Greetings, ladies and gentlemen, and welcome to the Truist Financial Corporation First Quarter 2024 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, today's event is being recorded. It is now my pleasure to introduce your host, Mr. Brad Milsaps.

Thank you, Jamie, and good morning, everyone. Welcome to Truist's first quarter 2024 earnings call. With us today are our Chairman and CEO, Bill Rogers; our CFO, Mike Maguire; and our Vice Chair and Chief Risk Officer, Clarke Starnes, as well as other members of Truist's Senior Management team. During this morning's call, they will discuss Truist's first-quarter results, share their perspective on current business conditions, and provide an updated outlook for 2024. The accompanying presentation, as well as our earnings release and supplemental financial information, are available on the Truist Investor Relations website, ir.truist.com. Our presentation today will include forward-looking statements and certain non-GAAP financial measures. Please review the disclosures on slides two and three of the presentation regarding these statements and measures, as well as the appendix for appropriate reconciliations to GAAP. With that, I will turn it over to Bill.

Thanks, and good morning, everyone. Thank you for joining our call today. So before we discuss our first quarter results, let's begin as always with purpose. We see that on slide four. Truist is a purpose-driven company dedicated to inspiring and building better lives and communities. And I'd like to share some of the ways we brought purpose to life last quarter. Our focus on small business heroes is a great example of purpose-driving performance. This strategy helps community heroes achieve their financial dreams and elevates their ability to support our neighbors and build strong communities. We're seeing great success with small business, evidenced by the addition of nearly 8,600 small business accounts during the quarter and $700 million worth of deposits. Our Truist Community Capital team committed more than $252 million to support over 1,600 units of affordable housing, over 3,000 new jobs, and projects that will help empower almost 400,000 people in underserved communities over the next three years. Additionally, we announced the initial recipients of grants from the Truist Community Catalyst Initiative, which is a three-year Community Reinvestment Act program aimed at four key focus areas: affordable housing, small business access to capital, workforce development, and essential community services. There are 17 community organizations receiving grants that will be used to support efforts in 54 communities across 13 states and allow local nonprofit organizations to better respond to critical community needs within their states. Lastly, we published our 2023 Corporate Responsibility and Sustainability report this month, which I encourage you to read and learn more about our progress in building better lives and communities. In all of these examples, our core belief is evident. We're leaders in banking, and we are unwavering in care. All right, so let's turn to some of our key takeaways on slide six. First, I need to state and remind everyone that our first quarter and for the previous periods have been restated to reflect the pending sale of Truist Insurance Holdings. This change has no impact on our net income available to common shareholders. The restatement does remove TIH's revenue and expense from our financial statements as net income from TIH has now been reported as net income from discontinued operation. Mike is going to provide a lot more details around that later in the call. On an adjusted basis, we reported net income available to common shareholders of $1.2 billion or $0.90 a share, which excludes a $0.04 per share impact from the industry-wide FDIC special assessment and a $0.05 per share impact from the acceleration of incentive compensation at TIH due to the pending sale. Pre-tax restructuring charges of $70 million negatively impacted adjusted EPS by $0.04 per share. So despite a few discrete items in the quarter, we're pleased with our underlying results. As you can see on the slide, our solid performance was defined by several key themes. First, we saw a significant increase in investment banking and trading revenue, driven by strong performance across much of our capital markets platform, with particular strength in M&A and equity capital markets. Loan demand continues to remain relatively muted, but we did see some improvement in our commercial lending pipelines during the quarter. On the consumer side, we recalibrated several of the capital-conserving strategies we deployed last year prior to announcing the sale of TIH. This resulted in an increase in loan applications, and in March, we saw the first increase in balance since October of 2022. Second, our results show our expense discipline and continued focus on managing cost. As a result of these efforts, adjusted expenses increased by less than 1% linked quarter and decreased by 4% on a year-over-year basis. Although the linked-quarter rate of expense growth will increase in the second quarter relative to the first, we are fully committed to delivering our expense objectives in 2024, which excluding TIH should now result in adjusted expenses remaining approximately flat in 2024 versus 2023. Our asset quality continues to normalize from historically low levels, but we're pleased that non-performing loans remained relatively stable, and the net charge-offs were within our expectations. Finally, during the quarter, we also announced that we will be selling our remaining stake in Truist Insurance Holdings, which is on track to close in the second quarter. The sale of TIH will significantly strengthen our relative capital position, which will create substantial capacity for growth in our core banking businesses. In addition, as we discussed in February, our stronger capital position affords us an opportunity to evaluate a variety of capital deployment opportunities post-closing, including a potential balance sheet repositioning designed to at least replace TIH earnings. The sale of TIH also positions us to resume share repurchases. The timing and size of repurchase activity will depend on our ongoing capital planning, market conditions, clarity around final capital rules, and other factors. But our goal is to resume a program that's both meaningful and durable. Before I hand the call over to Mike to discuss our financial performance in more detail, I want to provide a quick update on the progress we're making and improving experiences for our clients, which we see on slide seven. We continue to show strong and steady growth in our digital capabilities. In the first quarter of 2024, mobile app users grew 8%, and digital transactions increased 13% compared to the first quarter of last year. Though activating teammates to educate clients on our capabilities, transactions continue to shift towards self-service capabilities, with 77% of the deposits occurring through these channels, primarily driven by strong growth in Zelle transactions. Recently, we rolled out the Zelle QR code widget, where users can quickly access their QR codes from their home screens to seamlessly assist with bank transfers. At Truist, we aim to make banking simple and easy for our clients through thoughtful enhancements to their experience. Enhanced offerings coupled with strong growth in digital have resulted in higher retail digital client satisfaction scores. These scores surpassed pre-merger highs as we continue to focus on accelerated adoption and efficiency using our T3 strategy. Overall, I'm proud of the continued momentum Truist is making in digital and optimistic about the opportunity to expand our digital user base and drive self-service transaction volume. So with that, Mike, let me turn it over to you to discuss our financial results in a little more detail.

Thank you, Bill, and good morning, everyone. As Bill mentioned, our financial statements for the first quarter and for previous periods have been restated due to the pending sale of Truist Insurance Holdings. This restatement has no impact on our net income or earnings per share for historical or current reporting periods. However, and as you can see on our financial tables, revenue and expense associated with TIH is no longer shown on our financial statements. TIH's contribution to Truist net income and earnings per share is now captured in net income from discontinued operations. My comments today will focus on revenue and expense from continuing operations, although I will also provide some detail on revenue and expense for the quarter inclusive of TIH for comparative purposes. We reported net income available from continuing operations of $1 billion or $0.76 per share, which includes a $75 million pre-tax or $0.04 per share after-tax expense related to the industry-wide FDIC special assessment. We reported net income available from discontinued operations, which represents earnings from TIH of $64 million or $0.05 per share, which includes an $89 million pre-tax or $0.05 per share negative impact from the acceleration of incentive compensation at TIH due to the pending sale. So on an adjusted basis, we reported net income available to common shareholders of $1.2 billion or $0.90 per share, which includes adjusted net income from continuing operations of $0.80 and adjusted net income from discontinued operations of $0.10. In addition to the items I just noted, we also had pre-tax restructuring charges totaling $70 million in the quarter, which negatively impacted adjusted EPS to common shareholders by $0.04 per share. The bulk of these charges were related to severance and real-estate rationalization. Total revenue, which excludes revenue associated with TIH, decreased by 1.4% linked-quarter due to a decline in net interest income, partially offset by stronger non-interest income led by investment banking and trading. Revenue before the impact of discontinued operations accounting increased 0.2% on a linked quarter basis. Adjusted expenses, which exclude adjusted expense associated with TIH, increased by 0.7%. Adjusted expenses before the impact of discontinued operations accounting increased 1% on a linked quarter basis. Next, I'll cover loans and leases on slide nine. Average loans decreased 1.3% sequentially, reflecting overall weaker client demand and our decision to deemphasize certain lending activities during 2023, which impacted growth during the first quarter. Average commercial loans decreased to 0.9%, primarily due to a 1.2% decrease in C&I balances due mostly to lower client demand. In our consumer portfolio, average loans decreased 2%, primarily due to further reductions in indirect auto and mortgage. During the quarter, we did increase our appetite for high-quality indirect auto loans, which as Bill mentioned, resulted in consumer loan balances showing positive growth for the month of March. Overall, we expect average loan balances to decline modestly in the second quarter, albeit at a slower pace than the first quarter. Moving to deposit trends on slide 10. Average deposits decreased 1.6% sequentially as growth in client time deposits and interest checking was more than offset by declines in non-interest-bearing brokered and money market balances. Approximately $1.9 billion of the $6.3 billion linked quarter decline in average deposits was due to lower brokered deposits. Adjusting for broker deposits, our average deposits declined approximately 1%. Non-interest-bearing deposits decreased 4.9% and represented 28% of total deposits, compared to 29% in the fourth quarter of 2023. During the quarter, consumers continued to seek higher-rate alternatives, which drove an increase in deposit costs. Specifically, total deposit costs increased 11 basis points sequentially to 2.03%, which resulted in a 2% increase in our cumulative total deposit beta to 38%. Similarly, interest-bearing deposit costs increased 11 basis points sequentially to 2.82%, which also resulted in a 2% increase in our cumulative total interest-bearing deposit beta of 53%. Moving to net interest income and net interest margin on slide 11. For the quarter, taxable equivalent net interest income decreased by 4.2% linked quarter, primarily due to higher rate paid on deposits, lower day count in the quarter, and lower average earning assets. Reported net interest margin declined 7 basis points on a linked quarter basis, due primarily to higher rate paid on deposits. Turning to non-interest income on slide 12. Non-interest income increased $83 million or 6.1% relative to the fourth quarter. The linked quarter increase was primarily attributable to higher investment banking and trading income, which was up $158 million linked quarter, due to strong results across much of our entire capital markets platform with specific strength in M&A and equity capital markets. Lending-related fees decreased $57 million linked-quarter due to lower leasing-related gains. Non-interest income increased 1.8% on a like-quarter basis, as higher investment banking and trading, wealth, and other income were partially offset by lower service charges on deposit and mortgage banking income. Next, I'll cover non-interest expense on slide 13. GAAP expenses of $3 billion decreased $6.6 billion linked quarter, as fourth quarter 2023 expenses were negatively impacted by a $6.1 billion goodwill impairment charge, a $507 million FDIC special assessment, and $155 million of restructuring charges primarily related to our cost-savings initiatives. Excluding these items and the impact of intangible amortization, adjusted non-interest expense increased 0.7% sequentially. The increase in adjusted expense was driven by higher personnel expense of $156 million due to normal seasonal factors and higher variable incentive compensation, partially offsetting the increase in personnel expense were lower other expenses, which declined $82 million, reflecting lower operating charge-offs and lower pension expense. Adjusted non-interest expenses before the impact of discontinued operations accounting increased 1% on a linked quarter basis. On a like quarter basis, adjusted expenses declined $120 million or 4.2%, reflecting lower headcount and continued expense discipline. Moving to asset quality on slide 14. Asset quality metrics continue to normalize in the first quarter, but overall remained manageable. Non-performing loans remained relatively stable to linked-quarter, while total delinquencies were down 6 basis points sequentially, driven by a 7 basis point decline in loans 30 to 89 days past due. Included in our appendix is updated data on our office portfolio, which is virtually unchanged at 1.7% of total loans. However, we did increase our reserve on this portfolio from 8.5% to 9.3% during the quarter to reflect continued stress in this sector. We expect stress to remain in the office sector, but believe that the size of our office portfolio is manageable and well reserved. Approximately 5.5% of our office portfolio is currently classified as non-performing, but 89% of these loan balances are paying in accordance with the original terms of the loan. During the quarter, our net charge-offs increased 7 basis points to 64 basis points. The increase in net charge-offs for the quarter reflects increases in our CRE and consumer portfolios, offset by lower C&I and CRE construction losses. Our ALLL ratio increased to 1.56%, up 2 basis points sequentially and 19 basis points on a year-over-year basis due to ongoing credit normalization and stress in the office sector. Consistent with our commentary last quarter, we've tightened our risk appetite in select areas, but we maintain our through-the-cycle supportive approach for high-quality long-term clients. Turning now to capital on slide 15. Truist's CET1 ratio remained relatively stable on a linked-quarter basis at 10.1%, as organic capital generation and the impact of lower risk-weighted assets were mostly offset by the impact of the CECL phase-in that occurred during the quarter. We still anticipate the sale of TIH will generate approximately 230 basis points of CET1 under current rules and 255 basis points of CET1 capital under proposed Basel III endgame rules. It will also increase our tangible book value per share by 33% through a combination of a $4.8 billion after-tax gain and the deconsolidation of $4.7 billion of goodwill and intangibles from our balance sheet. The divestiture of TIH has a 255 basis point positive impact under the fully proposed phase-in Basel III endgame rules, which is 25 basis points higher than under current rules. The larger impact on our CET1 ratio under the proposed rules is due to the reduction in certain threshold deductions due to the overall higher level of capital from selling TIH. The sale of TIH accelerates our ability to meet increasing standards for capital and liquidity in the industry. And importantly, it creates capacity for Truist to evaluate a wide variety of capital deployment alternatives, including growing our core banking franchise during a time when much of the industry is conserving capital, repositioning our balance sheet, and resuming share repurchases. As it relates to a possible repositioning, recognizing securities losses under proposed Basel III rules would have no impact on our fully phased-in CET1 ratio since current proposed rules include AOCI in the calculation. Moreover, any decision to sell market value securities has no impact on our tangible book value per share. I will now review our updated guidance on slide 16. First, all of my comments today related to second quarter and full-year 2024 guidance exclude any benefit from interest income that Truist will earn on the $10.1 billion of after-tax cash proceeds that we expect to receive from the pending sale of TIH. Our guidance also excludes any impact from a potential balance sheet repositioning that we plan to evaluate post-closing. In addition, revenue and expense guidance for the second quarter and full year 2024 is based on revenue and expense from continuing operations and does not include any contribution from TIH in previous or in future periods. Looking into the second quarter of 2024, we expect revenue to decline about 2% from 1Q '24 GAAP revenue of $4.9 billion. Net interest income is likely to be down 2% to 3% in the second quarter due to continued pressure on the rate paid and a smaller balance sheet. We expect non-interest income to remain relatively stable on a linked-quarter basis. Adjusted expenses of $2.7 billion in the first quarter are expected to increase 4% in Q2, due to higher professional fees, some timing of projects delayed from Q1, higher marketing costs, and annual merit increases. For the full-year 2024, we previously expected revenues to be down 1% to 3%, which would have included revenue from Truist Insurance Holdings. If we had excluded revenue from Truist Insurance Holdings from our outlook, our expectation would have been closer to down 3% to down 5% in 2024. Today, we are tightening our previous revenue guidance adjusted for TIH of down approximately 3% to down 5% to now down approximately 4% to 5% to reflect the latest interest-rate outlook and continued pressure on the deposit mix, partially offset by our improved outlook for non-interest income. Our outlook assumes three reductions in the Fed Funds rate, with the first reduction coming in June 2024. Previously, we assumed five reductions in the Fed Funds rate, with the first reduction occurring in May 2024. We still assume that net interest income will trough in the second quarter of 2024 and modestly improve in the second half of the year. Fewer than three rate reductions would add pressure to our NII outlook and result in our annual revenue coming in at the lower end of our range for revenue to be down 4% to 5%. As a reminder, our second quarter and full-year revenue outlook excludes any benefit from interest income earned on the cash proceeds from the sale of TIH or the benefit of potential balance sheet repositioning. As Bill mentioned, we still expect the sale of TIH to be completed during the second quarter. We previously expected our expenses to remain flat or to increase by 1% in 2024, which included expenses associated with Truist Insurance Holdings. If we had excluded expected expenses from Truist Insurance Holdings from our outlook, our expectation would equate to expenses remaining approximately flat in 2024. Consistent with our previous expense outlook adjusted for TIH, we expect full-year ‘24 adjusted expenses to remain approximately flat over 2023 adjusted expenses of $11.4 billion. In terms of asset quality, we continue to expect net charge-offs of about 65 basis points in 2024. Finally, we expect our effective tax rate to approximate 16% or 19% on a taxable equivalent basis. Our estimated tax rate excludes any impact from the gain on the sale of TIH or a potential balance sheet repositioning that we might consider following the sale. So now I'll turn it back to Bill for some final remarks.

Great. Thanks, Mike. I am proud of the results our teammates delivered during the first quarter, which included solid underlying earnings, improved momentum, and the announced sale of Truist Insurance Holdings. As Mike mentioned, TIH will enter its partnership with its new investors with strong momentum as evidenced by its first quarter results. Providing risk advice to our clients is core to our purpose; we look forward to maintaining a strong partnership with that team into the future. We have great confidence in our capability to grow our core banking business and help our clients achieve financial success by delivering our commercial, consumer, payments, investment banking, and wealth platform throughout our existing footprint and specialty areas. Our top priorities for 2024 are unchanged and include growing and deepening relationships with core clients, maintaining our expense discipline, evaluating various capital deployment options following the sale of TIH, and enhancing Truist's digital experience through T3, all while maintaining and strengthening strong risk controls and asset quality metrics. Our expense discipline is showing up in our results, which gives us confidence that we'll meet our expense objectives this year. I'm also encouraged by the improvement in our wholesale banking business, which includes investment banking and trading as it was a key driver of our quarterly results. In investment banking, we've increased our market share across several capital market products due to significant investment in talent and industry verticals. These investments have resulted in a significant increase in the number of lead roles across several products, including equity capital markets, leveraged finance, asset securitization, and M&A. In addition, our mindshare with clients in our key industry verticals has never been stronger, and we continue to expand into new verticals that are primed for growth as capital markets activities recover. We are seeing solid year-over-year growth in referral revenue from commercial banking as we continue to deliver value-added advice and capabilities to our clients. Our commercial teammates have responded to new expectations, and we continue to add great talent to our comprehensive platform. And finally, we made new key leadership hires within our payments business during the quarter, as this is an area where we see significant opportunity for growth over time. In consumer, I'm encouraged that our internal consumer satisfaction scores have returned to pre-merger levels. In addition, net new checking account production was positive in the first quarter as we added 30,000 new consumer and business accounts. Importantly, we're also seeing year-over-year improvement in account attrition rates. Also during the first quarter, our digital channel, we acquired 172,000 accounts, including 63,000 new to Truist, while also seeing a 14% increase in deposit balances over the fourth quarter of 2023. While the branch network represents an opportunity for further efficiency in certain markets, we continue to see improvements in productivity due to teammate execution and investments in technology. We're encouraged by this increased productivity; we'll look to make investments in branches and select key growth markets in 2025. Overall, loan demand does remain muted, but I'm encouraged by the improvement in our commercial loan pipelines and the growth we witnessed in consumer balances late in the first quarter. By selling TIH, we'll have capital capacity to play more offense in our consumer and wholesale businesses, which includes seeking ways to accelerate loan growth in our core franchise. In addition, our significantly stronger balance sheet will be positioned to weather an even wider range of economic environments, while also giving us the unique ability to evaluate a variety of capital deployment opportunities post-closing, including a potential balance sheet repositioning and resuming meaningful share repurchases later in the year. Although we have a plan to replace TIH earnings in the near term, we recognize that our increased level of capital will result in near-term dilution to our return on average tangible common equity ratio. Our starting point for ROTCE following the sale of TIH will be exactly that, a starting point. The strength of our markets, our core banking franchise, and our capital deployment options we can consider after the sale will result in improved returns over time. We'll move with pace, but we'll not be in a rush to deploy capital to meet short-term expectations that don't have a long-term positive impact on our company, our clients, or our shareholders, especially since Basel III capital rules have not been firmly established for the industry. So in conclusion, we're off to a solid start in 2024, but we acknowledge, as always, there's more work to do as we strive to produce better results in the future. We view our first quarter performance as another step forward in that direction. I'm optimistic about our future; I look forward to operating our company from this increased position of financial strength in some of the best markets in the country. And finally, I'd like to thank all of our teammates and our leaders for their incredible purposeful focus and productivity, particularly over the last few months during this important time for both TIH and for Truist. So with that, Brad, let me hand it back over to you for Q&A.

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

And our first question today comes from John McDonald from Autonomous Research. Please go ahead with your question.

Thank you. Good morning. How does the rate environment affect the ability and willingness to restructure the securities book? Mike, could you comment on this? With higher rates, achieving a neutral impact seems a bit easier. Does that influence how much you might deploy? Also, Bill, could you share some broader insights about the options available for organic deployment, buybacks, and other initiatives? Thank you.

Yes. Thanks, John, for the question. We are certainly assessing the market rate environment, and I can say that we remain committed to the framework we shared back in February. We outlined objectives that include maintaining a relatively strong capital position and at least replacing the earnings from TIH. We also aim to enhance our liquidity and asset-liability management position. Although the rate environment has changed slightly since February, we still find it actionable. Our plans to evaluate repositioning after completing the sale are still in place. If we look at the short end of the curve, we see some potential benefits from a cash reinvestment perspective, and the same applies to the reinvestment rates on bonds. However, there is the trade-off of experiencing a somewhat higher realized loss in that scenario.

I'll go into the others, and as you said, John, we're in a different rate environment. So we'll evaluate all the other alternatives that exist with that, and there are some options with shorter paybacks that should be assessed. Additionally, we have some tax efficiency related to this, so there are unique aspects to consider along with the TIH sale. You mentioned other capital deployment options, and for us, the priority is growth in our business. As you saw this quarter, we made some strategic moves on the consumer side, where we increased our investment. We believe the margins in those areas remain strong, making our current additions more beneficial than in the past. The risk profile is solid, giving us the capacity to increase our efforts on the consumer side. On the wholesale side, our relevance is critical; we want to maintain the discipline we've established around pricing and structure. We're adding much more value now, so we'll keep pursuing opportunities in our markets and industry verticals, where we have positive momentum. Lastly, regarding share repurchase, we plan to re-enter that space as part of our portfolio. We'll approach this with care and consider a meaningful short- to medium-term share repurchase strategy, alongside a more sustainable long-term plan. This combination gives us optimism about improving our returns in both the short term and, importantly, the long term.

That's really helpful, thanks. And maybe as a quick follow-up, we saw a really strong investment banking results this quarter. How much of that is good environment versus payback on some of the investments you've made in that business, and maybe just comment on what's packed in your outlook for the second quarter there, Mike? Thanks.

Yes. A lot of the improvement is clearly due to market conditions, but as you mentioned, we have been investing in this business for quite some time, especially in recent years. Our team has risen to the challenge and has been collaborating effectively with the commercial team. We're experiencing significant benefits from our franchise, having added over 30 new MDs to our business, who bring valuable expertise and connections. So I believe it's a combination of these factors, and we feel very optimistic. We're confident as we enter the second quarter and look ahead for the rest of the year regarding the momentum in this business.

Thanks.

Our next question comes from Betsy Graseck from Morgan Stanley. Please go ahead with your question.

Hi, good morning.

Hi.

Betsy, good morning, and welcome back.

Thanks so much.

Great. Great to hear your voice.

Thanks so much, Bill. I really appreciate it. So I did just want to lean in on the loan side, a couple of comments in the prepared remarks that you made. One was on commercial lending pipelines building, and I wanted to understand, is this a change? And I mean, we often hear about pipelines in the investment banking side, not as much on the commercial lending side. And I wanted to understand your thoughts around what execution on that requires; is it lower rates, is it customers building more inventory, or just some color on that would be really helpful? Thank you.

In the fourth quarter, we observed a slight decrease in pipelines, but in the first quarter, we've seen an improvement, especially on the commercial side. The path to execution and finalization will depend on various market conditions. The positive aspect is that clients are engaging in discussions about expanding their operations, such as acquiring new warehouses or fleets of trucks. Importantly, our relevance in these conversations has increased. Nearly 60% of the new activity we experienced this quarter came from new relationships with clients who are new to Truist. Our pitch activity and new leads have significantly increased. This improvement stems from a combination of factors: the markets we operate in, a greater sense of optimism compared to the broader country, the investments we've made in products and capabilities, and our overall relevance to our clients. We are discussing topics they are interested in, and we feel we are better positioned than ever before.

Can you clarify what you mean by high-quality indirect autos? Additionally, is the increasing relevance to corporate clients due to balance sheet size, product mix, or something else? I realize I asked two follow-up questions, so thank you for addressing them.

Betsy, you have my permission. Yes, that's correct. On the auto side, to clarify, we are not focusing on subprime; instead, we are seeing growth in our core prime auto business. We aim to be more relevant to our dealers and increase our capacity. There have been many shifts in the auto sector, but we appreciate the consistency it offers. Our strong relationships with numerous dealers enhance our portfolio. Regarding the corporate side, if the question pertains to the risk profile, we are maintaining a similar risk profile. Over the past year, we have established many disciplines to optimize capital, and we plan to continue this approach. We hold the same expectations for our full relationships and our risk profile. Overall, I believe everything we are adding is more beneficial than what we previously incorporated based on our capabilities.

Okay. Thank you so much, Bill. I appreciate it.

Our next question comes from Scott Siefers from Piper Sandler. Please go ahead with your question.

Good morning, everyone. Thanks for taking the question. Let's see, Mike, I wanted to just ask a little on the guide and the nuance. So if I understood it correctly, on an apples-to-apples basis, the full-year guide is the same for expenses, but tightened up to the low end of a prior range as better fees are offset by slightly weaker NII outlook. So hopefully, I got that right. But within there, just curious for expanded thoughts on what has changed within the NII expectations. I imagine the preponderance of it is just fewer rate cut expectations with the 3% versus 6% previously, but maybe you could speak to other factors such as deposit mix or pricing nuance that might have impacted as well?

Yes, Scott, you made it easy for me. Those are the answers. We had five cuts back in January, and I believe the market had six. We're currently looking at 3%, while the market appears to have 2% or less. One nuance to our outlook is that we think a range of 4% to 5% suggests either three cuts or even fewer than three. It's also worth noting that in January, we were six months away from the last hike, and now we find ourselves at nine months. We expected slightly less churn and pressure on pricing and mix in the liabilities portfolio. Those are the two factors to consider. Additionally, we are seeing some strength on the fee side, so when combining these elements, 4% to 5% seems appropriate.

Yes. It's Mike, as you know that does not include TIH repositioning. So we still have to say all this in the same setup.

Yes, I completely understand. Thank you. Mike, I'd like to discuss the competitive landscape for funding. While it's a general inquiry, I'm also interested in your insights regarding the increasing presence of out-of-market competitors in your appealing demographic markets. I'm curious about your views on the rationality of funding pricing. Are they noticeably influencing the market, or is it behaving as you would expect in a prolonged higher interest rate environment? How are these factors shaping the outlook?

Yes. Operating in such appealing high-growth markets also attracts competition, making the marketplace quite competitive for us. However, I don't believe we are witnessing irrational behavior in the market. We are in a somewhat unusual phase in the cycle, remaining at these high levels for an extended period. Consequently, various strategies are emerging, but fundamentally, most players seem to be addressing the same challenge we are: when might we see some easing on the rate front? In the meantime, our focus is on supporting our clients. We believe we have the right products and client experiences in place, and we are prepared to offer competitive rates to maintain the necessary relationships.

It's also, Scott, why we focus on net new. So in addition to the pricing within our existing portfolio, we want to make sure we're adding net new accounts. So our rate of acquisition has been really strong, and our rate of attrition has been improved. So those are important barometers for us to sort of look at the overall health of the franchise and our relative competitive positioning.

Perfect. Okay, good. Thank you all for the color.

Thank you. Our next question comes from Ken Usdin from Jefferies. Please go ahead with your question.

Thank you, everyone. I’m curious about the sequence of events and how we will gauge the additional benefits following the transaction's closure. Are you still expecting to close by June 1? Also, do you think we’ll have a clearer understanding of the full impacts related to cash reinvestment and any restructuring decisions by the next earnings season?

Hey, good morning, Ken. It's Mike. We don't have a date certain on closing, but we have an increasing confidence that Q2, we will be able to complete the transaction. I think once we complete the transaction, we think there'll be an opportunity for us to communicate during the quarter, sort of, what things look like from there?

Okay, got it. And then just underneath the surface, I guess it's hard because by 3Q, you'll probably have done some of these things, but you mentioned NII down a little bit in the second quarter. Ex the deal, do you have a view of kind of where that core NII would be heading as we look into the second half of the year and kind of when that gets to a stability point?

Yes, that's correct. In our guidance for Q2, we excluded any cash or potential benefits from a repositioning. So we expect a decrease of 2% to 3% for that quarter. We believe that the second quarter will be the lowest point for us. Looking ahead to the third quarter, we anticipate some benefits, particularly since our baseline assumes a cut in June. If we get another cut in early September, that could further support us. We expect to have an extra day in the third quarter and potentially a slightly larger balance sheet if we begin to see some loan growth. Therefore, we project some modest improvement in both Q3 and Q4 along a baseline path. Fewer cuts may put some pressure on this expectation, but we still see Q2 as the lowest point for our net interest income.

Okay, great. Yes, it was a second-half point that I was looking for that incremental color on.

Yes.

Thank you on kind of how it improves. Okay, and then just one more follow-up on IB. You mentioned the investments you've been making at the quarter was outstandingly good. Are you kind of implying that flat fees in the second quarter that this is a new run-rate for IB and trading? Some other banks have talked about pull-forward in DCM, but I just want to kind of understand the color of where you think the puts and takes are for fee income growth from here? Thanks.

Yes. I don't think there's been any particular pull forward. This was a particularly strong M&A quarter. M&A is a little less predictable on a quarter-on-quarter basis. But I think as we look sort of, if we're thinking short-term, like next quarter, next couple of quarters, I mean, this seems to be a pace that we're operating at right now in terms of our momentum in pipelines.

Thanks very much, guys.

Our next question comes from Mike Mayo from Wells Fargo Securities. Please go ahead with your question.

Hi, if I can just get one simple question and one more complex question. The simple question is, so you're guiding for a trough in NII in the second quarter, and that does not include any deployment of the $10 billion. So if you just put the $10 billion, say you get a 5% yield on that, then you get $500 million, that would add 2% to your year-over-year revenue growth. And also, how much would the sale of insurance improve your tangible book value?

The first question, that's right, Mike. The guidance really for the year-end, and specifically, you asked for the quarter does not include the benefit of the cash. We do expect the cash proceeds after tax to be about $10.1 billion. You know you can pick your forward curve deployment rate, but I think you're in the ballpark. And then your second question was what would be the tangible book value per share improvement from the sale, I think was the question, and that would be by roughly, roughly a third.

Thank you, Mike. I want to clarify that our shareholders are integral to our mission and have never been excluded from our purpose. I truly believe that purpose and performance are deeply connected. We have indeed focused on clients, teammates, and communities during our merger and throughout COVID. We are equally committed to our shareholders now as part of that focus, and you can see this in the actions we are taking and the momentum we are generating. I highlighted earlier how our small business initiatives demonstrate this link between purpose and performance. By supporting small business community heroes, we’ve had a positive impact, adding 8,600 new businesses and creating $700 million in deposits. I am confident that our people understand this connection clearly. The actions we've taken recently and the momentum we've built are strong indicators of our commitment to our shareholders.

All right. Thank you.

And our next question comes from Ebrahim Poonawala from Bank of America. Please go ahead with your question.

Good morning. I guess...

Good morning.

Following up on a shareholder perspective, there is significant interest in what this company can earn moving forward, particularly regarding the return on tangible equity. I understand if you prefer to wait a few months until the deal closes. However, when you consider the consensus numbers indicating a 12% return on tangible equity, I assume that isn’t your target. Could you provide a framework for us to evaluate your position relative to peers and whether you believe you can achieve that level, as well as the timeline for it, especially considering additional technology expenditures in the coming years? It would be helpful if you could start with that. Thank you.

Yes, Ebrahim, I believe I made it clear that would only be a starting point and is not an acceptable long-term return for us. It's part of a reset. If we break it down, in the short and medium term, we have a real opportunity to make a more noticeable impact. Consider the repositioning of securities as a first step, with share repurchases starting off meaningfully and becoming more sustainable over time. We have a unique ability to boost that in the short and medium term. Longer-term growth needs to come from our business expansion. We are in the strongest markets, building momentum across all segments, and improving efficiency. Consequently, every dollar of revenue will yield more income for our shareholders over time, enhancing our capability to continue investing. The expenses we incur will also relate to our ability to save and invest for long-term growth. In the short and medium term, we can increase our trajectory, and then over time continue that upward trend. While it is still early for specific targets, our immediate goal is to grow significantly. As we gain a clearer understanding of the capital regulations and complete our capital planning, we'll be better positioned to outline longer-term objectives.

Got it. Mike, I have a quick question for you. It seems that few rate cuts are viewed as negative, but at the same time, having cash makes the balance sheet assets sensitive. With the cash in mind, I'm curious if we assume there won’t be any rate cuts this year, would that be considered negative or more of a neutral scenario since the cash would likely earn higher for a longer period in that context? If you could clarify that, thank you.

Yes. Well, Ebrahim, what I was talking about was sort of a continuing ops guide, so ex the incremental cash. So we feel like there'd be downside, right? So our 4% to 5% contemplates three cuts baseline, but fewer cuts as well to the low side. I think if you added the cash, you're right, that would add asset sensitivity, and that would just sort of transform our NII trajectory broadly. Obviously, when that asset sensitivity comes onto the balance sheet, we'll manage that consistent with how we've managed rate risk in the past, which is we will probably add some receivers to manage against lower rates longer. I think I answered your question, which is the guide is continuing ops ex-cash. We think the 4% to 5% has that in the cash and any repositioning benefit would be on top of that.

That's good. Thank you so much.

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

Good morning. What do you think is a good capital level to be running at kind of looking out medium-term, including AOCI?

Hey, Matt, it's Mike. I'll take a shot at that. It's a bit challenging to address this definitively. The positive aspect for Truist is that once we complete our TIH transaction, we will be in a very strong capital position, both relatively and absolutely. With the rules still in the proposal stage, it's tough for us to pinpoint an exact target. Currently, we have some excess capital, but it's hard to determine the exact amount. The encouraging news is that we have confidence in our current levels, allowing us to transition from conserving capital to deploying and optimizing it. Our first priority will be to grow client relationships and balances, generating profits the traditional way. We have made it clear that we are capable of considering a repositioning of the balance sheet, and Bill has been straightforward about our ambitions regarding stock buybacks. While I can't provide a specific target, our tone, mindset, and planning are focused on growth.

Okay. I didn't see any disclosures, but can you remind me what the adjusted CET1 is right now? And while you're acquiring a lot in the deal, what's the current starting point?

We're at 10.1% as of the end of the quarter, which is unchanged from last quarter. The CECL phase-in has affected our progression compared to the previous quarter. If we fully implemented the proposed rules, our AOCI would likely worsen by just over 3%, the thresholds would be slightly under 1%, and RWA inflation would add around 20 to 30 basis points. Therefore, we're approximately 5.9% to 6% on a fully phased-in basis today.

Okay. And then obviously, off that 6%, we would add the 2.5% or 2.6% you said, so...

That's right.

Yes.

Yes. Okay. All right. Thank you.

Our next question comes from Gerard Cassidy from RBC Capital Markets. Please go ahead with your question.

Good morning, Bill. Good morning, Mike.

Good morning.

Mike, to follow-up on the bond potential restructuring. A technical question, are you guys permitted? I know you can restructure the AFS available-for-sale portfolio. But can you touch the held-to-maturity portfolio as well? And then second, if this Basel III, as we know, appears to be delayed because of a big change coming, if Basel III doesn't get solidified and finalized until the first or second quarter of next year, how does that impact your guys' decision-making on when to possibly do this restructuring?

Sure, Gerard. Regarding your first question, the held-to-maturity portfolio cannot be repositioned. We cannot sell those securities without marking the rest of the held-to-maturity securities. As for Basel, we have been actively involved in the advocacy and tracking the developments of the rule. It appears that the final rule is delayed compared to our expectations from a year ago or even six months ago. However, we do not anticipate significant changes to the elements of the rule that matter most to Truist, particularly the inclusion of or deduction of accumulated other comprehensive income from regulatory capital. Therefore, we are optimistic about our future direction. We were clear in February about our goals related to potential repositioning. To reiterate, we want to ensure we maintain enough capacity to grow the business and carry out the buyback mentioned by Bill. Additionally, it is crucial for us to at least replace the earnings from the tax-intended holdings in any plans we consider.

Very good. And then possibly a follow-up on the commercial real estate detail you gave us in the appendix. It looked like the non-performing loan percentage declined a bit from the fourth quarter; charge-offs, however, obviously went up, your reserves also went up relative to total loans. Any color that you guys can provide us on what's happening to the mix of the commercial real estate? You know, obviously, your office is the one that we're all focused on, but any other areas that you guys have some color would be great? Thank you.

Yes, Gerard, this is Clark. We were very pleased with the quarter. We observed a decrease in our total commercial real estate non-performing loans, which resulted from our proactive measures to address the stressed exposure in the office sector. We reduced our office commercial real estate by $222 million, or 4.5%, while managing around $230 million in maturing loans. As we mentioned previously, we are committed to facing our exposures head-on and not postponing decisions. This approach contributed to higher losses for the quarter, but the benefit was a reduction in non-performing loans. Additionally, we feel confident about our reserves, with office reserves increasing to 9.3% and reserves for stressed institutional loans at approximately 11.8%. Overall, we are well positioned. The other commercial real estate segments are performing well. Regarding multifamily, we mostly see a shift to the watchlist, but not yet to non-performing loans or losses. We are actively engaging with borrowers, and we are pleased that many sponsors are addressing issues by resizing or implementing interest reserves to maintain performance. Overall, we feel positive about our commercial real estate portfolio and our current direction.

Thank you. I appreciate it.

And our final question today comes from Vivek Juneja from JPMorgan. Please go ahead with your question.

Thanks. Hi, Bill. Hi, Mike. I have a couple of quick questions. One is regarding the balance sheet restructuring you mentioned. Do you have an idea of the timing for when you expect to complete it? Assuming you close on June 1, do you think it will be finished by the end of this year, or could it extend into 2025? Are there any tax reasons that might impose time limitations?

The intention would be for it to happen simultaneously, reflecting how we might approach the potential restructuring.

Okay. As you restructure, are you planning to replace the securities with other ones? I know your goal is to achieve neutral earnings. What are your thoughts on this? Are you considering going beyond that? How do you view the ongoing run-rate of securities as a percentage of earning assets?

Yes. Hey, Vivek, it's Mike. I'll take it. In February, what we laid out was sort of an even redeployment into cash and securities. I think even that I think was hypothetical as you can imagine, we are keeping an eye on the market and thinking about the trade-offs around different, whether it be mortgages or treasuries and cash. So I think we'll get that mix right and we'll be guided on not just earnings. Obviously, we have an objective of shortening the balance sheet and improving our, you know our readiness around what we think will be more rigorous liquidity requirements over time. And so that's actually one of the great benefits of this transaction or this collection of potential transactions is, it's not just about capital. This really does move us forward more broadly.

Okay. All right. Thank you.

And ladies and gentlemen, with that, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to management for any closing remarks.

Okay. Thank you, Jamie. 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. We hope you have a great day. Jamie, you may now disconnect the call.

Ladies and gentlemen, that does conclude today's conference call. We thank you for attending. You may now disconnect your lines.