Truist Financial Q2 Earnings Lag as Provisions Increase Y/Y

Truist Financial’s TFC second-quarter 2025 adjusted earnings of 91 cents per share missed the Zacks Consensus Estimate by a penny. The bottom line reflects no change from the prior-year quarter.

The company recorded a rise in provisions in the quarter, which hurt results to some extent. However, an increase in net interest income (NII) and total non-interest income, along with lower expenses, were the major tailwinds.

Results of the reported quarter excluded a pre-tax restructuring charge of $28 million and a pre-tax loss on the sale of securities of $18 million. After considering these, net income available to common shareholders (GAAP basis) was $1.18 billion, up 42.9% from the prior-year quarter. Our estimate for net income was also $1.18 billion.

TFC’s Revenues Improve, Expenses Fall

Total revenues in the quarter were $4.99 billion, which compared favorably with negative revenues of $1.68 billion in the year-ago quarter. The top line marginally beat the Zacks Consensus Estimate of $4.98 billion.

Tax-equivalent NII increased 1.7% year over year to $3.64 billion. Our estimate for NII (FTE) was $3.61 billion.

Net interest margin (NIM) remained stable at 3.02%. We had also projected the metric to be 3.02%.

Non-interest income was $1.40 billion in the reported quarter. In the prior-year quarter, the company reported negative fee income of $5.21 billion, primarily due to securities losses resulting from the balance sheet repositioning. In the reported quarter, TFC recorded securities losses of $18 million, significantly down from a loss of $6.65 billion reported in the prior-year quarter. Also, the year-over-year rise in non-interest income was driven by higher other income. We had expected non-interest income to be the same as the reported number.

Non-interest expenses were $2.99 billion, down 3.5% year over year. The decline was mainly attributable to lower personnel expenses, regulatory costs, restructuring charges, costs related to amortization of intangibles and other expenses. Excluding certain non-recurring items, adjusted non-interest expenses rose 2.1% year over year. Our estimate for non-interest expenses was $3.04 billion.

The adjusted efficiency ratio was 57.1%, up from 56% in the prior-year quarter. A rise in the efficiency ratio indicates a decline in profitability.

As of June 30, 2025, total average deposits were $400.5 billion, up 2.1% on a sequential basis. Average loans and leases held for investment of $312.6 billion rose 2% sequentially.

TFC’s Credit Quality: A Mixed Bag

Provision for credit losses was $488 million in the second quarter, up 8.2% from the prior-year quarter. Our estimate for provisions was $407.9 million.

On the other hand, net charge-offs were 0.51% of average loans and leases, down seven bps from the prior-year quarter. The allowance for loan and lease losses was 1.54% of total loans and leases held for investment, which declined three bps.

As of June 30, 2025, total non-performing assets (NPAs) were $1.32 billion, down 10.8% from a year ago. We had expected NPAs to be $1.51 billion.

TFC’s Profitability Ratios Improve, Capital Ratios Worsen

At the end of the reported quarter, the return on average common equity was 8.1% compared with 6.1% in the second quarter of 2024.

As of June 30, 2025, the Tier 1 risk-based capital ratio was 12.3% compared with 13.2% in the prior-year quarter. The common equity Tier 1 ratio was 11% as of June 30, 2025, down from 11.6% as of June 30, 2024.

TFC’s Share Repurchases

In the reported quarter, Truist Financial repurchased shares worth $750 million.

Our Take on Truist Financial

A decent loan demand and TFC’s business restructuring initiatives are expected to continue supporting its top line. Also, relatively higher rates and a solid balance sheet position are other positives. However, elevated expenses and weak asset quality, given a tough operating environment, are major headwinds.

Truist Financial Corporation Price, Consensus and EPS Surprise

Truist Financial Corporation price-consensus-eps-surprise-chart | Truist Financial Corporation Quote

Truist Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of TFC’s Peers

The Bank of New York Mellon Corporation’s BK second-quarter 2025 adjusted earnings of $1.94 per share surpassed the Zacks Consensus Estimate of $1.74. Also, the bottom line reflected a jump of 28.5% from the prior-year quarter. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

BNY Mellon’s results were primarily aided by a rise in fee revenues and NII. Growth in the assets under custody and/or administration and assets under management balances further supported results. Also, the company recorded a provision benefit in the quarter, which was a tailwind.

Wells Fargo & Company’s WFC second-quarter 2025 adjusted earnings per share of $1.54 surpassed the Zacks Consensus Estimate of $1.41. In the prior-year quarter, the company reported earnings per share of $1.33.

Wells Fargo’s results benefited from an improvement in non-interest income and lower provisions. However, a decline in net interest income and higher expenses were the undermining factors.

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This article originally published on Zacks Investment Research (zacks.com).

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