the quarter, our trading business, which primarily supports our investment banking franchise, incurred losses driven by market volatility. The month of May was much improved, and June was more consistent with the performance we have historically experienced in this business and would expect to perform for the remainder of the year. As Bill mentioned, we also saw improvement in investment banking in the second half of the quarter, and we remain optimistic about investment banking and trading revenue improving in the second half of twenty twenty five, based on our current pipeline and an improvement in overall activity. On a like quarter basis, adjusted non interest income declined to $20,000,000 or 1.4% compared to the second quarter of twenty twenty four, primarily due to lower investment banking and trading income and lower wealth management income due to the sale of Sterling Capital Management in July 2024.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Next, I'll cover non interest expense on slide 13. Adjusted non interest expense, which excludes the impact of restructuring charges, increased 3.1% linked quarter due primarily to higher personnel expenses related to annual merit increases and strategic hiring efforts. On a year over year basis, expenses remained well controlled and were up 2.1% due primarily to higher professional fees and outside processing expense related to ongoing investments in technology and in our risk infrastructure. Moving now to asset quality on slide 14. Our asset quality metrics remain strong on both a like and linked quarter basis, reflecting our strong credit risk culture and proactive approach to quickly resolving problem loans.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Net charge offs decreased nine basis points to 51 basis points linked quarter, and were down seven basis points versus the second quarter of twenty twenty four, as we benefited from lower consumer and CRE losses on both a linked and like quarter basis. Our loan loss provision exceeded net charge offs by $92,000,000 but improved outlook for loss rates in certain portfolios like CRE office and multifamily contributed to a four basis point decrease in our ALLL ratio to 1.54% of total loans. Our CRE office portfolio, which represents just above 1% of total loans, declined almost $500,000,000 linked quarter on an end of period basis. Non performing loans held for investment as a percentage of total loans decreased nine basis points linked quarter and seven basis points on a like quarter basis to 39 basis points of total loans. We saw linked quarter improvement in several categories, including CRE and C and I non performing loans, which helped drive our non performing loan level to multi quarter lows.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Turning to capital on slide 15. On a linked quarter basis, our CET1 ratio declined 30 basis points to 11% as balance sheet growth, dollars $750,000,000 of share repurchases and the payment of our common dividend more than offset current period earnings. Our CET1 capital ratio, including the impact of AOCI, declined 30 basis points linked quarter to 9.3%, reflecting the aforementioned factors. During the quarter, we also received favorable CCAR results, resulting in a 50 basis point decrease in our total loss rate and a 90 basis point decrease in our CET1 erosion rate. As a result, we anticipate our stress capital buffer to decline 30 basis points and to be floored at 2.5% effective October 1.

Mike Maguire
Mike Maguire
CFO at Truist Financial

At June 30, our CET1 ratio was 400 basis points higher than our new regulatory minimum of 7%, leaving us well positioned to both grow our balance sheet and return capital to shareholders. Next, I'll provide additional color on our guidance for the 2025 and for the full year. That's on slide 16. For full year 2025, our outlook for revenue and expense growth is unchanged. We continue to expect revenue to increase 1.5% to 2.5% relative to 2024 adjusted revenue of $20,100,000,000 Net interest income remains on track to increase 3% in 'twenty five versus 2024.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Our net interest income outlook assumes low single digit average loan growth and two twenty five basis point reductions in the Fed funds rate in September and December, compared with three previously in June, September and December. We expect non interest income to remain relatively flat to '25 versus 2024. In terms of our outlook for adjusted expenses, we continue to expect full year 'twenty five adjusted expenses to increase by approximately 1% in 2025 versus 2024, which is also unchanged from our previous guidance and continues to imply positive operating leverage of approximately 50 to 150 basis points. In terms of asset quality, we expect net charge offs of 55 to 60 basis points in 2025 compared with 60 basis points previously. Finally, we expect our effective tax rate to approximate 17.5%, or 20% on a taxable equivalent basis in 2025, compared with 1720%, previously due to a lower contribution from non taxable income and certain tax law changes in states in which we operate.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Looking into the third quarter of twenty twenty five, we expect revenue to increase approximately 2.5% to 3.5% relative to second quarter revenue of $5,100,000,000 We expect net interest income to increase approximately 2% in the third quarter, primarily driven by loan growth, the benefit from fixed asset repricing and an additional day in the third quarter relative to the second quarter. We expect non interest income to increase by about 5%, driven primarily by higher investment banking and trading income, partially offset by lower other income. Adjusted expenses of $3,000,000,000 in the second quarter are expected to increase about 1% linked quarter. As it relates to buybacks, as Bill mentioned, we plan to target up to $500,000,000 for the third quarter. With that, I'll hand it back to Bill for some final remarks.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Great. Thanks, Mike. At the beginning of the year, we outlined several strategic priorities that would be key to driving our performance this year and beyond. These top priorities included a keen focus on executing our strategic growth initiatives, driving positive operating leverage, continuing to invest in talent and technology, maintaining our credit and risk discipline and returning capital to shareholders. Although there's still a significant amount of opportunity that lies in front of us, I'm pleased with both the performance and the momentum at the midpoint of this year.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

We're seeing solid progress in our key strategic focus areas, including premier banking, wealth payments, and middle market as production deepening with our existing client base and banker productivity have increased in all areas of our business. We also remain on track to deliver our goal of positive operating leverage in 2025, despite what's turned out to be a more challenging first six months in our investment banking and trading business. We continue to invest in important areas like talent, technology and our risk infrastructure to improve the client experience. Our credit and risk discipline has remained strong as evidenced by our favorable CCAR results and the improvement in asset quality metrics, which currently sit at multi quarter lows. Finally, our strong capital position continues to afford us the ability to grow our balance sheet, while also returning more than $2,600,000,000 worth of capital to our shareholders through the first half of the year.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

We will remain focused on these key strategic initiatives as we strive to generate better returns and greater shareholder value over time. I am optimistic as ever about our future, especially in light of the momentum that I see every day inside our company. I want to pause and thank all of our incredible teammates for their purposeful focus and productivity in moving our company forward. So thank you all for your interest in Truist. And with that, let me turn it over to Brad for Q and A.

Brad Milsaps
Brad Milsaps
Head - IR at Truist Financial

Thank you, Bill. Betsy, at this time, will you please explain how our listeners can participate in the Q and A session? As you do that, I'd like to ask the participants to please limit yourselves to one primary question and one follow-up in order to accommodate as many of you as possible today.

Operator

We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press then 2. We ask that you limit yourself to one question and one follow-up.

Operator

At this time, we will pause momentarily to assemble our roster. The first question today comes from Scott Sievers with Piper Sandler. Please go ahead.

R. Scott Siefers
R. Scott Siefers
MD & Senior Research Analyst at Piper Sandler Companies

Good morning, everyone. Thank you for taking the question. Bill, it was really nice to see the the strong loan growth. I was hoping you could spend just a quick second sort of expanding upon your thoughts on sort of overall sentiment among your customer base, I guess, on the interested on the commercial side, but maybe kind of across the portfolio given the stronger second quarter.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Yeah, Scott, thanks for recognizing that. It's interesting. So on the let's maybe start with the consumer side first. Our consumer business continues to be really strong. Consumers are staying in the game.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

The quality of the consumer, particularly as it relates to our portfolio continues to be, continues to be strong. So we've had really good credit quality, as part of this, as part of this production. That's been a lot of the initiatives and things that we put forth. And it also is a lot of product specific things. So things we're doing in service finance and doing in Sheffield and doing in Lightstream.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

So we're relevant to how consumers want to borrow. I think that's a really important component of, of our growth story on the consumer side in terms of loans. As it relates to the wholesale, the wholesale side, you know, that's our clients also came into this with lot of strength, you know, so a lot of liquidity, got through sort of the post COVID supply chain and all those issues. Still some wait and see in fairness. I mean, think I'm really pleased with our results given the fact that there's still some uncertainty out there.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Some certainty was cleared in the last several weeks. Think about the tax bill, think about some of the other things that have come in place. A lot of our activity, which I'm really happy about is with new clients. So these are new to Truist. So clients who wanting to experience what we have to offer are impressed with our purpose driven focus, impress with the products and capabilities.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

I talked a little bit about treasury management or whatever. So some unique of to Truist, some of it's unique to our markets that are really healthy. And I think we have a reason to still feel confident about where our both our consumers and our business and wholesale clients are going forward.

R. Scott Siefers
R. Scott Siefers
MD & Senior Research Analyst at Piper Sandler Companies

Terrific. Okay. Thank you. And and then, Mike, I was hoping you could apologies if if you mentioned this in your prepared remarks, but just given the small step down in the anticipated pace of repurchase in the third quarter and I understand April in particular might have presented kind of a unique opportunity on pricing, but maybe just sort of thoughts on why the step down in the anticipated pace of repurchase and then just thoughts on sort of broader capital management ambitions, especially given the lower SCB results.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Yeah, no problem, Scott. For us, the seven fifty versus 500 really was opportunistic as we watched the price simply present itself at a more attractive level. At 500, coupled with our dividend, we're at around 100% of total payout. And we feel like that's appropriately elevated given our current capital position. If you look at the quarter and sort of year to date, we are seeing the balance sheet growth that we've all been focused on.

Mike Maguire
Mike Maguire
CFO at Truist Financial

And so we still continue to prioritize our banking franchise first and then capital return second. So I think a return to 500 is probably a reasonable place to expect us to stay for the medium term. The SCB, we were pleased with the results there. Would say that our outcome was consistent with our expectations. We expected in a less severe scenario to see improved loss rates.

Mike Maguire
Mike Maguire
CFO at Truist Financial

We feel like the balance sheet was in a touch better condition. We appreciated some of the transparency that we saw this year with the process, saw some improvements PPNR modeling, etcetera. TIH was, we feel like, appropriately dealt with. So all in all, felt good about those results. I don't think that has necessarily an impact on how we think about a target operating area per capital.

Mike Maguire
Mike Maguire
CFO at Truist Financial

We've been pretty consistent that we think sort of a 10% CET1 area is appropriate. If you look at our result this quarter, we're at 11% stated and 9.3% adjusted for AOCI and you sort of split the middle is sort of 10%. And so I think you'll see us continue to glide towards that 10% area, assuming, by the way, that we see a rule finalized at some point here.

R. Scott Siefers
R. Scott Siefers
MD & Senior Research Analyst at Piper Sandler Companies

Okay, perfect. All right, thank you all very much.

Operator

The next question comes from Ken Upton with Autonomous Research. Please go ahead.

Ken Usdin
Senior Research Analyst, Large-Cap Banks at Autonomous Research

Hey. Thanks. Good morning, everyone.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Good morning.

Ken Usdin
Senior Research Analyst, Large-Cap Banks at Autonomous Research

I was wondering if could start. You talked about the deposit costs and some of those higher costs coming off already in the second quarter. Could you talk about underlying deposit competition? And you obviously are seeing good loan growth, you're funding that incrementally as well. And what do you expect to see in terms of deposit costs from here ahead of getting any incremental help from rate cuts? Thanks.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Sure. Good morning, Ken. I'll start with that one and maybe Bill you can add. But I'd say first and foremost, we're pretty pleased by how the deposit franchise is performing. We've seen some real strength, especially on the consumer side of things.

Mike Maguire
Mike Maguire
CFO at Truist Financial

It is competitive, we think rationally competitive. But look, we had a little bit of noise in the second quarter with the large sort of temporary M and A related deposits. Ex those deposits, we would have been down a touch. That would have been consistent with what we would have otherwise expected, just given some seasonal tax outflows and the likes. From a pricing perspective, as we move into sort of the third quarter and the fourth quarter, I think just losing the 10.9 that we've put noted in our disclosure, we would expect to see balances probably a little bit lower in the third quarter, but we would expect to make up hopefully some ground on pricing.

Mike Maguire
Mike Maguire
CFO at Truist Financial

So maybe you see the betas move closer to a 40% area or so. And by the way, think that contemplates a cut even though it's late. We think we might have some ability to get a touch ahead of that. And then in the fourth quarter, would expect continued momentum. If we get that second cut in the fourth quarter, maybe you start to see a little bit better rotation into some of the checking products, continued momentum on the production side in consumer and in wholesale.

Mike Maguire
Mike Maguire
CFO at Truist Financial

By the way, we've been onboarding a number of bankers in our new sort of corporate and commercial banking, know, hiring. And so feel pretty good that we might see a little bit of a bounce in the fourth quarter. We also have public funds coming online in the fourth quarter. And look, all things equal in our outlook, we assume getting back to sort of a mid 40 beta by the end of the year. Again, that's with two cuts.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Yeah, maybe I'd add Ken on the competitive side, maybe sort of break it up a little bit on the consumer side. We've sort of got two prongs going really well right now. One is the net new story, which is really important. We're adding relationships, and as I mentioned, they're more profitable, younger, higher median income. So really good net new story and then our deepening story with existing relationships.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

So that's also a really strong part of our component here and growing not only the net new, but also growing the overall balances. So you saw some pretty good growth on the consumer side, really good growth in some of our expansion markets, which we've talked about. And then maybe more importantly, we've really, we had some contraction in fairness in some of our key markets and those are reversing. So think about markets like Charlotte, Tampa, etcetera, where we're really pleased with what we're seeing in some of the, some of the share, early share numbers in those markets. So our relative, competitiveness has increased significantly.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Mike talked a little bit about the wholesale side. You know, feel like we're building momentum there, you know, so if we think about the new relationships that we're bringing in, much deeper penetration with those relationships, they're now coming with treasury relationships, deposits tend to follow that. So I think we have a good, you know, sort of some leading, good leading indicators on the wholesale side as we, as we think about, think about the deposit franchise. So I feel good about the momentum. It is competitive, but most importantly, feel really good about our competitive positioning.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

I don't think we've actually been better positioned than we are right now.

Ken Usdin
Senior Research Analyst, Large-Cap Banks at Autonomous Research

Got it. Thank you. Just a second question on the fee side. You mentioned the obviously, we knew about the IB softness in April. You also mentioned the trading.

Ken Usdin
Senior Research Analyst, Large-Cap Banks at Autonomous Research

Is there a way you can help us understand what that bounce back looks like amidst your commentary about just stronger expectations? Also just do we know how big that DCEP benefit was on the other side as well? Thank you.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Yeah, sure, Ken. On the trading and banking side, what I'd say is we saw weakness in both, especially in the month of April, and then May a little better, and then June almost fully recovered. And actually, if you look even into July, we're seeing more normalized results. And so I think it's been that trend that gives us the confidence that in the third quarter we'll be back to a normalized level and again also in the fourth. What's your second question on the non fall?

Mike Maguire
Mike Maguire
CFO at Truist Financial

Yes. Yeah, so let's see. In the quarter, non qual was better, I think 25,000,000. And so where you'll see that from a geography perspective is in other income, you're higher. But from a PPNR perspective, it's neutral because you also would see an increase in personnel expense by a similar amount. Okay, perfect.

Ken Usdin
Senior Research Analyst, Large-Cap Banks at Autonomous Research

Got it. Great, thank you.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Yep.

Operator

The next question comes from Ebrahim Koonawala with Bank of America. Please go ahead.

Ebrahim Poonawala
Ebrahim Poonawala
MD & Head - North American Banks Research at Bank of America Merrill Lynch

Good morning. Guess two questions. Maybe, Mike, for you as we think about the trajectory of how we get to a 15% ROTCE or at some point, when I look at the operating leverage and you spelled it out very clearly on Slide eight, Just talk to us, there wasn't much this quarter. It was barely anything in the first quarter. As we think about the positive operating leverage kicking in, is it back half loaded?

Ebrahim Poonawala
Ebrahim Poonawala
MD & Head - North American Banks Research at Bank of America Merrill Lynch

Was that sort of the view? Or do we need a meaningful pickup in fee revenue growth to actually drive that in order to get sort of narrow that gap to the 15% loss rate? Thanks.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Yeah, think I think there's a variety of things that are going to contribute to improve profitability and returns, Ebrahim. You hit on one. We do have an expectation. We've talked a lot about the initiatives that we've undertaken, the investments that we're making to improve just our ability to drive more, I'll call it capital efficient revenue through our existing sort of asset base and client base. Some of that's products, some of that's deepening with existing clients, some of that's continuing to invest in our businesses like wealth, like our wealth products, like investment banking.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Yes. And then, of course, also we expect to see some improvements in our margin. We're seeing the fixed asset repricing phenomena that should continue for the rest of this year and next year. We're going to continue to drive sort of smart growth. Funding is obviously a really important part of that.

Mike Maguire
Mike Maguire
CFO at Truist Financial

We're very, very focused on continuing to drive client deposit growth. That's not always perfectly matched. You're seeing that this quarter where loan growth is perhaps a touch ahead of deposit growth. That doesn't mean that we're not very, very focused on continuing to drive balances and operating accounts so on and so forth. So it's not going to be an overnight story, but we should continue to see sort of continuous improvement in that in that ROTCE.

Ebrahim Poonawala
Ebrahim Poonawala
MD & Head - North American Banks Research at Bank of America Merrill Lynch

Got it. And I guess, Bill, I think you mentioned in your prepared remarks around, the RTP capability. I'm just wondering the significance of that in terms of getting more commercial deposits like is there a case to be made where you could see a much increased wallet share on the commercial clients where you've been making a big push? Just give us a sense of how we should think about that opportunity, particularly as it relates to fee revenue or deposit growth. Thanks.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Yeah. Thanks. I highlighted one product, so it's not you know, one product doesn't drive, but it's but I think it's just evidence of our innovation, and evidenced by our overall improvement. So treasury management fees being up 14%, you know, more deepening with the wholesale relationships. The new relationships come now, you know, treasury management penetration that more reflects what we think the back book can get to.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

So it's a combination of a lot of things, and our overall relevance to clients. That specific product is sort of a unique product that allows, you know, clients to have, you know, faster, safer disbursements with the consumer side. So it's a nice sort of meat of the consumer and the wholesale side in how terms funds flow. But I think it's a bunch of things. It's a bunch of different investments that we've made And again, evidenced by the growth that we've seen.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

And I think deposits, as I said, these are leading indicators. I think deposits are a bit of a lagging indicators that come with more treasury business, more operating accounts, that, drive that.

Ebrahim Poonawala
Ebrahim Poonawala
MD & Head - North American Banks Research at Bank of America Merrill Lynch

Thank you.

Operator

The next question comes from Betsy Graseck with Morgan Stanley. Please go ahead. Hi, good morning.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Good morning.

Betsy Graseck
Betsy Graseck
Global Head - Banks & Diversified Finance Research at Morgan Stanley

I wanted to turn to expenses for a minute here and understand a little bit more about the restructuring piece of the expenses that you called out. Because, I know you mentioned severance and wanted to understand how much of that is severance. And is that severance related to the merger from years ago or something else? And then also just understand a little bit more about how you're thinking about, the investments needed to continue to build. I mean, you're already building, so I'm assuming it's in run rate, but maybe you could give us a sense as to where the incremental investments you're making today.

Betsy Graseck
Betsy Graseck
Global Head - Banks & Diversified Finance Research at Morgan Stanley

Are they at pace or is there an accelerator there? Thanks.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Mike, why don't you take the first part of that and then I'll take the second part if that's okay.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Yeah, I mean, all but I think $2,000,000 of the restructuring charges in the quarter were related to severance. It was not merger related. These were repositioning of different parts of the company. I won't go into any specifics, but that's the answer to your question.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Yeah, we're always trying to continue to drive that efficiency as we go through. So I think that's not merger related, but also just restructuring and getting aligned with our strategic priorities of our businesses. And then, that's him. I think your bigger question is, you know, can you can you maintain a 1% expense growth and then continue to invest in the company? And the answer to that's You know, because we continue to have, I mean, if you think about, you know, sort of end of twenty three, you know, we put a lot of cost saving disciplines into our company.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

And they continue to accrue, meaning the discipline continues to accrue. Compliments to Mike, he's done a really great job of creating a process for us that we've got a lot of discipline. We sort of know what's next up on the expense side and we know what's next up on the investment side. So we've got a good calibration of, of thinking through that. And then the top priorities for investing are, yeah, think we talked about all those and hopefully some of the prepared remarks enhancing our digital platform.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

You've seen the results of that payments and product capability. I mean, I was intentional in mentioning some of the product capability that we've been investing in and seeing the results of that. Hiring and retaining talent, you know, continue to be a big part of what we're doing. And then, and you see all those in the results and then the infrastructure part, you know, it's a little harder to see, but, you know, investing in the risk platforms, the data platforms, cyber controls, all the things that we need to do to make sure that we're running a great company. So I think we've got the calibration of this right, that we can continue to invest in the company.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Our, our teams and our leaders sort of get the, you know, save a dollar, invest a dollar kind of mentality. And I think we've got good calibration and good understanding of those, those levers of the company.

Betsy Graseck
Betsy Graseck
Global Head - Banks & Diversified Finance Research at Morgan Stanley

Yeah. And the call out that you gave earlier, Bill, on the payments piece was what I got from that tell me what I missed is that corporate treasurers can now process activity via their cell phones twenty four seven.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Well, it's really disbursements. It's where where they can really the disbursements can relate to sort of how consumers wanna interact. So they can have disbursements related to aliases like cell phones as an example. So that's a really pretty big advancement. So think about the, you know, disbursements are made that this can be done the way the client wants to receive it and the way, and it speeds up the, the interaction with the, with with the business and the consumer.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

So it's sort of a, it's sort of a twofer in the sense it's really good for the companies in terms of understanding their cash flow and really helps their businesses. So, you mean, you think about the best product is more helping a client achieve their objectives.

Betsy Graseck
Betsy Graseck
Global Head - Banks & Diversified Finance Research at Morgan Stanley

And this is 20 fourseven real time. Is that right?

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Yeah. Yeah. Yeah.

Betsy Graseck
Betsy Graseck
Global Head - Banks & Diversified Finance Research at Morgan Stanley

Okay. Thank you so much.

Operator

The next question comes from John Pancari with Evercore. Please go ahead.

John Pancari
Senior MD & Senior Research Analyst at Evercore ISI

Morning.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Hey, John. Morning.

John Pancari
Senior MD & Senior Research Analyst at Evercore ISI

Just on the expense front, I know you had indicated that numbers came in a little bit the higher end of your expectation and part of that is your investments in your hiring. Can you just talk about the flexibility there? I mean, how can you manage that? Or what are the areas of managing it if you do see revenue remain stubborn here? Do you have as much flexibility given that you're still hiring in select areas and investing into businesses and select areas of technology?

John Pancari
Senior MD & Senior Research Analyst at Evercore ISI

So can you just talk about the ability to drive the positive operating leverage regardless of the uncertainty on the top line?

Mike Maguire
Mike Maguire
CFO at Truist Financial

Yeah, John, it's Mike. I'll respond to that one. I mean, certain of our businesses, as an example, if you look at our outlook and you might say, maybe there's risk in this. In a lot of cases, if we're doing our jobs, our incentive designs are performance sensitive, right? So to the extent that revenue doesn't sort of present itself, then we'll obviously take appropriate actions related to incentives.

Mike Maguire
Mike Maguire
CFO at Truist Financial

That's a part of it. I'd say that the later you get into the year, just to say it, it does get a little harder to stop and start things. But we've actually been pretty planful as it relates to that. And so we generally keep a number of levers handy in the top drawer or whatever, such that to the extent that the environment does change, we can be flexible. I think we're crystal clear on the importance of generating positive operating leverage this year and into the future.

Mike Maguire
Mike Maguire
CFO at Truist Financial

And so that's a real focus of our planning. And I don't know how else to say it, but we just feel really confident in our ability to deliver there.

John Pancari
Senior MD & Senior Research Analyst at Evercore ISI

Got it. Okay, Mike. Thank you. And then just separately, on on the loan front, I just wanted to get a little bit more color on the low single digit outlook. I know, Bill, you had mentioned on the commercial wholesale side, there's a bit of a wait and see still. But I guess if you give a little bit more color, where in the back half do you see commercial growth accelerating? Maybe what areas and what would be the drivers? Is it M and A financing? Or do you see CapEx actually becoming a greater driver? And maybe just talk about the line utilization aspect? Yes.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Let me start with the back part, too, because I didn't talk about that earlier. Yeah, line utilization is actually pretty flat. So if we think about the components of loan growth, the components are production, pay downs and utilization. Pay downs have been pretty flat, utilization has been pretty flat. Their pockets, the asset securitization, some of those others, they tend to, they have a little bit, which I think probably maybe tariff related, but overall pretty flat.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

The story for us has been production, you know, so our confidence in sort of maintaining this is that we're we're producing at a pretty high level. So that has tail attached to it. The quality of what we're producing is really, really high. So so think about left leads, think about treasury penetration, and then a lot of net new, you know, so these are a lot of new clients that, that we continue to have an opportunity to to expand with. I do think pay downs could increase on the backside, by the way.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

So I think that's something to actually think about in terms of like, how do we maintain and they could increase with capital markets opening back up, clients getting more active in that. And by the way, we'll benefit from that. Our capture rate on clients who use capital markets We've sort of been through those cycles before. So really it's a production story and we've had consistent now production story and it's a new client story.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

It's a new market story. So I think we feel confident. We've got good momentum. I think just feel confident where we are in the second half. What we have today is funding a lot of growth.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Then on the consumer side, you talk about the consumer, on the consumer side, you know, similarly really, really great production stories and consistent production stories. We have a little seasonality. I think I mentioned that earlier. We have a little seasonality. If you think about our businesses like Sheffield and like service finance, you think about the markets we operate in and HVAC and, you know, lake related activities and mowers and those kinds of things.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

There's a little bit of seasonality in that. But again, the overall production numbers are, are really strong and expansion. So I think a lot of new dealers I've mentioned before, to those businesses. So some of its markets, some of its idiosyncratic to us and our initiatives and focus and relevance and importance with our clients and our markets.

John Pancari
Senior MD & Senior Research Analyst at Evercore ISI

Got it. Alright. Thank you, Bill. Appreciate the color. Yep.

Operator

The next question comes from Mike Mayo with Wells Fargo. Please go ahead.

Mike Mayo
Mike Mayo
MD & Head - US Large-Cap Bank Research at Wells Fargo

Hey. First, a CFO question and a CEO question. But the CFO question is, what do you think about a normalized NIM? Or where should NIM be over time? And how long might it take to get there?

Mike Mayo
Mike Mayo
MD & Head - US Large-Cap Bank Research at Wells Fargo

And then the CEO question is, how much of your time has been spent on the merger and regulation if you go back one to two years ago? And how much time should be freed up given this kind of new world now that you're fighting back and more on offense? Thanks.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Hey, Michael, I'm up first, guess. On the NIM, you saw a basis point better this quarter. We would expect that positive trend to continue into the third and fourth quarter. I think your question was more what's normalized. I'm not sure there's like a normalized I would expect us to continue to if the operating environment is relatively normal, to continue to improve.

Mike Maguire
Mike Maguire
CFO at Truist Financial

I think last year at some point we said we thought maybe three teens area, maybe even a touch better is achievable. That contemplates the balance sheet sort of continuing to evolve with kind of rolling up the curve, so to speak. Frankly, in our case, we think about the second half of this year and next year, getting some of the cuts and being able to drive beta to touch. But I think three teens is a reasonable expectation. It could be a little better, a little worse.

Mike Maguire
Mike Maguire
CFO at Truist Financial

And just to say it because I think, I mean it, we really do focus on NII growth and of course, profitability is really important to us too. But sort of quarter to quarter and the size of the balance sheet can change, you know this, but over a longer period of time, I'd like to see us more in that neighborhood than where we are today.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Great. And then Mike, I hope you think I can answer a CFO question too, by the way. Think they don't have to be distinguished. But to go into the sort of the time spent and merger regulation, I'd say like focusing on the merger integration is behind us. And I think that's the real pivot that you feel.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

The regulatory stuff sort of tatonic, I mean, doesn't really have high rates of speed. Mike, you and I've talked about this a lot of times, the J curve, if you think about our merger was longer and deeper than we anticipated. So we sort of have to own that, but we're at the accelerant part of that J curve, so look back, we're not inhibited by integration issues, but you know, all of that's behind us, all the things that we see in terms of growth initiative, client service, you know, teammates on the ground, those who want to be with us or with us and those who've joined us are like fired up and ready to go. The investments we're making are starting to pay off and create momentum. So I think, I think the large part of what you see here is integration, you know, being clearly behind us and everything that goes along with integration.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

And we're on that positive, you know, high part of the slope of the, of the J curve in moving terms forward. Net news, probably like a really good example, net new in terms of consumer and new in terms of wholesale. So, clients and markets are attractive. We're turning the corner you know, some of the deposit share opportunities in some of our large markets, which has been really, really great. And again, on the regulatory stuff, I think that's more of a go forward thing.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

You know, things don't, things don't shift quickly. They don't have stair step like all of a sudden, somebody's new in the office and we spend a lot of less time. We want to create a really good risk infrastructure for our company. There are things that we're going to do, whether we're asked to do them by a regulator or not, because we want to be sustainable long term, great governance and great risk controls to think about what the future opportunities are in our business. But I think the big one for us, Mike, is the integration fully behind us.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

We've taken it out back and like put it to bed.

Mike Mayo
Mike Mayo
MD & Head - US Large-Cap Bank Research at Wells Fargo

So just a short follow-up, Bill. So, I mean, I think a lot of your competitors for a few years there, that Truist was the gift that keeps on giving in terms of giving up chair. And you talked about the J curve being deeper longer than you expected. But my sense is it's a little bit more of a knife bite in the Southeast. I mean, it's just really competitive.

Mike Mayo
Mike Mayo
MD & Head - US Large-Cap Bank Research at Wells Fargo

It seems like you're really reinvigorated to go at it really hard. Can you just talk about the competitive dynamics in the fastest growing markets, but it also seems like some of the most competitive and how do you adjust for that?

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Mike, it's always been competitive. So I think that's maybe the important part of this. This isn't sort of new to a market. It's always been competitive, you know, some new entrants, but also like really sophisticated large competitors who we've had for a long time. Maybe I won't get into the knife fight comparison, but I just don't think we've ever been better competitively positioned, you know, so our ability to sort of win every day, win every client, you know, compete, with, prowess and advice and capabilities, we've just never been stronger.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Our team, you know, they've got to bring it on attitude. They've got a champion mindset. I mean, chin straps are buckled and trust me, we're in the game and competing really, really hard. And you see that start to see that now in our results in couple of quarters worth that benefit, I think you're going to continue to see it.

Mike Mayo
Mike Mayo
MD & Head - US Large-Cap Bank Research at Wells Fargo

And just real short follow-up, just compared to before the global financial crisis, I guess maybe the crazies are off the street. Might be competitive, but is it rational?

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

We just have a lot of sophisticated competitors. Mean, we compete a lot on product capability and advice. I mean, that's sort of how we want to lead is, are we giving the best advice? Are we most relevant to our clients? Are we, are we, satisfying their needs?

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Are we introducing relevant opportunities to help them grow and help them achieve shareholder value for their, for their companies and for their individuals to help them grow along their, their platform and increase their capabilities to satisfy their needs grow and prosper. So, I think it's sophisticated competitive market, and we're a sophisticated competitive you know, force.

Mike Mayo
Mike Mayo
MD & Head - US Large-Cap Bank Research at Wells Fargo

Thank you.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Yep.

Operator

Ladies and gentlemen, we ask that you limit yourself to one question going forward to accommodate everyone. The next question comes from Chris McGratty with KBW. Please go ahead.

Christopher Mcgratty
MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)

Oh, great. Good morning. Thanks for the question.

Christopher Mcgratty
MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)

Bill, just going back to expense comment for a moment, the operating leverage, I think you talked about not only this year, but over the next several years generating positive operating leverage. I'm wondering if that narrative gets it all easier given with the progress on deregulation. I guess that's the first point. And then two, I'm interested in whether that might be any savings might be used to increase technology to compete more with CAT ones. Thanks.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Yeah, Chris, I think it's a lot of things. Again, I don't see the stair step on the regulatory and expense side over time. Yes, but I think that's just a result of us having better infrastructure, better governance, better foundational elements that we can operate on. We have invested a lot in those over the last few years. So that has been a significant part of our investment.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Again, I would say that's more us versus sort of like regulatory driven necessarily. But I think your other point's exactly right. And by the way, throw other technologies, AI into this, throw other developments and opportunities on the expense savings side. As long as we continue to see ways to invest and grow our markets, I think we do have those kind of trade offs. And the best way to drive operating leverage is to grow the top line.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

So we want to use some of the expense saves and some of the opportunities to continue to drive revenue and get that mix right. So having positive operating leverage with no growth is not a good outcome, you know, so we want to have positive operating leverage and, growth that reflects the markets and opportunities that exist for us.

Mike Maguire
Mike Maguire
CFO at Truist Financial

And some of the areas Bill's talking about are they self fund, right? So there are investments we can make in things that create efficiency. And there are a number of those right now, given sort innovation that's happening. That's also a phenomenon that's helping support that positive operating leverage expectation.

Christopher Mcgratty
MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)

Exactly. Thanks.

Operator

The next question comes from Steven Alexopoulos with TD Cowen. Please go ahead.

Steven Alexopoulos
US Large Cap Bank Analyst at TD Securities

Hey, good morning, everybody.

Mike Maguire
Mike Maguire
CFO at Truist Financial

Good morning. Good morning. Welcome.

Steven Alexopoulos
US Large Cap Bank Analyst at TD Securities

Thank you. I wanted to try to better understand the sensitivity of the guide to rate cuts. And the question is, if we don't see any rate cuts, do you guys think you could still get into that revenue range and the positive operating leverage range for the year?

Mike Maguire
Mike Maguire
CFO at Truist Financial

Hey, Steve. Good morning. Yeah, I think we could, right? I mean, I think the answer is probably it depends. I think the shape of the curve matters a lot.

Mike Maguire
Mike Maguire
CFO at Truist Financial

I think to the extent we didn't get the cuts, but we and we see a pretty stable, call it, two year or maybe we even stay a touch higher, those forces would offset one another. I think if you saw no cuts and you saw the long end lower as an example, that would maybe create some risk. But I think at the end of the day, I don't think we feel super sensitive to sort of the rate path second half of the year on our revenue outlook. We're going to be working pretty hard to manage our funding costs and to generate good core funding. It's probably more of a watch item for next year.

Mike Maguire
Mike Maguire
CFO at Truist Financial

We'd love to get more cuts sooner and keep it going.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Yeah. Most of it's embedded for this year. Our rate cut forecast is towards the end of the year, and you got a pretty pretty small impact.

Mike Maguire
Mike Maguire
CFO at Truist Financial

It it really ends up being a lot more curve shape, I think.

Steven Alexopoulos
US Large Cap Bank Analyst at TD Securities

Yeah. Curves. Got it. Okay. I'll limit myself to the one question. Thanks.

R. Scott Siefers
R. Scott Siefers
MD & Senior Research Analyst at Piper Sandler Companies

Thanks, Steve.

Operator

The next question comes from Matt O'Connor with Deutsche Bank. Please go ahead.

Matthew O'Connor
Matthew O'Connor
Analyst at Deutsche Bank

Good morning. Wanna circle back on the investment banking capital market fees. Look, I mean, I I know versus like the big banks. It's it's hard to copy guys versus regionals. It's everybody's got a little bit of a different mix.

Matthew O'Connor
Matthew O'Connor
Analyst at Deutsche Bank

But I guess I was surprised, like, how low the number was and then your characterization of June as kind of being more normalized as opposed to maybe kind of strong as we're hearing elsewhere. So just trying to understand like, is it a mix difference? Is it timing? Is it, you know, we're gonna have this massive number in 3Q and, you know, this question's pretty irrelevant. How should we think about that a little bit more?

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Yeah, thanks, Matt. I mean, sort of remember, sort of distinguish between the large guys. I mean, we have a trading business that's driven by our client business. You're right, we don't have sort of a separate trading business. And in April, some of those markets were substantially disrupted.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

I mean, think sort of the public finance market as the prime example. And we have a good business in public finance, by way, it's a huge deposit driver for us. So it's an important part of our overall business structure. So that was a case where, you know, that was probably as a weighted element, probably a little more idiosyncratic to us in terms of a little overweighting in our, in our, in our treasury, but not overweighted to our business. And I think that's sort of the way, sort of the way to think about it.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

On the M and A front, you know, it's a little bit like which deals are you in? So we had a lot of deals get deferred during the second quarter. By the way, none went away. Many are back in the market already. So there's a little bit of, there's reason to be optimistic that didn't didn't really change the change the trajectory.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

And then as Mike mentioned, June sort of back on track, I mean, sort of May got better, June's back on track. You know, all the elements that you see in loan growth and new clients and building our corporate banking business and all those elements, those are all regular way business that we've been doing for decades. And, you know, I think we have every reason to be confident that we're confident that we'll continue to be, continue to be on that trend. So a little bit was the client oriented businesses that we're in and the businesses that we support. But I think that diversity also really benefits us on the other side.

Matthew O'Connor
Matthew O'Connor
Analyst at Deutsche Bank

Okay. Thank you.

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

Yeah. Thanks, Matt.

Operator

The last question today comes from Gerard Cassidy with RBC. Please go ahead.

Thomas Leddy
Thomas Leddy
AVP - Equity Research at RBC Capital Markets

Hi. Good morning. This is Thomas Letty standing in for Gerard. Just a quick high level question on credit quality. So it was strong in the quarter, and many of your peers also saw pretty healthy metrics.

Thomas Leddy
Thomas Leddy
AVP - Equity Research at RBC Capital Markets

Given all the noise and uncertainty in the macro and geopolitical environments, I'm not asking you to comment on other banks' credit trends, but what in your view is driving the generally strong credit results this quarter?

William Rogers
William Rogers
Chairman, CEO & Director at Truist Financial

I'm going let Brad Bender do that. Brad?

Brad Bender
Brad Bender
Chief Risk Officer at Truist Financial

Yes. Thanks, Thomas. As you mentioned, we did see strong performance and continue to see signs of stabilization and resilience. I think in terms of the short run, really is around we're starting to see some certainty that is helping. There are some macros out there that we're watchful, but that is also why you saw us revise the guide into the 55 to 60 range.

Brad Bender
Brad Bender
Chief Risk Officer at Truist Financial

CRE, we we see that that sector now is largely behind us. You saw some adjustments there, and so the teams really continue to perform really strongly there. We took the right actions several periods back. I'd say areas that we continue to just focus on and watch is around what is consumer confidence, where is spending, what are those cost pressures that are in the system. If all of those continue to hold, we see really strong positive trends to continue.

Brad Milsaps
Brad Milsaps
Head - IR at Truist Financial

Okay, great. Thank you for taking the question.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Brad Milsatz for any closing remarks.

Brad Milsaps
Brad Milsaps
Head - IR at Truist Financial

Betsy, 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. Betsy, you may now disconnect the call.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Executives
    • Brad Milsaps
      Brad Milsaps
      Head - IR
    • William Rogers
      William Rogers
      Chairman, CEO & Director
    • Mike Maguire
      Mike Maguire
      CFO
    • Brad Bender
      Brad Bender
      Chief Risk Officer
Analysts
    • R. Scott Siefers
      MD & Senior Research Analyst at Piper Sandler Companies
    • Ken Usdin
      Senior Research Analyst, Large-Cap Banks at Autonomous Research
    • Ebrahim Poonawala
      MD & Head - North American Banks Research at Bank of America Merrill Lynch
    • Betsy Graseck
      Global Head - Banks & Diversified Finance Research at Morgan Stanley
    • John Pancari
      Senior MD & Senior Research Analyst at Evercore ISI
    • Mike Mayo
      MD & Head - US Large-Cap Bank Research at Wells Fargo
    • Christopher Mcgratty
      MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)
    • Steven Alexopoulos
      US Large Cap Bank Analyst at TD Securities
    • Matthew O'Connor
      Analyst at Deutsche Bank
    • Thomas Leddy
      AVP - Equity Research at RBC Capital Markets
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