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Truist’s Loan Income Misses Estimates as Deposit Costs Weigh

(Bloomberg) -- Truist Financial Corp. posted lower first-quarter lending profits than analysts expected as it was forced to pay customers more for deposits with interest rates remaining elevated, and the bank trimmed its revenue guidance for the rest of the year.

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The Charlotte, North Carolina-based lender reported net interest income on a taxable-equivalent basis of $3.43 billion, down from the prior quarter’s level and missing analysts’ average estimate of $3.47 billion for NII, or what banks make from loan payments minus what they pay for deposits.

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“Loan demand was muted and deposit costs continue to be under pressure,” Chief Executive Office Bill Rogers said in a statement. NII is expected to reach its trough in the second quarter and improve modestly during the rest of the year, executives said on a conference call with analysts Monday.

Shares dropped 0.8% to $36.52 at 9:37 a.m. in New York, and are down 0.9% this year.

Investors have been keeping a close eye on how banks are faring as borrowing costs stay higher for longer, with the Federal Reserve holding off on interest-rate cuts as inflation remains above the level policymakers are targeting. While elevated rates allow banks to charge borrowers more, they also increase the cost of deposits, with customers demanding more for their savings. Banks including JPMorgan Chase & Co. and Wells Fargo & Co. missed NII estimates when they reported first-quarter results this month.

Read More: Bull Case Fizzles for Big Banks to Earn Ever-More on Lending

At Truist, revenue on a taxable equivalent basis totaled $4.87 billion from continuing operations for the first quarter.

Truist now expects taxable-equivalent revenue to decline about 4% to 5% from $20.2 billion last year, with the new guidance based on continuing operations and excluding the impact of interest income earned from the proceeds of its insurance-unit sale and a possible balance-sheet repositioning. The bank previously guided for revenue to be down 1% to 3% from $23.6 billion last year.

The company said it’s positioned to resume share buybacks late this year, contingent on factors including market conditions.

During the quarter, Truist announced a highly anticipated deal to sell the rest of Truist Insurance Holdings to a group led by Stone Point Capital and Clayton Dubilier & Rice. The transaction valued the insurance-brokerage unit at $15.5 billion, and Truist said it would consider a range of options for capital deployment. The sale is expected to be completed in the second quarter, executives said on the call.

Read More: Truist Agrees to Sell Rest of Insurance Arm to Stone Point, CD&R

Last week, the company told its investment-banking staff they would be expected in the office five days a week beginning in June.

Read More: Truist Calls Investment Banking Staff to Office Five Days a Week

Truist was formed by a 2019 merger of BB&T Corp. and SunTrust Banks Inc. Last year, it moved to shrink its board to bring itself more in line with industry peers. It underperformed peers last year, making it one of the worst performers in the KBW Bank Index, with its shares falling 14% in 2023.

(Updates with NII forecast, shares, insurance deal details starting in third paragraph. A previous version of this story was corrected to remove non-comparable analysts’ estimate for revenue.)

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