Greetings, ladies and gentlemen, and welcome to the Truist Financial Corporation Fourth 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, this event is being recorded. It is now my pleasure to introduce your host, Mr. Brad Milsaps.

Thank you, Betsy, and good morning, everyone. Welcome to Truist's fourth quarter 2024 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 fourth quarter results, share their perspectives on current business conditions, and provide an updated outlook for 2025. 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 2 and 3 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.

Thanks, Brad, and good morning, everyone, and thank you for joining our call today. So before we get started, I want to take a moment to introduce Brad Bender. Brad recently became our Chief Risk Officer. He brings extensive experience across a number of Truist areas, including risk operations, technology and consumer lending to his role. Brad is off to a great start. He'll continue to carry forward Truist's strong credit culture and risk discipline. Clarke Starnes, I'm really happy, is working closely with Brad on the transition. I'm incredibly grateful for Clarke's impactful 40-plus-year career at Truist, most recently serving as our Chief Risk Officer. Also want to thank Beau Cummins for his significant contributions to our company following his announced departure this week. Since 2005, Beau has purposely served as an instrumental leader at Truist, most recently as Vice Chair and Chief Operating Officer. Both he and Clarke played crucial and formative roles in the merger of equals to create Truist and setting the course for our future. I just can't tell you how much I appreciate their leadership during this time at Truist. They were fantastic partners. I just wish them all the best in their new chapters in their lives. All right. So, before turning to fourth quarter results, let's begin, as we always do at Truist, with purpose. We are a purpose-driven company dedicated to inspiring and building better lives and communities, which is the foundation and guide for how we conduct our business. So one example in the fourth quarter was our response to Hurricane Helene. The impact of the Hurricane on Western North Carolina was truly unprecedented. Truist has deep roots in the region, and our team was quick to respond, but they were also compelled to play a pivotal role in the area's long-term recovery, aligned with our purpose to inspire and build better lives and communities. We announced a three-year $725 million commitment to address critical needs, including a focus on small business, housing, and infrastructure projects. By listening to the needs of the community and leveraging our expertise and capital partnerships, we believe we can be a catalyst for recovery and growth. So now turning to our results on Slide 5. For the fourth quarter, we reported net income available to common shareholders of $1.2 billion or $0.91 a share. For the year, we reported GAAP net income of $4.5 billion or $3.36 a share and adjusted net income of $5 billion or $3.69 per share. Mike is going to provide some more details on quarterly and annual results later in the call. 2024 was an important year for Truist, and I'm proud of the results our teammates delivered, which included executing on several important strategic initiatives, delivering solid underlying earnings, maintaining sound asset quality metrics, and positioning us with strong momentum as we enter 2025. Our solid performance was defined by several key themes. First, 2024 ended on a strong note with annual adjusted revenue finishing at the high end of our expectations and annual expenses declining 40 basis points. Our adjusted efficiency ratio of 56.3% remained relatively stable on an annual basis, reflecting our ongoing expense discipline and focus on managing costs. In addition, on a linked quarter basis, average deposit balances increased 1.5%, and average loan balances were stable. End-of-period loans experienced a little over 1% growth as we saw an increase in loan demand due to the results of our focused initiatives in the latter half of the quarter. These factors, along with our continued discipline around rates paid on deposits, resulted in net interest income exceeding our expectations for the quarter. Investment banking and trading revenue increased 46% for the year versus 2023, as we continue to add talent and expertise to an already strong platform that continues to gain market share. Credit metrics remain solid as non-performing loans held-for-investment declined $38 million linked quarter, while net charge-offs increased 4 basis points in the fourth quarter, resulting in losses for the year coming in line with our expectations. Our CET1 capital ratio finished the year at 11.5%, which is up 140 basis points versus 2023, due to the gain on the sale of Truist Insurance Holdings in 2024 earnings, partially offset by the strategic balance sheet repositioning completed in May and $3.8 billion of capital we returned to shareholders through our common dividend and the repurchase of $1 billion of our common stock. The execution of these important strategic initiatives and resulting relative capital advantage leaves us well-positioned to grow our balance sheet and return capital to shareholders through our common dividend and our share repurchase program. In 2025, we're focused on five key areas, all aimed at driving better growth, positive operating leverage, and improved profitability. First, last year was a testament to the attractiveness of our platform, attracting, developing and retaining top talent will continue to be our priority. Second, we see a material opportunity to deepen existing client relationships within our attractive footprint, especially in areas like premier banking, wealth, and payments, all of which represent significant opportunities to capture additional share within our existing client base. Third, we also see growth potential beyond the markets where we have strong share, especially in states like New Jersey, Pennsylvania, and Texas, where we have smaller but faster-growing market share. These are not new markets, but areas where we have invested significantly and have great momentum deploying our full Truist capabilities. We're also optimistic about further expanding into certain verticals in the middle market where we can bring the expertise we provide to larger companies in our investment bank to mid-sized companies all across the country. Fourth, we'll continue to invest in our technology platform, which is improving the client experience, driving new account production, and delivering efficiencies. Finally, we plan to accomplish all of this while maintaining our expense discipline, driving positive operating leverage, and investing in important areas like our risk infrastructure and cybersecurity. Maintaining our momentum and executing against these strategic priorities will be the key to driving positive operating leverage this year and showing progress towards our mid-teens medium-term ROATCE target. Before I hand the call over to Mike to discuss our quarterly results, I want to spend a little bit of 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 Slide 6 and 7.

Thank you, Bill, and good morning, everyone. So I'm going to start with our performance highlights. We reported fourth quarter 2024 GAAP net income available to common shareholders of $1.2 billion or $0.91 per share. Total revenue decreased 0.5% linked-quarter as both net interest income and fees decreased modestly. Adjusted expenses increased 4% linked-quarter. And as we discussed last quarter, this increase was driven by higher professional fees and outside processing expenses related to a number of projects that were initiated later in the year. As Bill mentioned earlier, non-interest expenses declined 0.4% in 2024 versus 2023. Moving to capital, our CET1 ratio declined 10 basis points linked-quarter to 11.5% as our larger balance sheet, the payment of our common dividend, and share repurchases completed during the quarter offset our current period earnings. From a credit perspective, net charge-offs increased 4 basis points on a linked-quarter basis, and our non-performing loans declined 1 basis point on a linked-quarter basis. So moving to Slide 9, I'll cover loans and leases. Average loans remained relatively stable on a linked-quarter basis as a decline in average commercial loans was offset by growth in average consumer loans. Average commercial loans decreased $1.5 billion or 0.8%, primarily due to a decline in CRE and C&I balances driven by lower production in CRE. Commercial line utilization remained relatively stable on a linked-quarter basis. In our consumer portfolio, average loans increased $1.4 billion or 1.2% linked-quarter due to growth in indirect auto, residential mortgage, and other consumer. On an end-of-period basis, loans held for investment increased by $3.3 billion or 1.1%, primarily due to higher residential mortgages, C&I, and indirect auto. As Bill mentioned, we're encouraged by the increase in end-of-period loan balances and improved loan production in certain key focus areas during the quarter. Moving to deposit trends on Slide 10. Average deposits increased 1.5% sequentially or $5.7 billion, driven by growth in all deposit categories except for time deposits, which were down linked-quarter. Average non-interest-bearing deposits increased 1.8% and represented 28% of total deposits, which is unchanged compared to the third quarter of 2024. During the quarter, we continued to actively manage rates paid, which resulted in a decrease to our deposit costs. Specifically, total deposit costs decreased 19 basis points sequentially to 1.89%, which implies a 29% cumulative total deposit beta. Interest-bearing deposit costs decreased by 26 basis points sequentially to 2.62%, representing a 40% cumulative total interest-bearing deposit beta.

Just to add to that, I mean, we expect average deposit balances to decrease by about 1% in the first quarter due in part to the outflow of seasonally higher municipal deposits. Moving to net interest income and net interest margin on Slide 11. Taxable equivalent net interest income decreased 0.4% linked-quarter or $16 million, primarily due to the lag in deposit repricing versus earning asset repricing, which was partially offset by higher earning assets and some benefit from fixed-rate asset repricing. Our net interest margin decreased by 5 basis points on a linked-quarter basis to 3.07% due primarily to the previously mentioned beta lag and a larger investment securities portfolio. Based on our current outlook, we believe that the net interest income will decline by 2% linked-quarter due primarily to the impact of two fewer days in the first quarter relative to the fourth quarter and then we would expect it to trend higher in the second quarter of 2025 and throughout the course of the year. As you can see in the charts on the right, we expect net interest income to grow in 2025, driven primarily by low-single-digit end-of-period loan growth and the continued benefit from fixed asset repricing of our securities portfolio as well as our fixed-rate loan portfolios. During the fourth quarter, our average investment securities portfolio totaled $125 billion and carried a weighted average yield of 2.88%. That excludes the impact of pay-fix swaps. We expect to receive approximately $13 billion of cash flows from the investment portfolio throughout the course of 2025 that we anticipate reinvesting at higher yields. These securities roll off at a weighted average yield of 3.08%, excluding the impact of pay-fixed swaps and based on the current forward curve. In addition, our average fixed-rate loan portfolio totaled $135 billion and carried a weighted average yield of 5.38% during the fourth quarter. We anticipate having the opportunity to reprice approximately $42 billion of loans at higher yields during 2025, based on current maturity schedules.

I just wanted to note that this quarter we added additional disclosure on our swap portfolio and that's on the bottom right-hand corner of the slide. At December 31, we had approximately $84 billion of notional received fixed swaps with a weighted average yield of 3.45%. These swaps are designated against our commercial loan portfolio and long-term debt and designed to protect net interest income from lower short-end rates. Approximately $45 billion of these swaps were effective at the end of the quarter. The remaining $39 billion of received fixed swaps are forward-starting and will become effective over time. Based on our current portfolio, at December 31, the effective received fixed swap position peaks around $63 billion during the fourth quarter of 2025. At December 31, we also had approximately $30 billion of notional pay-fixed swaps with a weighted average pay-fixed rate at 3.39%. These swaps are designed to protect the economic value of the balance sheet as well as to manage future capital volatility through AOCI as these swaps are designated against our AFS securities portfolio. At December 31, the entire $30 billion pay-fixed swap portfolio was effective with approximately half the portfolio carrying a maturity of less than three years.

So turning to noninterest income on Slide 12. Noninterest income decreased $12 million or 0.9% versus the third quarter. The linked-quarter decrease was primarily attributable to lower investment banking and trading income, which declined $70 million linked-quarter, due to lower debt and equity capital markets activity and M&A fees. The decline in investment banking and trading was partially offset by growth in other income, service charges on deposits, and mortgage banking income. Although fourth quarter investment banking trading income declined on a linked-quarter basis, 2024 investment banking and trading revenues increased 46% versus 2023 and represented the highest level since 2021, due to higher transaction activity levels and continued market share gains, which helped drive a 6.2% increase in adjusted non-interest income for the full-year 2024. We remain optimistic about our ability to continue to gain share and grow not only in investment banking and trading but also in wealth and payments, where we believe there is significant opportunity to grow within our existing client base.

Next, I'll cover noninterest expense on Slide 13. Adjusted noninterest expense, which excludes the impact of restructuring charges and core deposit intangible amortization expense, increased 4% linked-quarter due to higher professional fees and equipment expense, partially offset by lower personnel expense in the quarter. On an annual basis, adjusted noninterest expense declined by 0.4%, and our adjusted efficiency ratio remained relatively stable. Beginning with the first quarter of 2025, we will begin including core deposit intangible amortization expense with adjusted expense to make our reporting align and be more comparable with peers.

Moving to asset quality on Slide 14. Asset quality remained relatively stable on both a like- and linked-quarter basis, reflecting our strong credit risk culture and proactive approach to quickly resolving problem loans. During the quarter, our net charge-off ratio increased 4 basis points to 59 basis points due primarily to seasonally higher consumer losses. Net charge-offs of 59 basis points for the year were in line with our expectation of 60 basis points. Our loan-loss provision exceeded net charge-offs, but growth in certain loan portfolios contributed to a 1-basis-point decrease in our ALLL ratio to 1.59%. Non-performing loans held for investment as a percentage of total loans decreased 1 basis point linked-quarter, but increased 3 basis points on a like quarter basis to 47 basis points. NPLs have remained in a fairly narrow band of 44 basis points to 48 basis points over the course of the past five quarters. Included in our appendix is updated data on our office portfolio, which is down $235 million linked-quarter and represented 1.5% of total loans. Our office reserve increased from 10.4% to 11.1%. Approximately 5.3% of our office portfolio is currently classified as non-performing compared with 5.1% at September 30. Notably, approximately 18% of our office portfolio is housed within our commercial community banking and wealth segments, where loan sizes tend to be more granular, guarantor support more prevalent, and overall losses lower. We expect stress to remain in the office sector and believe that the size of our portfolio is manageable and well-reserved, but our position is to remain very proactive in identifying and resolving issues in this portfolio. So turning now to capital on Slide 15. On a linked-quarter basis, our CET1 ratio declined 10 basis points to 11.5% due to the payout of 98% of our earnings via our common dividend and $500 million of share repurchases, as well as balance sheet growth. Our CET1 capital ratio, including the impact of AOCI, decreased from 9.9% to 9.6%, reflecting the aforementioned factors and an increase in AOCI due to the increase in longer-term interest rates experienced during the quarter. During 2024, our CET1 ratio increased by 140 basis points, which was driven by the sale of Truist Insurance Holdings and retained earnings, partially offset by our strategic balance sheet repositioning, our common dividend, and $1 billion of share repurchases.

We continue to believe that our strong capital position gives us the unique ability to utilize our future earnings and AOCI accretion to fund balance sheet growth and to return a significant amount of capital to our shareholders. Now, I will move to Slide 16, and review our guidance for 2025. Looking into the first quarter of 2025, we expect revenue to decrease 2% relative to fourth-quarter revenue of $5.1 billion. We expect net interest income to decrease 2% in the first quarter, primarily driven by two fewer days in the first quarter relative to the fourth quarter and seasonally lower average deposit balances. This will be partially offset by slightly higher average loan balances. Excluding the impact of day count, we would expect net interest income to remain relatively stable linked-quarter. We expect noninterest income to decrease 2.5%, driven primarily by higher investment banking and trading revenue, partially offset by lower other income and service charges on deposits. Adjusted expenses of $3 billion in the fourth quarter, which includes CDI amortization expense, are expected to decline by 3% linked-quarter, as seasonally higher personnel expenses will be offset with lower other expenses and professional fees.

As it relates to the buyback, similar to the fourth quarter, we're targeting approximately $500 million of share repurchases in the first quarter of 2025. For the full year 2025, we expect revenue to increase by 3% to 3.5% relative to 2024 adjusted revenue of $20.1 billion, driven by growth in net interest income and noninterest income. Our net interest income outlook assumes low-single-digit end-of-period loan growth and two reductions in the Fed funds rate, including a cut in March and another in September. We expect non-interest income to increase at a low single-digit rate. This expected growth rate reflects the fact that certain fee revenues that were recognized in 2024 will not reoccur in 2025. These fees are related to the shared services agreement that was in place following the sale of TIH back in May and six months of revenue associated with Sterling Capital Management, which was also sold around mid-year last year. We expect full-year 2025 adjusted expenses, which include CDI amortization expense, to increase approximately 1.5% in 2025 versus 2024. Our 2025 revenue and expense outlook implies positive operating leverage of 150 basis points to 200 basis points. In terms of asset quality, we expect net charge-offs of about 60 basis points in 2025, which is stable compared with net charge-offs of 59 basis points in 2024. Finally, we expect our effective tax rate to approximate 17% or 20% on a taxable equivalent basis in 2025. I'll now hand it back to Bill for some final remarks. Thanks, Mike. So to conclude, I'm really pleased with the progress we made as a company last year, and I'm confident that we have strong momentum with clients and teammates this year as our value proposition has just never been stronger. First, we have an incredible franchise with leading share in high-growth markets. We've got motivated and energized teammates and a fulsome set of specialized wholesale and consumer capabilities that our loyal clients value. Second, our relative capital position remains a differentiating factor that gives us the ability to grow our core business, serve existing and new clients, invest in our infrastructure, and return considerable amounts of capital to our shareholders in the form of dividends and share repurchases over the next several years, all of which we plan to continue doing in 2025. Third, as we execute our strategic growth and capital management priorities, we see a significant opportunity to improve our profitability over the medium-term and we would expect to show progress in 2025. Our path to profitability improvement is multifaceted and a function of client and business growth while maintaining our cost discipline. As I discussed earlier, much of the profitability improvement potential we plan is centered on further deepening existing client relationships in verticals and product lines like wealth, payments, premier, and investment banking that already exist at Truist. We see opportunities to grow in markets, where we have less dominant share like New Jersey, Pennsylvania, and particularly Texas, while also further penetrating the middle-market lending segment. The good news is that we see multiple paths and initiatives that with proper execution will result in improved performance, which we expect to show you in 2025. Fourth, we plan to accomplish all of this while maintaining our expense discipline, generating positive operating leverage in 2025 and beyond while also continuing to invest in talent, technology, and our infrastructure. Finally, we never take for granted our strong track record on asset quality as we'll continue to focus on maintaining strong risk discipline and controls. I'm as optimistic as ever about Truist's future, especially in light of the momentum I see every day inside this company. I'd like to thank all of our teammates and leaders for their incredible purposeful focus and productivity in moving our company forward. I'm so proud to be their teammate. So again, thank you for your interest and investment in Truist. And Brad, we'll turn it into Q&A.

Thank you, Bill. Betsy, 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 yourself to one primary question and one follow-up in order that we may accommodate as many of you as possible.

We will now begin the question-and-answer session. The first question today comes from Scott Siefers with Piper Sandler. Please go ahead.

Good morning, everyone. Thanks for taking the question. Mike, I appreciate the disclosures on the swap book and the anticipated repricing opportunities this year. Kind of, it sounds like, after a little bit of a step back in the first quarter, there's just a lot of programmatic opportunity. So maybe just in sort of simple terms, maybe if you could discuss how much of the building momentum simply sort of happens versus how much you see is dependent on the external rate environment? I guess, in particular, in there, maybe how your thoughts would change if we got either more or fewer cuts than the two you've envisioned in the guidance?

Yes. Good morning, Scott. Happy to do that. I think about our NII trajectory and you hit it, I think the first quarter, we're going to experience a little bit of a step back and that's really just day count driven. But from there, we would expect to begin to see a positive trend. And some of that is sort of a continuous expectation that we'll begin to see end-of-period balance growth occur throughout the course of the year, again, relatively modest. The betas on the deposit side are catching up, essentially will become fully caught up in the first quarter. So we really do begin to see, I think, some benefit there. And I think as we came into the cutting cycle, that was maybe more of a question around where these betas might start. We're very pleased by the 40% that we were able to achieve in the first quarter or, pardon me, the fourth quarter, and have an expectation that we'll be in the mid-40%s plus in the first on our way to 50% next year. So I think that's the primary driver of our outlook for next year are just that, some modest loan and deposit growth, coupled with the fact that the betas are where they are. In terms of the Fed rate path, we've got the two cuts in now in March and September. I think if we were to see later cuts, fewer cuts, even no cuts, that would present a touch of a headwind, but I think manageable, frankly, inside our guide. To the extent that the short-end was a little lower and we saw maybe sooner cuts or more cuts. I think that's a touch of a good guy. But again, we do have, I think our sensitivity, at least to the short-end relatively neutral. I mean, one other factor that we're keeping our eye on, I think, like others, frankly, is just the shape of the curve. Today's curve is, I think, attractive. And to the extent that we can hang on to a long-end that does benefit the fixed loan and the securities repricing, that's something we have our eyes on as well.

Thank you for that information. Regarding the loan balance, it seems there is a modest but positive loan growth expected. Could you share some broader insights about your customers and how you anticipate loan demand will change as the year continues?

Yes, Scott, it's Bill. As Mike mentioned, we aren't anticipating significant loan growth, but we are starting the year with some positive momentum, expecting small single-digit growth by the end of the period. We're seeing the benefits of our activities and investments, particularly as we believe our markets may recover a bit faster than the national average. To break it down further, on the consumer side, our investments in indirect auto, service finance, and mortgage sectors have contributed to this growth, and I expect that trend to continue. We're committed to maintaining our pricing, structure, and credit standards. On the commercial and industrial (C&I) side, we experienced an increase in production during the fourth quarter, especially towards the end, with a slight uptick in utilization and increased commitments reflecting significant growth, particularly in the middle-market segment. We experienced a 50% increase in syndicated deals, with half being new to Truist. Our targeted efforts are yielding positive results. Regarding client sentiment, clients appear to be more expansion-oriented, which is evident in the rising commitments, indicating they are preparing for future investment opportunities. I believe M&A activity will be a crucial factor moving forward; depending on the volume of M&A, it could accelerate our projections. Currently, we are engaged in numerous discussions, and while we need to see more action, there is a significant increase in dialogue around these opportunities. I hope this information is helpful, Scott.

Yes. That's terrific. Bill and Mike, thank you guys very much.

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

Good morning. I just wanted to follow up on Bill. I think I heard you a couple of times call out, in particular, New Jersey, Pennsylvania, Texas. Just talk to us in terms of the growth opportunity set you see there. Should we expect new branch openings, hiring of teams? Or could these be markets that are attractive even from a bank M&A perspective?

Yes. Let me sort of go into that. I mean, remember, these are markets that we've been in for over a decade in most cases. So this isn't new in terms of markets, but it is new in terms of investment and momentum and the things that we can offer those markets. So if you think about just the expansive nature of the products and capabilities, and then, we've just got great leaders, who are bringing those to the benefit of our clients. As far as new bankers, we're seeing that. I mean, in those markets, we've added about 25 new bankers to our existing platforms. People are attracted to this opportunity. In terms of production and fee income growth, I mean, they're big numbers off a smaller basis of 80%, 70% kind of activity. In those markets alone, sort of take Philadelphia and Texas, we did about $3.5 billion of loan production. So this is sort of new incremental on top of that. And in Texas, specifically, we added about 5,000 net new clients. So you can sort of see the impact of that. I do think you'll continue to see more expansion from us in there. So that's maybe more to come and more dialogue this year as we think about the full network, not only in terms of bankers but in branches and other types of investments we're making in those markets. And I think in fairness to the last part of the question, I think that will be organic. I think we've got really good organic momentum. So I like the opportunities that we have there. The teams on the field are really strong, and areas that we're leaning into.

That's helpful. Can you remind us about the concerns regarding talent attrition in your markets due to competition? What is your confidence level that these two franchises have been integrated well, and do you feel optimistic about defending or possibly increasing your market share in your traditional markets when it comes to deposits?

Yes. I mean, you see that in the results. You see that in the quarter. I mean, we've had good momentum against the balance sheet. I talked about net new. So I do feel good about not only defending, but actually leaning into the markets that we serve in these fantastic markets. We've lost some teams and we've added some teams. I mean there's a reality of that of the size company that we are. We've added a lot of great talent. I mean our leaders have really done a fantastic job of attracting teams to the value proposition. So the teams that we have on the field and their capacity and ability to deliver against our value proposition has never been better. So we've added a lot. I feel really good. As I mentioned in my comments, our focus is going to be on attracting, developing and retaining great teammates, who can deliver against this Truist value proposition. So the answer is, we're in not just a defensive, but we're in an offensive position in our markets and fully prepared, and we see the results and momentum of that.

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

Good morning. Can you guys talk about how you're thinking about targeted capital levels over time? Obviously, there's still some potential changes coming on the regulatory side, including CCAR, but just without having all the details on that, just the thought process? And then also just related to that, are there other opportunities to tweak the preferred stock? You had some redemptions this quarter and, obviously, that impacts the business going forward. Thanks.

Good morning, Matt. Recently, we discussed a long-term target for CET1 around 10%. We don’t have an updated perspective on that at the moment. Currently, with existing rules and some anticipated changes, we stand at 11.5%. If we adjust that for AOCI, we are closer to the 9% to 6% range. We are considering our current position, the likelihood of new regulations, and we still believe that aiming for around 10% remains a reasonable expectation for you. There is a lot happening right now, and as we gather more information, we may have the chance to revise our outlook if needed. Regarding the preferred stock, we've engaged in some liability management over the past few quarters, and you'll see this continue on a total capital basis. We are in a solid position, and capturing the benefits where we can is what you’ve observed.

Okay. That's helpful. And the 10%, I assume is including the AOCI?

Yes. I believe the rule will evolve over time. It’s challenging to predict all the potential impacts. There has been much discussion regarding the effects on RWA inflation and similar factors. However, if we focus on OCI, that is what informs my guidance.

Okay. And then just squeezing in, what's the duration of the securities book? I know you had some adds this quarter or last two quarters.

Yes. The AFS portfolio is shorter due to the work we did this spring with the repositioning. On a net basis with the payers, our AFS durations are in the low 3%. Our HTM portfolio is extended and closer to 7%, resulting in a combined average of mid-4s.

The next question comes from Erika Najarian with UBS. Please go ahead.

Hi. Good morning. My first question is for Bill. I understand there’s a macro aspect to the return of lending growth, but you have modest assumptions in your net interest income and revenue outlook. Could you discuss how some of the growth might be influenced by the leadership changes and adjustments to incentive compensation and your go-to-market strategy? Clearly, there’s a macro element, but it also seems there’s a Truist-specific aspect where you’re transitioning from a defensive to an offensive approach. Additionally, you made some announcements regarding leadership this week that were received positively by investors. What message would you like us to take away from these leadership changes?

Yes. I mean you sort of went a couple of different tributaries there. But look, overall, when I said this, I think, in the answer to other question, I mean, the talent that we're investing in our teammates, who I think, can really lead this organization in the future, they really know our value proposition in terms of where we're going. And in terms of this week, I mean, we had Beau depart our Company. I mentioned earlier, a great career. He really did a lot of important things in terms of establishing the framework for the future. And then we took the opportunity to take some of those responsibilities and distribute them among some of my existing leaders. So that gives them some more opportunities to grow and some more opportunities to expand their toolkits. I feel really, really, really good about that. And then as you mentioned, there have been some other key important leadership hires along the way that I think will be important parts of our future. So I don't think there's a story there, other than we have a great franchise and we're attracting really good people to our franchise. We have existing teammates, who have really expanded their toolkits. We have great leaders, who really understand and know how to attract and retain really, really strong talent.

And Erika, maybe I'd just add to that a little bit. I mean, another dynamic, obviously, is, post the sale of TIH, the capital position we find ourselves in, I think, also gives our teammates a lot of confidence. I mean, we have a very sort of pro-growth agenda and we're doing a lot of senior and banker hiring in our commercial and wholesale businesses, you're seeing that pull-through in terms of activity levels and we're trying to activate capital across our consumer lending platforms. And so those are very defensible, strong businesses that we think have good growth potential. So I think there's just a clarity of focus on growth in the client and you're starting to see that pull-through. And I think that's going to obviously, gives us a lot of confidence as we go into the year. And I think you're right, I think our expectations for low-single-digit growth are relatively modest. So we're just focused on execution.

And the second question is a lot more boring. On Slide 11, on the $45 billion in active received fixed swaps by year-end, how does that progress quarterly through from 12/31/24 to 12/31/25? In terms of traditional changing you have.

Yes, we're at $45 billion in the fourth quarter, which remains fairly stable in the first quarter. I anticipate a slight increase, possibly an additional $1 billion in the second quarter, and a bit more growth in the third quarter, reaching a peak of $63 billion in the fourth quarter. You could likely model a nearly straight progression between approximately $46 billion and $60 billion. We expect a bit more in the third quarter. For the entire year, $30 billion of payers are accounted for, resulting in a net $15 billion by the end of Q1, and consider it as a net $30 billion by the end of Q4.

Got it. Thanks.

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

Hi, good morning.

Good morning, Betsy.

I did want to just drill down into the expense outlook a little bit here. Maybe you could help us understand what's the driver behind the expense declines in the first quarter, Q-Q, down 3%? And then on the outlook for the full year, revenue growth 3% to 3.5%, expense growth only 1.5%. So help us understand how you're anticipating managing to that type of outcome, especially in an environment where capital markets is pretty strong and there's a comp payout ratio there. Thank you.

For the quarter, the decline is mainly due to elevated professional fees in the fourth quarter, along with slightly higher other expenses and some operational losses during that time. As these factors are resolved, we anticipate some benefit. We expect that after the increase in the first quarter, expenses will start to stabilize for the remainder of the year. Regarding 2025, you raised a question about whether potential gains in capital markets might lead to higher full-year expenses. It's true that the correlation with certain areas of our business, particularly in Wealth and Investment Banking, can be more variable. However, we believe that the 1.5% figure reflects our baseline outlook. We would be pleased to see revenues surpass our expectations due to improved market conditions and activity levels, which would allow our expense outlook to adjust accordingly.

And embedded within.

Yes. Just to maybe add to that, Betsy. I mean, so, in that existing guidance, I mean, we've had really good consistent low double-digit kind of performance in Investment Banking, and I expect that to continue. So this is built into this. And we also continue to have efficiency points. So those are offset against those. So think about this year, we had the best year in Investment Banking and we were down 40 basis points in expenses. So this is an environment where we continue to have efficiencies against the investment, all oriented towards that consistency and the efficiency ratio and creating and sustaining positive operating leverage. So we don't want this to be a one-time thing. We want this to be a sustainable platform. So our teams look at the investment side and the savings side with the same level of intensity.

I understand your concern. There is a notable amount of operating leverage here, with a low end of 1.5 percentage points and reaching up to 2 percentage points. I'm curious whether there has been any recovery from previous investment spending, especially with tech being minimized, that is helping maintain this expense forecast at 1.5% and preventing it from rising to 2% or 2.5%.

A lot of these are investments that we've already made as part of the strategy we've discussed. In terms of the merger, we created numerous opportunities for new products and capabilities, along with consolidated platforms. Our strategic focus is on expanding with existing clients. These products and capabilities are in markets where we've already invested, leveraging that investment. This inherently results in high returns and effective leverage.

Good morning.

Hey, John.

On the expense guide, I agree that it is lower than we had forecasted. Could you remind us of the most significant areas of investment that you noted? What are the key factors currently affecting your expense outlook? Also, given the current state of this guide, do you have flexibility if revenue is weaker? Thanks.

The primary investments in our expenses are related to areas we've previously discussed. Investment Banking is one, as it has a direct correlation with revenue. Additionally, we are continuing to invest in our risk infrastructure as we expand our Company. As we grow larger, it's essential to maintain a robust risk infrastructure and cybersecurity measures. Therefore, these will be areas of ongoing investment. Regarding the various adjustments we can make, we have a commitment to positive operating leverage. If we experience favorable conditions, that presents one opportunity for adjustment, and if we face challenges, we are equipped to manage that as well.

Yes. John, I would just add. I mean we're hiring talent across the board right now. So whether it'd be in wealth or commercial or corporate or investment banking, we're hiring premier bankers, we're hiring area leaders, we're hiring people to go drive our growth agenda. We're also investing in products. We've talked a lot about the opportunity we believe we have. For example, in treasury, we're adding, we've invested in our trading capabilities in our investment bank, where you heard Bill talk about deepening our penetration in some of our markets, where we think we have an opportunity to do so. So, I think those are all areas where you're seeing some incremental growth. But just recall, and this is for Betsy too, like we're giving you a net number. I mean, the work we were doing in 2024 to manage expenses and drive efficiency continues in 2025. So we're looking at sourcing. We're looking at all the various levers you would expect us to be focused on to drive that outlook. And look, just to say it as well, just with the focus on operating leverage, we feel pretty good about the revenue outlook we've provided. We don't think we've got heroic loan growth in our outlook and we've got a pretty good curve. And so, we feel pretty good as we turn the page on 2024 and move into 2025.

Great. All right. Thanks, Mike. And then just separately back to the capital front. I hear you in terms of the 10% CET1 target. You've already guided to about another quarter of $500 million in buybacks in the first quarter. Is that a reasonable pace as we look over the remainder of the year just given your current capital position or could that slow a bit if loan growth picks up more meaningfully than your modest assumption at this point?

Yes. John, the good news is we've got ample capital to sort of stay at that pace. So we're in the, I think, unique position that we can grow and distribute capital. So I think we're, right now, on, let's call it short-term to medium-term, I think we anticipate staying at that pace in terms of the share buyback. We'd love to have dramatic loan growth that would change that. But the good news is that we can accommodate a good level of loan growth and we can accommodate share buybacks. So I think we're in a really good position to ensure the future of our Company and reward shareholders along the way.

The next question comes from Saul Martinez with HSBC. Please go ahead.

Hey, good morning, guys. First of all, just wanted to clarify the revenue guidance of 3%, 3.5%. I think the non-interest income guide is low-single-digits, which, I assume, is 1% to 3%, which would imply NII growth is a little bit above that range. Is that right? I might be stating the obvious, but I just wanted to clarify nonetheless.

No, you've got it right. There are maybe a couple of things to consider. The non-interest income guidance in our outlook is a better headline than fees. However, I mentioned in the prepared remarks, and it's worth repeating, the transactions we completed last year, including the sale of TIH and the related transition services agreement, generated some temporary fee income in 2024. Additionally, the sale of Sterling is reflected in the 2024 numbers but won't be included in 2025 numbers, which does impact the fee income outlook. If we were to exclude those items that won't recur in 2025, our fee outlook based on the core businesses would be more aligned with a mid-single digit forecast.

Understood. So on a core basis, it's more in the mid-single digits. Additionally, I have a follow-up question. With fixed-rate loans totaling $42 billion at a yield of 6.36%, which is higher than the portfolio yield, it suggests that some of the higher-margin loans are maturing. How should we approach the new money rates on that $42 billion? What kind of additional spread are we seeing there?

I think we're not changing our mix or our risk appetite. So I don't want to imply that there's a change in the core spread. However, if you look at the run-on yield compared to the run-off yield, with today's curve, we have a run-on rate for the fixed-rate loans of 100 basis points or more compared to the run-off rate. And for the bonds, that's even better.

Due to time constraints, please limit yourself to one question. The next question comes from Mike Mayo with Wells Fargo. Please go ahead.

I understand that during the merger, you experienced a loss of market share in the Southeast for a couple of years. Now that you're taking a more proactive approach, I'm surprised you brought up Pennsylvania and New Jersey, especially since there seems to be significant potential in the Southeast. I'm curious about why those specific markets were mentioned now and what has changed. Also, what strategies are in place to improve your core deposit market share in both the Southeast and in Pennsylvania and New Jersey? I realize this is part of your expense guidance, and if you are increasing marketing, building branches, or hiring, that will be reflected in those expenses. Could you elaborate on how these investments will translate into better deposit share performance in those areas? Thank you.

Yes. Mike, we observed some deposit growth this quarter along with positive momentum. In the context of a merger, we have surpassed the expectations regarding market share challenges. I believe we are making a significant shift in those markets concerning our product capabilities and the opportunities available. We're making solid progress here. When you bring up Texas and other markets, those are also ours. We have a long-standing presence in these areas and are focused on continuing our expansion. I mentioned those markets because there are also opportunities to grow rapidly and disproportionately. This allows us not only to defend and grow but also to expand aggressively in other areas. I'm just trying to present a complete picture of what Truist represents.

Given your extensive experience, Bill, do you think the competition among banks is increasing? It seems like many banks are entering each other's markets. Conversely, it appears that some of the risks have been mitigated since the financial crisis. What do you think about the current competitive landscape? Is it becoming more intense, favorable, or logical?

My decades of experience have always been in highly competitive markets, and I don't think that has changed. We've always faced smart competitors, which I consider an advantage since we are also one of the smart players. Our ability to compete has never been better, and I believe we're in an excellent position. Good markets tend to be very competitive, and they grow at a faster rate, allowing for continued growth even while being competitive. I don't think we're experiencing unreasonable pricing or overly intense competition; we have well-established competitors, but we also possess a strong value proposition. This is evident in our successful track record, particularly with net-new opportunities, and it demonstrates our capability to succeed against those competitors.

Hi, Bill. Hi, Mike. Can you share your thoughts on the success you've had in the Investment Banking business? It currently makes up about 21% of your fee revenues in 2024, up from 15% in 2023, and around 9% of total revenues compared to roughly 4% last year. Where do you see this heading? Are you satisfied with these levels in relation to your overall revenue, or do you believe there's potential for further growth, possibly reaching 15% of total revenues? I'm curious about your perspective on growth opportunities.

Thank you for recognizing the strength of the Investment Banking business. This has been developed organically over a long period. We have consistently experienced a low double-digit compound annual growth rate and I believe we can maintain that pace. I'm optimistic about our future. As we have mentioned before, our business heavily focuses on the middle market and our existing client base. This focus should result in less volatility over time as we expand our client relationships. We also operate efficiently and make smart capital decisions, which supports our continued growth. We aim for all parts of the business, including payments and wealth management, to grow together, ensuring we do not become overly reliant on any one area. This diversity in fee income and balance sheet is essential to our overall strategy. We're not restricting growth in this area because we recognize the opportunities and appreciate our efficient operations and strategic alignment with Truist's overall goals.

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

Okay. Thank you. 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.

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