Truist Financial’s Earnings Call Maps Path to Higher Returns

Truist Financial Corporation ((TFC)) has held its Q4 earnings call. Read on for the main highlights of the call.

Truist Financial’s Earnings Call Signals Momentum Despite One-Off Costs

Truist Financial Corporation’s latest earnings call struck a distinctly constructive tone, with management emphasizing profitable fourth-quarter and full-year results, broad-based loan growth, and improving net interest margin and deposit costs. Executives leaned into a narrative of accelerating momentum heading into 2026, bolstered by strong digital and Premier banking performance, stable credit trends, and a robust capital return plan that includes a fresh $10 billion share repurchase authorization and an explicit path to a 15% return on tangible common equity (ROTCE) by 2027. While legal and severance charges weighed on reported expenses and a modest dip in noninterest income underscored some lingering revenue pressure, management argued that structural improvements in margin, operating leverage, and capital deployment more than offset the near-term headwinds.

Solid Quarterly and Full-Year Earnings

Truist reported Q4 2025 net income available to common shareholders of $1.3 billion, or $1.00 per diluted share, and full-year 2025 net income of $5.0 billion, or $3.82 per diluted share. These results underscore that the bank is firmly profitable and entering 2026 with clear earnings momentum despite a noisy quarter on the expense line. Management framed the year as a transition period: one in which Truist laid the groundwork for faster revenue growth and higher returns, rather than relying on one-off gains or cost-cutting alone. The consistency of earnings across 2025—alongside the company’s willingness to absorb legal and severance charges now—was presented as evidence that the core franchise is strengthening.

Loan Growth and Portfolio Composition Strengthen Core Earnings

Loan growth was a central positive theme. Average loans held for investment rose $4.3 billion, or 1.3% linked quarter, to $325 billion, while full-year average loans increased 3.6% to $316 billion. Consumer and card loans led the way with 5.4% growth, and commercial loans grew 2.4%, signaling balanced demand across retail and corporate clients. Wholesale loans were particularly strong, rising 3% on average for 2025 and jumping 8% in Q4 versus the prior year’s quarter. Management highlighted this mix as attractive from a risk–return standpoint, supporting both net interest income growth and diversification across consumer and business segments.

Net Interest Income and Margin Move in the Right Direction

Net interest income (NII) trends provided another bright spot. Taxable-equivalent NII increased 1.9% linked quarter, adding $69 million, while net interest margin (NIM) rose six basis points to 3.07%. The improvement reflects both loan growth and better pricing, as well as easing pressure from higher funding costs. Importantly for investors, management expects NII to grow 3%–4% in 2026 and projects that full-year NIM will exceed the 2025 average of 3.03%, with the bank aiming to exit 2026 in the low 3.1% range. That guidance suggests Truist sees the worst of margin compression behind it, and management clearly tied this margin momentum to the broader push to lift returns into the mid-teens over the next two years.

Deposit Costs and Betas Show Tangible Improvement

On the funding side, Truist reported meaningful relief in deposit costs, which has been a key focus for bank investors in a higher-rate environment. Average interest-bearing deposit cost fell 27 basis points to 2.23%, while the total cost of deposits dropped 20 basis points to 1.64%. Cumulative interest-bearing deposit beta improved from 38% to 45%, and total deposit beta moved from 24% to 30% quarter over quarter, reflecting a healthier mix of deposits and reduced reliance on higher-cost funding. Management framed these improvements as evidence that Truist is successfully repricing deposits and leveraging its franchise strength, helping support NIM expansion and earnings resilience as rate dynamics evolve.

Capital Return Plan Signals Confidence in Earnings Power

Truist’s capital return story was a major highlight. The bank returned $5.2 billion to shareholders in 2025, including dividends and $2.5 billion of share repurchases, with $750 million repurchased in Q4 alone. Building on that, the board approved a new share repurchase authorization of up to $10 billion with no expiration, and management is targeting approximately $4 billion of repurchases in 2026. While such a sizable buyback program will be paced against regulatory capital requirements and earnings, Truist’s willingness to commit to this level of capital deployment indicates strong confidence in its capital generation, credit quality, and long-term earnings trajectory.

Expense Discipline Drives Positive Operating Leverage

Despite a quarterly spike in GAAP expenses, management emphasized that the underlying cost story is one of discipline and improving efficiency. Truist delivered about 100 basis points of positive adjusted operating leverage in 2025. Looking ahead, GAAP noninterest expense is guided to grow just 1.25%–2.25% in 2026, which implies roughly 275 basis points of positive operating leverage on a GAAP basis—or about 165 basis points excluding the Q4 legal accrual. This signals a focus on growing revenue meaningfully faster than expenses. Management framed the current severance and legal costs as one-time drags that clear the way for cleaner, more favorable operating leverage in 2026 and beyond.

Digital and Premier Banking Momentum Underpins Growth

Truist continued to lean heavily into digital and affluent-client initiatives as key growth engines. The bank added 77,000 digital new-to-bank clients in the quarter, up 10% year over year, with digital production up 9% for 2025. Premier Banking—a focus area for higher-value relationships—also delivered strong results, with deposits up 22%, lending up 32%, and financial plans up 12%. The company’s Truist Assist digital platform saw a 97% increase in digital chat engagement during 2025, reflecting rising adoption and deeper client interaction. Management argued that these digital and Premier trends are not only enhancing client experience but also driving more stable, higher-margin growth and better cross-sell opportunities over time.

Stable Asset Quality Supports the Growth Narrative

Credit quality remained a pillar of the Truist story, helping underpin its aggressive capital return and growth targets. Nonperforming loans held for investment stayed stable at 48 basis points of total loans, and the allowance for loan and lease losses declined slightly to 1.53% of total loans. Full-year net charge-offs fell five basis points to 54 basis points in 2025, with management expecting net charge-offs of roughly 55 basis points in 2026. These metrics indicate a broadly stable credit environment for Truist, with loss levels in line with or better than through-the-cycle expectations, giving the bank confidence to pursue loan growth and capital deployment without materially increasing risk.

Clear Path to Higher ROTCE by 2027

A key strategic message from management was a reaffirmed target of 15% ROTCE in 2027, with a 14% goal for 2026. To reach those levels, Truist outlined plans to roughly double its 2025 revenue growth rate in 2026 by deepening client relationships, leveraging digital and Premier platforms, and lifting capital return. The path relies on a combination of mid-single-digit revenue growth, continued positive operating leverage, stable credit costs, and sizable buybacks. For investors, the explicit ROTCE targets and the supporting financial roadmap—loan growth, NIM expansion, and tightly controlled expenses—provide a clear framework for evaluating progress over the next two years.

Legal Accrual and Severance Charges Temporarily Cloud Results

Not everything in the quarter was smooth. Truist’s Q4 results included a $130 million after-tax incremental legal accrual tied to a settlement, which reduced earnings by about $0.08 per share, along with approximately $0.04 per share of severance-related charges. These items lifted GAAP noninterest expense and weighed on adjusted profitability metrics. Management positioned these charges as largely one-time in nature, emphasizing that underlying expenses were essentially flat and that the bank is using this period to resolve legacy issues and align its workforce and cost base with its strategic priorities for 2026 and beyond.

Quarterly Expense Spike Masks Underlying Cost Control

The impact of these one-off items was visible in GAAP noninterest expense, which increased 5.2% linked quarter, primarily due to the legal accrual and higher personnel costs, including incentives and severance. Excluding these factors, expenses were roughly flat, down 0.3% quarter over quarter. Management acknowledged that the GAAP spike represents a near-term optical headwind but stressed that the underlying cost trajectory is well controlled. Investors are likely to focus on whether Truist can deliver the promised positive operating leverage in 2026 now that much of the restructuring and legal cleanup has been recognized in 2025 numbers.

Noninterest Income Sees Modest Pressure Despite Trading Strength

Noninterest income was a mild soft spot for the year, declining $12 million, or 0.8%, versus 2025. The drop reflected modest weakness across several fee lines, partially offset by stronger investment banking and trading performance. In Q4, trading and investment banking revenue rose 3.7% linked quarter to $335 million, and H2 saw a marked rebound from a volatile first half. However, for the full year, investment banking and trading revenue fell 6% compared with 2024 due to earlier market disruptions. Management’s message was that the fee income base is stabilizing, with improved capital markets conditions providing a tailwind heading into 2026.

Short-Term Credit Metrics Move but Stay Within Expectations

While full-year credit trends were benign, the quarter did show some seasonal and portfolio-related movement. Net charge-offs increased nine basis points quarter over quarter to 57 basis points, driven mainly by seasonal patterns in consumer portfolios and some movement in commercial and industrial loans. Still, the full-year net charge-off rate improved to 54 basis points, and management reiterated expectations for net charge-offs of about 55 basis points in 2026. The bank characterized these fluctuations as normal noise rather than the start of a deteriorating credit cycle, a view supported by stable nonperformers and solid reserve coverage.

CET1 Ratio Ticks Down but Capital Remains Robust

Truist’s Common Equity Tier 1 (CET1) capital ratio declined 20 basis points linked quarter to 10.8%, reflecting the impact of share repurchases and balance sheet growth. Even with that decline, management continues to target operating capital levels around 10% CET1 while still funding an elevated buyback program. The ability to maintain a robust capital cushion while returning substantial capital to shareholders is central to the bank’s investment case. Management framed the slight CET1 dip as an expected outcome of capital deployment rather than a sign of strain, and emphasized ongoing discipline around risk-weighted asset growth.

Forward-Looking Guidance Points to Steady Growth and Higher Returns

Looking ahead to 2026, Truist guided revenue growth of 4%–5% versus 2025’s $20.5 billion, powered by 3%–4% NII growth and mid- to high-single-digit gains in noninterest income. The NII outlook is anchored in expectations for 3%–4% average loan growth and low-single-digit growth in period-end deposits, alongside a full-year NIM above 2025’s 3.03% despite modest compression in the first quarter. GAAP noninterest expense is expected to rise just 1.25%–2.25% from the 2025 level of $12.1 billion, implying about 275 basis points of positive operating leverage (around 165 basis points excluding the prior-quarter legal accrual). Management also projects net charge-offs around 55 basis points, an effective tax rate near 16.5%, and plans to repurchase roughly $4.0 billion of stock in 2026, including about $1.0 billion in the first quarter. All of this is framed within a roughly 10% CET1 capital framework and a clear road map toward achieving 15% ROTCE in 2027.

Truist’s earnings call presented a bank leaning into its strengths—solid loan growth, improving margins, disciplined costs, and stable credit—while using a period of strong profitability to clean up legal and restructuring issues and ramp up capital returns. For investors, the combination of mid-single-digit revenue growth, positive operating leverage, and a sizable buyback under a well-defined capital framework supports a constructive outlook for earnings per share and returns over the next two years. While near-term noise in expenses and noninterest income remains a watch point, the overarching message from management is one of growing confidence that Truist can deliver higher, more durable returns through 2026 and into its 2027 ROTCE target.