Truist Financial says it's working fast to reduce expenses in an effort to become a leaner, more efficient firm.
Six weeks after unveiling
Truist has also merged its consumer payments and wholesale payments businesses into one operation, while reducing the number of consumer and small-business banking teams.
In the past, such changes would have been implemented at a slower pace, one at a time, Truist Chairman and CEO Bill Rogers told analysts during the company's third-quarter earnings call.
"You sort of do one, do another one, you sort of go through the process," he said. "Today they're all on these great, parallel paths, and I think that's going to have a faster, longer-term impact."
Truist has been
On that call, Truist lowered its full-year revenue forecast for the second time in seven weeks, increased its spending projections and suggested that positive operating leverage might not be achievable before 2025.
In September, Truist executives rolled out their $750 million spending-reduction plan. And earlier this month, they announced that the company's
Executives have said the spending cuts will take place over a 12- to 18-month period, with the largest portion — about $300 million — being achieved through job cuts. Another $250 million in savings will come from organizational restructuring, such as consolidating businesses and closing branches, while the remaining $200 million will come from spending less on technology, according to the company.
The plan should keep 2024 expense growth at no more than 1%, Rogers reaffirmed Thursday.
Truist, which has $548 billion of assets, has not said how many jobs will be eliminated as a result of the overhaul. As of Dec. 31, 2022, the company had 55,126 full- and part-time employees, according to a regulatory filing.
During the third quarter, Truist incurred about $75 million in restructuring charges, largely due to employment severance packages and closures of certain facilities. In total, the company expects to incur between $187 million and $225 million in charges related to the cost-savings program, amounting to 25% to 30% of the gross cost savings, executives said.
While Truist works to reduce its expenses, it also continues to tweak its balance sheet. That means focusing on core client relationships, shrinking lower-yielding portfolios and paying down higher-cost borrowings, all of which happened during the third quarter, Rogers said.
The moves contributed to a four-basis-point increase in the company's net interest margin, which was 2.95% for the period. That uptick follows two quarters of declines, Chief Financial Office Michael Maguire noted.
While Truist is making big changes in certain areas, its insurance subsidiary is not one of them, at least for now. Amid recent media reports that the bank is preparing to sell the rest of Truist Insurance Holdings — it owns 80% after
When an analyst asked what would need to happen to make Truist consider a deal, Rogers said there isn't a "particular trigger point."
"We just want to make sure that we retain that flexibility," he said.
For the quarter, Truist reported net income of $1.1 billion, down from $1.5 billion during the third quarter of 2022. Its earnings per share were 80 cents, slightly lower than the average estimate of $0.81 from analysts surveyed by FactSet Research Systems.
Expenses totaled $3.8 billion, up 3.7% year over year due partly to higher personnel and regulatory costs, the company said. Another factor was a $70 million expense related to changes Truist made in connection with deposit service charges and the settlement of certain legal matters. The latter category includes
Truist decided voluntarily to change its deposit fee structure, according to Rogers. A company spokesperson declined to provide additional information about the fees at issue. Truist also accrued $87 million for customer refunds, which took a bite out of its noninterest income in the third quarter.
"We've listened to a lot of client feedback. We reviewed and changed our protocols with respect to deposit-related fees," Rogers said. "I think we're taking just a more contemporary view of sort of where the world is, where the puck is going and making sure that we get ahead of that."
