Truist nears finish line on merger integration

Truist Financial is inching closer to completing the integration process that began nearly two years ago with the merger of BB&T and SunTrust Banks.

The company’s branch count continues to dwindle, non-branch office space keeps shrinking, and customer contact centers, ATMs and digital payment systems have all been upgraded. As of Monday, retail and commercial customers of BB&T are using Truist’s digital platform.

Two final pieces of the integration remain: the migration of legacy SunTrust retail and commercial customers to Truist’s platform and the rebranding of all branches as Truist offices. The company expects to hit those milestones during the first quarter of 2022.

Truist is beginning to move from a focus on the merger to a focus on performance, CEO Bill Rogers told analysts Friday during his first earnings call since becoming chief executive last month.

It’s been a long slog to get to this point. The onset of the pandemic-induced recession — which came shortly after the merger closed in December 2019 — initially caused some concern about Truist’s ability to meet its goal of eliminating $1.6 billion in annual expenses by the end of 2022.

Then, four months into the crisis, the $529.9 billion-asset company decided to push back its core bank conversion by several months, while speeding up expense reductions through job cuts, office space reductions and renegotiated vendor contracts. But there were limitations on how fast the cost-cutting could happen, even as the low interest rate environment pressured margins and created headwinds for revenue growth.

As it has tried to cut costs, Truist’s adjusted efficiency ratio, which measures expenses as a percentage of revenue, has recently been hovering in the mid-to-high 50 percent range. After declining in the second quarter to 56.1%, the ratio rose to 57.9% in the third quarter.

Still, Truist executives sounded confident Friday that the company will meet its $1.6 billion cost-cutting goal on schedule and achieve an efficiency ratio in the low-50 percent range next year. In response to a question about whether the bank would commit to achieving positive operating leverage in 2022, Rogers was quick to say that such an expectation is “totally reasonable.”

“We’re committed to having a business that has positive operating leverage and has industry-leading efficiency,” he said. “I mean, I feel more comfortable about that today than I did the day we announced the merger.”

Truist reported net income of $1.6 billion for the quarter, up 51% from the same period a year earlier.

Net income would have totaled $1.9 billion if not for three items that cut into earnings: $132 million in merger-related charges, $147 million in operating expenses related to the merger that don’t meet the definition of merger charges and a one-time $30 million fee in connection with a program through which employees helped identify, prioritize and lay out a framework for revenue growth.

Non-interest expenses totaled $3.8 billion during the third quarter, up 1.1% year over year.

Last month, Truist launched a voluntary separation and retirement program for employees. About 2,000 workers agreed to participate in the program, and roughly half of them left Truist on Sept. 30.

The company also said Friday that it plans to repurchase $500 million of common shares in the fourth quarter.