Truist Financial is taking steps to trim expenses as it lowers its full-year revenue forecast.
The Charlotte, North Carolina-based company announced Thursday that it will fold
And on top of a recent
"In the past, these might have been things that sort of would have been off the table," Rogers told analysts. "Now they're firmly on the table, like everything else as it relates to expenses."
The cost-cutting measures coincide with Truist's revised revenue outlook for 2023. It now projects that revenues will grow 5% to 7% compared with last year, down from the 7% to 9% growth that the company predicted in January. The downward shift is mostly based on the expectation that higher deposit funding costs will lead to a reduction in the company's net interest income.
Other banks are also anticipating lower net interest income. On Wednesday, Citizens Financial Group said it's
Meanwhile, Truist's outlook for expenses remains unchanged at an expansion of 5% to 7% for the year. The outlook doesn't include potential Federal Deposit Insurance Corp. surcharges and
While the company is still aiming to achieve positive operating leverage this year, which means revenue growth would surpass expense growth, the "degree of difficulty" in reaching that goal has increased since January due to higher deposit funding costs, Rogers acknowledged.
"Trust me, every business leader [at Truist] has a positive operating leverage plan and they are readjusting those plans … particularly those that have a net interest income component to their plans," he said.
Expense reduction and management has been central to Truist's story since the $560 billion-asset company was formed in late 2019 by the merger of BB&T and SunTrust Banks.
Cost synergies were a key rationale for the mammoth deal, which created one of the largest U.S. banks. Executives pledged to cut $1.6 billion of annual expenses by the end of 2022.
By January, the last of the merger-related expenses had been incurred and the company had checked off all the boxes on its lengthy integration to-do list. Excluding merger-related costs, noninterest expenses in 2022 were $13.1 billion, up from $12.8 billion in 2019.
For the first quarter, noninterest expenses rose 0.5% year over year to $3.7 billion. The increase was a result of higher personnel costs, so-called "other" expenses and regulatory costs tied to an increase in the FDIC's deposit insurance assessment rate, Truist said. The uptick in "other" expenses was related to higher operating costs and pension-related charges, the company said.
It isn't the only bank that delivered higher expenses. Bank of America's noninterest expenses rose 6% to $16 billion during the first quarter after remaining relatively flat throughout 2022. As a result, the No. 2 largest U.S. bank by assets
Some analysts have been wondering when Truist will start reducing expenses at a faster pace. On Thursday, analyst Erika Najarian of UBS Securities wanted to know if Truist could commit to "cleaner quarters" next year when it comes to expenses. She pointed to "adjustments here and there" on the expense side that make it hard for investors to see improvement in cost-cutting.
In July of last year, the company
Indeed, third-quarter 2022 costs, excluding merger charges, came in 2% higher than the same quarter the prior year. The company
The goal is to cut more costs, but the company will spend money if need be, Rogers said.
"I think they're getting cleaner every quarter and they're going to continue to stay on that flight path," Rogers said. "But when we have opportunities that we think are long-term beneficial, we're not going to miss those."
