Truist Financial of Charlotte, NC, has come up with its initial estimate – $ 1.8 billion – of how much it is spending on initiatives to boost long-term profits.
Founded through the merger of BB&T and SunTrust Banks in December 2019, the company, with assets of $ 509 billion, has already spent approximately $ 725 million in those expenditures, bringing nearly 1, $ 1 billion to be spent. These costs are on top of the $ 2.1 billion merger costs associated with severance payments and system conversions.
"We're investing more than we originally thought, but we think these are the right investments … all for the right reasons," Truist Chief Financial Officer Daryl Bible said Thursday during a conference call to discuss quarterly results.
These investments include creating new commercial loan and mortgage delivery systems, with executives arguing the upgrades will result in better customer experiences and more loan applications.
Truist executives asked several questions about $ 1.8 billion, and Evercore analyst John Pancari wrote in a notice to clients that the amount "appears higher than expected."
"We invest a lot in the company as we evolve and you see it in the results," answered Bible when asked about planned spending. “Look at our earnings. Look at the account growth we're getting. We're doing really, really well amid lots of conversions. "
Truist net income increased 17% quarter over quarter to $ 1.3 billion for the fourth quarter. Revenue rose 1.4% to nearly $ 5.7 billion, led by fee income up 3.4%. Loan loss provisions decreased 58% to $ 177 million.
The company reported some positive signs of credit quality. Loans operated under payment facilities such as deferrals decreased 42% to $ 4 billion. Approximately 97% of business customers and 91% of consumers who left utility programs have paid off their funds or are up to date with their loans.
Loan balances for industries hardest hit by the pandemic declined 2.6% to $ 27.1 billion, or 9% of total loans, on Dec. 31. Lending to hotels, resorts, and cruise lines fell 4% to $ 6.5 billion, while lending to oil and oil companies fell 4% to $ 6.5 billion – gas companies fell 5.6% to 4 . $ 9 billion.
However, Truist said the number of student loans due 90 days after they were due has nearly doubled to $ 1.1 billion. The company plans to sell a portfolio of small loans worth $ 1 billion.
Total loans decreased 2% to $ 306 billion.
The company pushed ahead with its three-year integration plan, closed 104 branches and cut 1,300 jobs in the fourth quarter. A pilot program for the digital platform is scheduled to begin in the second quarter.
Executives said they plan to close around 800 branches as part of the merger integration, including 226 this quarter. Truist's workforce has shrunk by 8% since the contract was announced in early 2019.
The company stuck to its goal of cutting annual spending by $ 1.6 billion by the end of 2022, with approximately $ 1 billion of those cuts coming over the next four quarters.
"Most of the hard work will be done by the end of this year," said Kelly King, chairman and CEO of Truist, during the call.
King also reiterated the optimistic outlook for the economy from other major bank CEOs.
"I expect that as we get closer to fall and the end of the year, you will be really surprised at how robust this economy is," said King.
"That will be very evident in terms of commercial lending activity," he added. “You will likely see more growth in home loans than we would have expected in a slower economy. And you will surely see it in terms of insurance too. "