Truist Financial, which has been
The spending reduction will involve "significant" job cuts between now and the first quarter of 2024, CEO Bill Rogers said at an industry conference. He also promised a reduction in the number of management layers, the consolidation of certain business lines and cuts in technology spending.
The cost-cutting initiative, which equates to an annual spending reduction of about 5%, is aimed at helping Truist keep expense growth to no more than 1% next year. That would be a steep drop-off from the estimated 7% increase in expenses that the company has forecast for all of 2023.
Still, the plan may not be enough to soothe investors' frustration, analysts said. Before Monday's announcement, market prognosticators had foreseen roughly a 1% decrease in Truist's 2024 expenses.
"People wanted to see some sort of tangible evidence of a sense of urgency from management, so just getting something out there is good," Piper Sandler analyst Scott Siefers said in an interview.
He added that analysts and investors are now wrestling with the question: "Is it enough?"
Some other analysts expressed similar thoughts. In a note, Terry McEvoy of Stephens Research said that he questions if "the 2024 outlook will be good enough."
Mike Mayo of Wells Fargo Securities echoed that view. Mayo has been highly critical of Truist in recent months, saying the company needs to "take action with urgency" to turn things around.
"The hope is that management may be trying to under-promise," Mayo said in a research note Monday.
At least one analyst struck a more optimistic tone.
"We are pleased to see the new expense initiatives," Christopher Marinac of Janney Montgomery Scott wrote in a research note, adding that the plan announced Monday could be a short-term catalyst for the stock.
Truist's stock price, which has fallen about 30% this year, was up about 1% Monday afternoon.
The North Carolina-based bank's presentation at the Barclays Global Financial Services Conference was hotly anticipated for weeks. Truist has been under pressure to take aggressive steps to cut its noninterest expenses, which have stayed elevated over the past several quarters.
During the company's second-quarter earnings call in July, Truist executives
On Monday, Rogers tried to convey urgency in his message to investors. He referred to the cost-cutting strategy as a "very intentional pivot" to improve financial performance and "achieve the promise of Truist." The company was formed by the 2019 merger of BB&T Corp. and SunTrust Banks — and predicated, in part, on cost savings and various other synergies.
"This is very much a 'now' event and not a 'later' event," Rogers said.
The largest portion of the estimated $750 million in savings — about $300 million — will be realized through job cuts.
A Truist spokesperson declined to say how many jobs will be eliminated. But Rogers said that some of the affected positions will be "support" roles in areas such as marketing, finance and management.
As of Dec. 31, 2022, Truist employed more than 51,000 people, according to a regulatory filing.
Another $250 million in expenses will be chopped through organizational restructuring, which includes consolidating certain businesses, reducing the size of the company's branch network, revising compensation and benefits programs and "deemphasizing investments" in under-performing businesses. The final $200 million in savings will come from spending less on technology.
Truist also said Monday that it expects to generate more revenue in areas such as investment banking, payments, insurance and retail and small-business banking, as well as commercial and corporate banking. In addition, the company said that it has revised its executive compensation to better align with shareholder returns.
Notably, Truist did not announce any additional changes to its massive and highly profitable insurance business. Back in February, Truist
He said the company continues to "evaluate strategic options" for the insurance segment.
The future of that business remains a lingering question for investors, Siefers said.
"Will they sell another portion to restructure some of the balance sheet?" Siefers said, adding that the bank still needs to determine how to proceed. "At minimum, they've got great flexibility there, but they're not doing anything with it now."
