Truist Financial Corp Q1 FY2026 Earnings Call

Greetings, ladies and gentlemen, and welcome to the Truist Financial Corporation's First Quarter 2026 Earnings Conference Call. As a reminder, this event is being recorded. It is now my pleasure to introduce your host, Mr. Brad Milsaps.

Thank you, and good morning, everyone. Welcome to Truist's First Quarter 2026 Earnings Call. With us today are our Chairman and CEO, Bill Rogers; our CFO, Mike Maguire; and our 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 first quarter 2026 results, share their perspectives on current business conditions, and provide an updated outlook for 2026. The accompanying presentation as well as our earnings release and supplemental financial information are available on the Truist Investor Relations website. 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 will turn it over to Bill.

Thanks, Brad, and good morning, everyone, and thanks for joining our call today. Before we discuss our first quarter 2026 results, let's begin, as we always do, with purpose on Slide 4. At Truist, our purpose is to inspire and build better lives and communities. And one way we bring that to life is through the work we do every day for our clients. One example of this is our project finance business, which is a client-focused platform that provides financial advice and capital to help develop essential infrastructure that drives long-term economic growth, job creation, and stronger and better communities throughout our footprint in the United States. Our relationships with these clients have led to broad-based franchise engagement, which includes deposits, payments, and lead roles in capital market transactions. From a financial perspective, there are aspects of this business that generate returns somewhat differently than our other businesses. A meaningful portion of this benefit is realized through reductions to our tax provision rather than reported revenue. Mike is going to walk you through the impact of that later in the call, but this dynamic contributed to our lower tax provision in the first quarter and is a factor in our expected lower tax rate for 2026 compared to 2025. This, though, is a great example of how serving our clients and communities is true to our purpose and also drives strong financial outcomes for our shareholders. Now turning to our results on Slide 5. Before I get into the details of our first quarter, I want to spend a moment on the quality of what we're delivering across the company and how we're executing against our strategic priorities. What I'm most excited about this quarter is the underlying momentum we're seeing. New client pipelines are growing. Activity levels remain healthy, and we're continuing to add talent and execute in the areas that matter most to our strategy of driving improvement in our profitability. During the quarter, we once again added new clients, deepened existing relationships, and grew profitably in the business and products where we've chosen to focus with loan growth coming from priority segments, fee growth driven by core client activity and stronger referrals and connectivity across the company. I can clearly say that we're focused, we're aligned, and we're executing well, which is evident in our first quarter results. As you can see on Slide 5, we delivered net income available to common shareholders of $1.4 billion or $1.09 per diluted share for the first quarter, which represents a 25% increase over the first quarter of last year earnings of $0.87 a share. Our performance was driven by continued execution against strategic priorities, including growth in both consumer and wholesale loans, along with strong noninterest income growth led by investment banking and wealth management businesses. Together, those factors along with our expense and credit discipline contributed to 250 basis points of year-over-year positive operating leverage in the quarter. As a result of this execution in managing our capital through share repurchases, return on tangible common equity improved by 150 basis points to 13.8% compared to the first quarter of 2025, representing meaningful progress towards our full year 2027 ROTCE target of 15%. While we remain firmly on track to achieve this target, as I've said before, it's not a ceiling for our company. The progress we're seeing today across our company gives us confidence in our ability to drive profitability higher over time. With continued execution against our strategic priorities, continued capital return and the benefit of expected changes to the capital framework, we're establishing a long-term ROTCE target of 16% to 18%. Before I hand the call over to Mike to discuss quarterly results, I want to spend some time discussing the positive momentum we're seeing within our business segments and with our digital strategy on Slides 6 and 7. First, let me start with Consumer and Small Business Banking. CSBB delivered another solid quarter that was consistent with our expectations and strategy to drive profitability improvement across the enterprise. Average consumer and small business deposits and loans were up 1% and 4%, respectively, versus the first quarter of last year of 2025. Average loans declined modestly for the fourth quarter which is consistent with normal seasonality and our goal of emphasizing growth in categories offering the most attractive risk-adjusted returns. As you can see on the slide, Premier Banking was again a source of strength with both deposit and lending production up significantly, driven by deeper client engagement, adviser productivity and continued momentum in financial planning activity. Digital continues to be a key growth engine for CSBB. Digital share of new-to-bank clients increased to 45% with Gen Z and millennials representing more than half of the growth. Active digital users grew year-over-year and digital transaction volumes remained strong, reflecting sustained client engagement with our platforms. Building on that digital progress, we're increasingly focused on how AI can further enhance productivity, decision-making and client engagement across the company. We see AI as a real operating lever, one that improves the client experience while also creating productivity and operating leverage across our businesses, without compromising control, safety and reliability. Our focus is on using AI to strengthen relationships, giving clients faster, more personalized service and enabling our teammates to spend more time advising and problem-solving rather than navigating processes. We're already deploying AI across Consumer and Small Business Banking in practical client-facing ways. Truist Insights delivers personalized financial guidance at scale. Truist Assist handles most routine service requests digitally and around the clock, improving consistency in reducing call volumes. AI-enabled call summarization is live for care center agents, lowering after-call work and enhancing insight capture. Overall, our disciplined focus on capital allocation, pricing, productivity, and digital execution is translating into strong underlying performance and positions consumer and small business banking well as we progress through the year. Now turning to Wholesale on Page Slide 7. In Wholesale, we delivered a strong start to 2026 with continued momentum across loans, deposits, and fees while maintaining a disciplined focus on relationship returns and capital efficiency. Average wholesale loans and deposits increased 9% and 2%, respectively, versus the first quarter of 2025, reflecting diversified growth across our industry banking, middle market, and CRE teams as we continue to prioritize high-quality relationship-driven loan growth. Middle market deposits, in particular, an area where we've invested heavily, grew 11% year-over-year, driven by 7% growth in our legacy markets and 30% growth in expansion markets such as Texas, Ohio, and Pennsylvania. Wholesale fee performance was also standout this quarter with strong results in Wealth Management and Investment Banking and Trading. Investment Banking and Trading delivered its highest quarterly revenue since 2021, driven by strength across a broad set of product areas. Importantly, we're also seeing even stronger connectivity among our commercial, corporate, and investment banking platforms. This is driving higher quality fee growth with an increase in the number of lead roles and meaningful contributions from existing commercial and wealth clients. We're also leveraging AI across Wholesale to enhance productivity underwriting and client engagement using predictive analytics to improve adviser effectiveness, accelerate underwriting speed and precision, and scale lead generation and conversion among payments and wealth. These capabilities are helping us serve clients more efficiently while improving returns and speed to market. Overall, we see clear evidence that our strategy is working. We are pairing high-quality balance sheet growth with improving fee mix, stronger client engagement and enhanced operating efficiency, which gives us confidence in Wholesale's outlook for the remainder of this year. Now let me turn it over to Mike to discuss our financial results in a little more detail.

Thanks, Bill, and good morning, everyone. We reported a GAAP net income available to common shareholders of $1.4 billion or $1.09 per diluted share for the first quarter of 2026. This represents a 25% increase in earnings per share compared to the first quarter of 2025, and a 9% increase from the fourth quarter of 2025. Revenue decreased by 1.9% compared to the previous quarter due to lower net interest income, primarily linked to the day count. However, revenue increased by 5.1% year-over-year, driven by higher net interest income from strong loan growth and increased noninterest income, mainly from Investment Banking, Trading, and Wealth Management. GAAP noninterest expenses dropped by 5.9% compared to the fourth quarter of 2025, mostly due to reduced other expenses. Noninterest expenses rose by 2.6% in comparison to the first quarter of 2025, which contributed to a positive operating leverage of 250 basis points year-over-year. Our effective tax rate for the first quarter was 12.4%, down from 17.9% in the first quarter of 2025, with about half of the decline attributable to increased client transaction activity in project finance. Now, moving on to loans and leases. Average loans held for investment rose by $2.3 billion or 0.7% quarter-over-quarter to $327 billion, driven by a 1.8% increase in commercial loans, offset by a 0.9% decline in consumer loans. End-of-period loans saw a slight increase as 1% growth in commercial loans was countered by a 1.1% decrease in consumer loan balances. These loan trends align with our expectations outlined in January for loan growth and mix for 2026, which anticipated average loan growth to be primarily driven by commercial and other consumer categories, with slower growth in residential mortgages and indirect auto. We expect average other consumer loans to grow at a mid- to high single-digit pace in 2026, consistent with attractive risk-adjusted returns. Based on our current pipeline, we expect average loan growth of approximately 3% to 4% in 2026. Now, regarding deposits, growing client deposits is a key priority and I'm pleased to report that we saw growth in client deposits this quarter, which is typically weak seasonally. Average deposits increased by 0.7% linked quarter, boosted by growth in interest checking, although we saw declines in other deposit categories. Average interest-bearing deposit costs fell by 14 basis points to 2.09%, and average total deposit costs decreased by 9 basis points to 1.55%. Our interest-bearing deposit beta rose from 45% to 46%, and our total deposit beta increased from 30% to 31% from the last quarter. Moving to net interest income and net interest margin, taxable equivalent net interest income decreased by 2.8% linked quarter, or $105 million, mainly due to having two fewer days in the quarter compared to the fourth quarter and seasonal changes in our deposit mix. Our net interest margin fell by 5 basis points to 3.02%, primarily driven by the same seasonal deposit mix change. For the entire year of 2026, we now expect net interest income to grow by 2% to 3%, revising down from our prior estimate of 3% to 4%. This adjustment is mainly due to our revised expectation that the federal funds rate will stay unchanged throughout 2026, as opposed to our earlier prediction of two 25 basis point cuts. We still anticipate a 3% to 4% average loan growth and continued benefits from fixed rate asset repricing. Although we expect the net interest margin to remain stable in the second quarter, we project that the average net interest margin for 2026 will exceed 3.03%, the average for 2025. In noninterest income, we saw an increase of $7 million or 0.5% compared to the fourth quarter of 2025, driven by strong growth in Investment Banking and Trading income, as well as lending-related fees, though somewhat offset by lower investment income. Investment Banking and Trading income rose by $37 million or 11% quarter-over-quarter to $372 million due to increased trading income and capital markets activities, even as M&A fees declined. Year-over-year, noninterest income was up 11.6%, largely attributable to the 36% growth in Investment Banking and Trading and a 7.6% increase in Wealth Management income. Regarding noninterest expenses, we observed a decline of 5.9% linked quarter, attributed to lower other expenses and personnel costs. The decrease in other expenses during the fourth quarter of 2025 included an accrual related to a legal issue, while lower personnel expenses were mainly a result of reduced incentive compensation. This was slightly offset by higher regulatory costs, since the previous fourth quarter benefited from a one-off FDIC special assessment credit. Year-over-year, noninterest expense grew by 2.6%, reflecting increased personnel expenses but offset by lower professional fees and processing costs. Lastly, on asset quality, our metrics remain strong both linked quarter and year-over-year. Net charge-offs increased by 4 basis points to 61 basis points and were up by 1 basis point compared to the first quarter of 2025. Nonperforming loans held for investment rose by 2 basis points to 50 basis points of total loans, predominantly due to higher consumer and nonperforming loans, partially mitigated by improvements in C&I and CRE loans. The rise in consumer nonperforming loans is primarily associated with a change in the nonaccrual criteria regarding certain indirect auto loans, which we disclosed in our 10-K, rather than any deterioration in credit trends. This modification will lead to higher reported nonperforming indirect auto loans over time, but it will not affect cash flows or loss expectations throughout the lifetime earnings of these loans. Before I move on to discuss our capital position on Slide 16, I do want to spend a few moments on our nondepository financial institution or NDFI exposure and how we think about the risk profile of that portfolio. To support that discussion, we've included expanded detail on our NDFI loan portfolio on Slide 15. As of March 31, loans classified as NDFI represented 12% of total loans. This is a well-diversified portfolio across 35 different asset classes and it's structured with protections that have held up well historically in stressed environments. Our largest NDFI exposure is the diversified equity REITs. This is a client-driven business that we've been active in for more than 20 years, and it's an area where we have deep experience. These loans are secured by income-producing real estate, underwritten with conservative leverage, and supported by strong covenant packages which helps mitigate downside risk. With respect to private credit, our exposure is primarily through lending relationships with business development companies or BDCs and middle-market loan funds. In total, these exposures represent about 1% of our loan portfolio. From a risk standpoint, these facilities are underwritten with advanced rate limits, borrowing base mechanics, and meaningful equity positions beneath us, all of which are designed to provide significant loss protection in stress scenarios. Moving now to capital on Slide 16. Our 10.8% CET ratio was stable with the fourth quarter. During the first quarter, we repurchased $1.1 billion of common stock compared with $750 million in the fourth quarter. We are targeting repurchases of $1.2 billion in the second quarter and approximately $5 billion in 2026, compared with our previous expectation for $4 billion of repurchases for the full year 2026. Overall, our capital allocation priorities remain unchanged. These priorities include supporting the organic growth needs of our clients, paying our common stock dividend, and returning excess capital to shareholders through share repurchases. M&A is not a priority for Truist as we remain focused on improving our own profitability and returning capital to our shareholders. Finally, we are well positioned for the recently issued Basel III proposal. Under the newly proposed capital rules, we estimate that risk-weighted assets could decline by 9% under the revised standardized approach and by 11% under ERBA. We believe the proposed changes align well with our lending strategies and support continued elevated capital return to our shareholders. And now I'll review our guidance for 2026 and the second quarter on Slide 17. As I previously mentioned, given the shift in market expectations for interest rates this year, we now expect 2026 net interest income growth of 2% to 3% compared with our prior expectation of 3% to 4%. On the other hand, we now expect stronger noninterest income growth this year, reflecting continued momentum across all of our fee-based businesses. We now expect high single-digit growth in noninterest income compared with our prior expectation of mid- to high single-digit growth. In addition, we now expect full-year GAAP noninterest expense to increase approximately 1.75% in 2026 versus our previous expectation of 1.25% to 2.25% growth. Taken together, although we are modestly refining our revenue outlook to the low end of the prior 4% to 5% range, our overall earnings expectations for 2026 remain unchanged. In terms of asset quality, there is no change in our expectations for net charge-offs to be about 55 basis points in 2026. As I mentioned earlier in the call, due to increased client-driven transaction activity in our project finance business, we now expect our effective tax rate to approximate 14.5% or 16.5% on a taxable equivalent basis in 2026 versus our previous expectation of 16.5% and 18.5%, respectively. Finally, as it relates to buybacks, we're now targeting $5 billion of share repurchases in '26 versus our previous expectation of $4 billion.

In other words, despite the pressure we see in net interest income, our stronger noninterest income, increased share repurchases and a lower tax rate from client-driven activity result in an overall earnings expectation for 2026 that remains unchanged. As a result, we remain confident in the EPS trajectory we expected in January and in our ability to achieve our 14% ROTCE target in '26 and our 15% ROTCE target in 2027. Now looking into the second quarter of '26, we expect revenue to remain relatively stable relative to the first quarter revenue of $5.2 billion. We expect net interest income to increase approximately 1% in the second quarter primarily driven by an additional day and increased client deposit balances. We expect noninterest income to decline approximately 1% linked quarter due to lower Investment Banking and Trading income, partially offset by higher other income and treasury management fees. Noninterest expense of $3 billion in the first quarter is expected to increase by 3% to 4% linked quarter due to higher personnel expense. Consistent with our full-year outlook, we're targeting approximately $1.2 billion of share repurchases in the second quarter of 2026. Now I'll hand it back to Mike for some final remarks. Thanks, Mike. With close, I want to reinforce the confidence I have in Truist's direction and earnings trajectory we're building. We continue to have clear line of sight to a 14% return on tangible common equity in 2026 and 15% in 2027 driven by improving profitability, continued execution across the franchise and strong capital return. As I mentioned earlier, our 15% ROTCE target in 2027 remains a firm and achievable target. However, we view it as an important milestone, not the endpoint. With continued execution and discipline, we have the ability and clear line of sight to drive returns to 16% to 18% over the next 3 to 5 years as earnings power continues to strengthen and capital is deployed. Achieving these returns will be driven by the same core factors we've discussed today and on previous calls. These factors include sustained growth in our key businesses, positive operating leverage, disciplined expense and risk management, and elevated capital return to shareholders. Overall, we're encouraged by the progress we're making, and we remain focused on executing with discipline, delivering for our clients and creating long-term value for our shareholders. I want to thank our teammates for their commitment, focus and their purposeful work and thank our shareholders for your continued trust and support. Brad, let me turn that back over to you.

Thank you, Bill. 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 short follow-up in order to accommodate as many of you as possible today.

The first question today comes from Scott Siefers with Piper Sandler.

Mike, when you think about the rationalized NII outlook for the year, could you please provide just a little context regarding just more specifically, how the lack of likely Fed fund rate cuts impact things? Just hoping to understand, does that just mean likely for deposit cost leverage? Or are there other factors involved? And maybe you could talk a little about the competitive environment, particularly on the deposit side, please.

Yes, sure. Scott, no, I think you said it. I mean, we had cuts in April and July. With both coming out of our outlook, we've, I think, been pretty consistent about the fact that we're positioned liability sensitive on the short end. And so saw a little bit of pressure there that came through. And frankly, the second part of your question is probably the other contributing factor, which is it is competitive. I think with rates where they are, we're seeing a little bit more rotation on product. We're seeing a little bit more yield seeking and rate awareness in the market across the businesses. So probably not unexpected, given the expected path on rates but that's where the pressure is really coming from that drove our outlook a little lower. I think the good news, Scott, just to say it and we mentioned this in our prepared remarks, we are seeing great momentum on the fee side. And so I think when combined allowed us to hang on to the low end of the revenue guide and that coupled with the tax outlook and the buyback tweaked a little higher, we're seeing the bottom line, still in line with our January expectations.

Yes, perfect. And then on that last point, it's great to see the pace of repurchase step up in the first quarter as well as the higher expectation for the year. Maybe if you could talk a little more about that decision? How much would you say is sort of confidence in your own outlook versus just sort of panning in the risk-weighted asset release that we get from the offering of new proposals, for instance?

Yes. I wouldn't attribute the increase from $4 billion to $5 billion to the Basel III proposal. I think that will have an impact in terms of, we mentioned the durability of being able to stay at an elevated buyback into '28 and maybe beyond. We'll need to see where the rule finalizes. This was more of a follow-through on how we've been thinking about capital management in '26 and '27. We're targeting that 10% CET1 level in '27 as the various moving parts that you would expect to contribute to capital planning that just retrended the buyback a little bit higher this year. So hopefully, that answers your question.

The next question comes from Ken Usdin with Autonomous Research.

I have a follow-up regarding the longer-term expectation of a 16% to 18% return on equity. I'm curious about the capital aspect you just discussed and how that might affect the return on assets moving forward. What is your outlook on the ROA trajectory in relation to achieving that 16% to 18% and how much additional impact you expect once you reach 15%?

Ken, it's Michael. I'll start there. Look, I think as you think about the 16% to 18% over just that extended horizon, I think we've got a lot of confidence based on a lot of the areas that Bill mentioned in his remarks in terms of the areas where we expect to improve profitability, right, client deposits. We expect our margin to improve. Our fee businesses are all generating accelerating growth. Those same factors are going to contribute to that next horizon the 3- to 5-year outlook of 16% to 18%. I see our ROA profile moving closer to, call it, one-twentieth in that sort of 2017 outlook, and I think it creeps a little higher from there.

Yes, Ken, I would just add, I think the 16% to 18% is a mixture. Mike talked about just accelerating our growth in fees, expanded NIM, margin, client deposit growth, optimizing the balance sheet, benefits, prudent capital allocation, more durability in our return on capital. Think about things like that, for us, the HTM pulled a par and then just efficiencies in our business. So not only is it an ROA story, but it's also an efficiency story. I mean I think that we're seeing some of the benefits of things like AI, but in fairness, just the process improvements that we're making that we can redeploy for growth and also harvest for profitability.

Got it. And second, just a question on Investment Banking, a really solid result this quarter. I know Mike, you talked about the second quarter a little bit. But just can you talk about the different sides of the business? What were the drivers IB versus Trading? And then just how you're seeing the environment and customer confidence in terms of transaction willingness?

We had broad-based strength this quarter, especially on a like-quarter basis, you saw outsized performance and trading. But I'd say we're seeing really good activities across the core banking business as well as trading. If you think about our outlook for the year, I think at one point, we were thinking about kind of mid-teens growth. I think it could be higher than that, high teens, maybe even 20% across that full line. A lot of that is trading year-over-year, but we expect double-digit growth in what I think of as like the traditional investment banking business. And it's broad-based. It's really across all the products.

And I mentioned in my comments, I think one of the things I'm probably most excited about is just this connectivity to our core franchise. I mean I think that's a set of our secret sauce in the investment banking business. The fees from our commercial and wealth businesses were up actually substantially, and the pipelines are up substantially as part of that. So it feels and the confidence that we talked about, it just feels more durable and feels more sustainable because it's tied in tightly to the franchise.

The next question comes from Erika Najarian with UBS.

Bill, I have a question for you. I'm curious about the decision to announce a new long-term ROTCE target today. I understand that the Basel III reform is on the horizon, but Mike indicated that it didn't impact the repurchase. So, I'm wondering if there was something in the ROA profile that you observed to be improving or accelerating, which gave you the confidence to reveal a new ROTCE target today?

Yes. I mean, I think, Erika, you and others have asked us a lot is 15% sort of the endpoint or is it a point on the journey. And I think one, we feel confident where we're going. You can see this quarter's results, and we feel confident in the momentum that we're building. Quite frankly, the Basel III is a component. So we wanted to answer that question as well, sort of how does that fit into this piece. And as Mike highlighted, it's pretty beneficial to our balance sheet. It's beneficial to how we do business. And so our ability to redeploy capital as it relates to that part of it. So I think it's a variety of things. We felt it was important to start putting a stake in the ground for you, your constituency, for our shareholders and for our teammates. We just feel really good about the momentum we're building.

Let me add to that, Erika. In fairness, we didn’t have a long-term target set before. The 14% and 15% ROTCE targets are short-term, and I agree with Bill that it was appropriate for us to establish a long-term target. The clarity on the evolving capital framework played a role in that. Ultimately, it’s our confidence in the business and the momentum we’re experiencing that influenced our decision to announce a new target.

I have a second question that needs to be addressed because Truist made headlines a few weeks ago. A Bloomberg article hinted at the possibility of you being appealing to another partner. I understand you've made a clear commitment to your direction. However, your market cap in relation to core deposits appears to be quite low compared to your competitors. Considering your Board includes several seasoned veterans from major financial institutions, Bill, this is somewhat of an open-ended question. What are your views on potentially monetizing your business in this way?

Yes, Erika, we have all been at this for a long time, and I'm not inclined to speculate on rumors or articles. Let's set that aside. How do we feel about our business? We feel great about it and about the trajectory we are establishing. We have put forth a plan that aims for mid-teens EPS growth over an extended period while maintaining a strong risk posture. This approach provides a favorable return to our shareholders, which is always our primary goal. Ensuring we have a plan that offers an advantageous return to our shareholders is the main focus of our Board, myself, and our team.

The next question comes from Manan Gosalia with Morgan Stanley.

Bill, a question for you on the ROTCE target. I know you laid it out as a 3- to 5-year target. But as we think about that 15% number for next year, do you need to see the benefit from the lower capital requirements come through before you get to the lower end of that longer-term ROTCE target? Or can we continue to see some improvement post that 15% as we get into 2028 and beyond?

Yes. I mean, if the question is the 15% was established without any regard to Basel. So if that's the question, that's how we establish that goal. And then the 16% to 18% starts to take a first sort of nibble at that in terms of how we might deploy capital and confidence in how we would use capital to continue to grow our business. But as Mike highlighted, it's really about our just accelerated confidence in our business, our ability to improve margins, accelerate growth in fees, and continue to stay on the trajectory that we've already established. So the 15% was established under sort of, I would say, non-Basel and then the 16% to 18% has some incorporation, but more in terms of how we would utilize the capital against our strategies.

Absolutely. I would like to add that while the Basel impact is a contributing factor, it doesn't represent the majority of the benefit we anticipate during that period. The focus will be on generating more capital-efficient revenue and achieving better balance sheet efficiency and productivity. We are concentrating on both the numerator and the denominator and are pleased to have strong visibility in that area.

Got it. And just as my follow-up, as we think about net interest margins, Mike, you noted yield-seeking behavior and more competition on the loan side. I guess, how are you thinking about that 3 teen level on NIM going forward?

Yes, we still feel optimistic about achieving a net interest margin in the low 3% range. However, without rate cuts this year, it seems unlikely that we will reach that level by the end of the fourth quarter, as we initially suggested in January. This is mainly due to the current interest rate trajectory. The curve indicates a rate cut in 2027, and along with factors such as cumulative fixed rate asset repricing, we expect to reach that margin by then. The actual rate path remains uncertain, so we remain hopeful, but achieving a low 3% margin this year is not very probable. We do expect our net interest margin to continue its upward trend throughout the second half of the year. In the second quarter, we will see some seasonal benefits from CSBB deposits that will reflect in the third quarter, plus we anticipate strong seasonal patterns in the fourth quarter related to public funds and other factors. Therefore, after a steady second quarter, we expect to expand our margin and finish the year with a net interest margin that exceeds what we achieved in 2025, although it seems we won't reach the low 3% exit rate at this moment.

The next question comes from Mike Mayo with Wells Fargo.

You mentioned an increase in yield-seeking behavior among customers for deposits. And I guess, everybody loves your markets, obviously. And they're moving there, they vacation there, and all the banks are opening branches and hiring bankers. So I ask this question every quarter. It just seems like it's continues to pick up. I don't you say none of this is new, you're used to that, but just seems to be reach to the next level. I think you have like the Truist One checking sign-up bonus. So I guess my question is, what's the temperature on the degree of competition? How much are you using kind of marketing expenses, such as paying customers to move their accounts, and what impact is it having?

Yes, it's competitive as we've acknowledged, and we're noticing this from individuals who have moved into our markets, which has seen a net migration of almost 300,000 people. For instance, in Charlotte alone, we've experienced growth of about 150 new residents each day. This influx and the competitiveness are evident to us. On the deposit side, we also experienced growth in new accounts, which is an important indicator for us. In the first quarter, we saw new account growth, which is crucial for us and indicates we're succeeding. We do employ marketing tools like others in the industry and offer incentives for clients to join us. Additionally, we reported strong production in areas we're focusing on. For example, our premier banking segment saw a 20% increase, a space where we've recently begun to concentrate our efforts. We're starting to see significant gains from targeted deposit initiatives and we also see deposit growth outside of our core franchise. Overall, our deposit production has notably increased beyond our main business. Not only are we competitive, but we're also actively pursuing opportunities in multiple areas. However, as noted, a prolonged period of high rates poses challenges for deposits. We're focused on whether we're generating new accounts and expanding our client base, which we observe on both the wholesale and consumer fronts. While the current profitability of these clients may be lower, adding them bodes well for future profitability.

Okay. So planting seeds for the future. And just a follow-up to your answer to the other question, I wasn't sure on the exact answer to that. What conditions would Truist consider another merger of equals? Under what circumstances would Truist think about selling to another bank? And when would Truist contemplate acquiring another bank? This topic does come up frequently, not just in the media but with investors, as you know. As you mentioned, achieving a return on tangible common equity of 16% to 18% with a lower risk profile over the next 3 to 5 years indicates you have a strategy in place. That said, the question does arise. Also, Bill, you sound energetic as we hear you right now, but what are your plans for the future? How long do you intend to stay? Is there a mandatory retirement age? I forget the details about succession and that broader topic.

So Mike, we're just going to go after all of them. Okay. All right. Well, let's go down it. So on the succession side, I've got a great job leading a great purpose-led company. We've got a great team, incredible teammates, strong leadership team, businesses hitting on more cylinders every day towards our performance and return objectives, and just be confident that our Board has a strong succession process, and they can apply against this incredible framework. So just like put that 1 in that category. We've been really clear on the M&A front, Mike. I mean I don't know how to be more clear that that's just not a priority for us. So I mean, I'll just say it one more time. And part of your question is part of the answer is we've got a great plan. We've got a really strong plan. I think this quarter is one more evidence of the fact that we're executing against that plan. We have an opportunity to deliver return to shareholders that I think are advantaged and they are advantaged given where we're coming from, given the growth that we see. And look, that's going to be the goal is how do we maximize this franchise? How do we create advantage shareholder value? And that's the focus every day. Again, from me, my team, the Board, and our incredible teammates.

All right. That's great. If I can squeeze one more. Your core investment banking business growing double digits even without trading. That seems to be much faster than peers your size. I'm not sure why you're growing so much faster than others there.

Well, a couple of things, Mike. First, we've been working on this for a long time, building our business over multiple decades. As I mentioned earlier, this relates to our franchise. It's not a separate business reliant solely on market conditions. We have outstanding bankers in the field who truly understand how to leverage their skills, provide advice, and utilize industry expertise and products for all our commercial, corporate, and middle-market clients. The confidence we have not just in our future but in the excess performance is closely linked to the resilience of our franchise. This is a culture we've developed over many years, which is why our team members want to join and be part of this investment banking business and our core corporate and middle-market operations. They see the opportunity here, and it is reflected in our results.

I mean the consistent pattern, Mike, for IB is that we're playing more meaningful roles in even larger transactions. So you've got some leverage there, too, just as we continue to bring great talent to the platform, and again, our earning, again, more important roles. So hopefully, that will continue.

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

Was just hoping to dig into the loan growth a little bit. I guess, first, why don't we see a little bit more on the commercial side this quarter? And why not more optimistic on the year? And is there some kind of loans that are being fed through kind of the banking network instead as we just think about kind of the business holistically?

Yes, definitely, Matt. Let me address that. In our commercial corporate banking business, we've seen an increase of just over 8% year-over-year, and nearly 2% recently. We're experiencing good momentum in areas where we're concentrating our efforts. I'm particularly pleased that our team is focused on improving returns. We've established 22% more new relationships, with 60% of associated payments coming from these higher quality clients. This is reflected in a better risk profile and increased revenue per client, indicating a solid investment in our future. Additionally, we're observing excellent activities in markets like Texas, Pennsylvania, Western Pennsylvania, and Ohio, suggesting our model is resonating well. Our teams are dedicated to pursuing higher returning and more substantial relationships, allowing us to take on a leading role. While our opportunities may seem smaller, our success rate is high, and we're winning in the areas we aim for. On the consumer side, we've strategically reduced focus in some lower-return areas, particularly as indirect auto spreads have tightened significantly. However, our core consumer businesses, such as Sheffield, Lightstream, and Service Finance, are growing at over 7.5% with average balances increasing. Remember, there is seasonal variation here; production in these sectors typically rises by 30% to 50% in the upcoming quarters. Overall, I believe we're well-positioned to focus on higher returning businesses that will yield good returns for us. Our pipelines are strong, particularly in businesses and regions where we anticipate the best long-term returns for our shareholders.

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

Just wanted to follow up, Bill, I guess, with all the questions and just from a stock standpoint, like I think you said like you've got a great plan, strong momentum just as you talked about the businesses. Correct me if I'm missing something. When we look at the revenue growth outlook for the full year, 4%, expenses, whatever up 2%, is that the algo? Or do you think this bank should be doing much better than 4% in a nominal GDP world of 3% to 5%? Just how do you put sort of the medium-term growth outlook for the company? And is 4% the right way? Because I think part of it is, you've got the scale, you've got all these businesses, shouldn't you be doing better in an environment which seems generally constructive?

Yes. Ebrahim, I think what you're seeing is that building over time, right? So we're hitting on more cylinders. So that growth in revenue continues to increase. As it relates to this specific outlook, I mean, we took a posture that we've looked at the forward curve and took a view that that's going to have an impact on NII and wanted to reflect that. But if you look at the momentum in terms of new clients, the activity, the fee businesses, the things that are going on, I think we'll continue to sustainably build that business and sustainably build it with a more positive and continued operating leverage. And you see it in this quarter, and you see it in our confidence in establishing that in a longer-term goal. And that was the purpose of doing that. We'll continue to improve, continue to hit on more cylinders. And I think every day, it better reflects the opportunity that's our franchise.

The next question comes from John Pancari with Evercore.

Can you provide an update on your growth expectations for deposits and the business areas you are focusing on? I understand that deposit generation on the core side has been a significant focus for the bank this year. Could you also discuss the progress you've made in adjusting your deposit base? Additionally, what is your updated sensitivity to rate changes along the curve?

I'll address the first and third questions and let Bill add some insights on deposit production. Our year-over-year outlook for deposits is in the low single digits, which we are comfortable with, and we are also concentrating on the mix. Given some of my earlier remarks about DDA and client retention, it's clear that the competitive landscape is quite challenging. Regarding interest rate risk sensitivities, they remain relatively stable compared to our new baseline. We are not anticipating any cuts at this time. We perceive some risk in both the up 50 and down 50 scenarios. We find ourselves in an unusual situation where clients are either taking advantage of options on both sides. So whether it's due to rotation or prepayment, we are mostly neutral, which might be a clearer way to express it.

Yes. And then in terms of the focus area, John, so I mentioned before, the premier production, which is really strong, net new, which is good. And then overall, like in our middle market business and across wholesale, we've had a really significant increase in their activity in deposits. 60% of our new business has a mandated component to it. So while some of those are more interest-bearing at this point, I think it's indicative of the quality of the relationship and ability to improve the profitability on that going forward. And so I feel good about the momentum that we've established in the wholesale side and the consumer side. I think today, getting new clients is actually really important. And I think our engine is firing on a lot of cylinders and the profitability of that, certainly from the deposit side will improve over time.

The next question comes from Gerard Cassidy with RBC.

Thank you for the additional information on the NDFI, and it's encouraging to see improved disclosures from everyone. I don’t think there are any real concerns about credit losses today. Given how the loans are structured and your disclosures, it seems that even in a downturn, losses may be limited. However, can you share what the actual risks are in this portfolio during a typical recession or credit cycle, where we anticipate that everyone will face increased credit challenges?

Yes. Thanks, Gerard. I appreciate the question. So I think first for us, we start with really strong relationships. We have solid bankers covering these asset managers and the clients. And then as you noted, the structural protections that exist, particularly in the BDC or the private credit section that middle market, our advance rates are sort of in that 60% to 70% range. And so we have significant protection in there. So we've also modeled this in a stressed environment, and this overall actually performs better than our aggregate C&I portfolio. And so we're confident in where we sit today with how we've underwritten these credits and how we manage and monitor them. As you know, they have regular collateral inspections, strong borrowing base. So we're confident in where we sit today with it. I think how it manifests in a downturn, you would watch what happens to the underlying companies and their performance within those structures.

The next question comes from Saul Martinez with HSBC.

I want to follow up on the investment banking outlook. We had a good quarter, and we are expecting high-teen growth, which may be influenced by some easier comparisons from the first half of last year. However, I would like to know about your confidence in maintaining double-digit growth beyond 2026. What drives that growth? Which products contribute to it? Is it ECM, advisory, or something else? Additionally, when you refer to double digits, are you discussing core investment banking or including both Investment Banking and Trading as they appear in the consolidated income statement?

I'll address the easier question first. When I mentioned double digits, I was referring to nontrading for the year. As we consider the sustainability of double-digit growth, this business has typically grown at a high single-digit to low double-digit rate. There are fluctuations due to transaction activity and marketing, but performance has consistently remained in that range. Therefore, for the foreseeable future, we plan to continue investing in the business and hiring top talent. We believe we have the necessary products to succeed and serve our clients across various sectors. Additionally, we are continually exploring new ways to meet our clients' needs. This is a growth-oriented business, and I think an expectation of high single-digit to low double-digit growth is reasonable.

Yes, this is broad-based, which is really good. We have a strong equity capital markets business and FRM business, and we've discussed project finance earlier in the call. Our debt capital markets have consistently contributed significantly. I believe M&A will play a larger role in our growth moving forward, as we've invested heavily in that area. Additionally, our corporate and middle market banking teams, with about 23% being new to the platform, are leveraging these capabilities and products effectively. Their high productivity gives us more confidence in our future direction. We've also added strong teams in Investment Banking, and our chosen specialty areas have robust pipelines. While there will be quarter-to-quarter volatility, our overall confidence in the business is based on a long-term organic strategy. We built this business step by step, adding team members and creating products and capabilities to sustain this momentum going forward.

The next question comes from Chris McGratty with KBW.

Mike or Bill, I'm interested in the operating leverage narrative over the 3 to 5 years that you lay out for your new targets. I'm interested in, does that get easier? Or does that get perhaps more challenging? And what role does AI and investing in the company play in that? Any kind of color would be great.

I believe we will continue to achieve positive operating leverage in the coming years. Regarding revenue growth, there are natural factors at play, such as the current underperformance in our net interest margin. Bill highlighted our bond portfolio, which is seeing natural repricing of fixed-rate assets. We are also putting greater emphasis on capital allocation and portfolio construction. Therefore, we are optimistic about our top-line growth. Additionally, tools like AI will contribute to this, although it's too early to accurately quantify its impact over the next three to five years. Nevertheless, we expect to drive efficiency and productivity throughout the business as we establish our targets.

Yes, as you mentioned, Chris, I believe AI will play a significant role and provide us with much more flexibility in reinvesting in the business, as I stated earlier, to enhance profitability. We have made substantial progress in this area. We consolidated our technology and operations units for a clear purpose, allowing everyone to view processes comprehensively. We are seeing notable improvements and opportunities. As Mike pointed out, we are just beginning, and I see this as a major opportunity for the entire industry. Our team is well-equipped for this challenge. We are exploring ways to expand our client business, enhance efficiency, create a positive teammate experience, and benefit shareholders throughout this journey.

The last question today comes from David Chiaverini with Jefferies.

So it sounds as if the pricing pressure is more on the deposit side versus the loan side, can you talk about the loan pricing environment and how spreads are holding up?

Yes, I'd say credit spreads have actually remained relatively tight despite all that's happening in the world. And so that's been a little bit of a head scratcher. As you look at our yields, you've got a lot going on, right? You've got some remixing. We're expanding our corporate and commercial banking business. So you might see a touch of mix in yield. You might see obviously, spreads across the board, still relatively tight as well. So that will be a welcome development if we see some expansion of margin on the credit side.

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. You may now disconnect.

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