TFC - Truist: Low Expectations And More Flexibility Create Opportunities (Rating Upgrade)

2024-06-19 22:29:42 ET

Summary

• Truist management has faced deserved criticism for poor execution and lagging performance, but deal integration challenges should be largely over and the insurance sale creates new options.
• Management has already used some of the insurance sale proceeds to reposition the balance sheet, improving the securities yield and adding net interest income leverage.
• Despite challenges in organic market share, Truist still compares well on metrics like net interest margin, asset yield, and operating efficiency, and the bank has capital to invest in growth.
• Core adjusted earnings growth of around 3% and ROTCE in the low double-digits can support a fair value close to $45.

I’ve been a pretty harsh critic of Truist (TFC) management more than a few times – not only has the execution of the SunTrust merger left a lot to be desired, but the bank has been losing organic market share in its core markets and has struggled to define and execute upon a path of differentiated growth and return improvement. With that, the shares have continued to lag – lagging the peer group by about 10% since my last update (though up about 15%), while lagging by more than 15% over the last five years and 35% over the last ten years....

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