Q4 2024 Truist Financial Corp Earnings Call

Michael Maguire

Thank you, Bill and good morning everyone. So I’m going to start with our performance highlights. We reported fourth-quarter 2024 GAAP net income available to common shareholders of $1.2 billion or $0.91 per share. Total revenue decreased 0.5% linked quarter as both net interest income and fees decreased modestly.
Adjusted expenses increased 4% linked quarter. And as we discussed last quarter, this increase was driven by higher professional fees and outside processing expenses related to a number of projects that were initiated later in the year. As bill mentioned earlier, non-interest expenses declined 0.4% in 2024 versus 2023.
Moving to capital, our CET1 ratio declined 10 basis points linked quarter to 11.5% as our larger balance sheet, the payment of our common dividend, and share repurchases completed during the quarter offset our current period earnings. From a credit perspective, net charge offs increased 4 basis points on a linked quarter basis and our nonperforming loans declined 1 basis point on a linked quarter basis.
So moving to slide 9, I’ll cover loans and leases. Average loans remained relatively stable on a linked quarter basis as a decline in average commercial loans was offset by growth in average consumer loans. Average commercial loans decreased $1.5 billion or 0.8%, primarily due to a decline in CRE and C&I balances, driven by lower production in CRE. Commercial line utilization remained relatively stable on a linked quarter basis.
In our consumer portfolio, average loans increased $1.4 billion or 1.2% linked quarter due to growth in indirect auto, residential mortgage, and other consumer. On an end of period basis, loans held for investment increased by $3.3 billion or 1.1%, primarily due to higher residential mortgages, C&I and indirect auto.
As Bill mentioned, we’re encouraged by the increase in end of period loan balances and improved loan production in certain key focus areas during the quarter. This should lead to positive growth in end of period loan balances in 2025.
Moving to deposit trends on slide 10. Average deposits increased 1.5% sequentially or $5.7 billion, driven by growth in all deposit categories except for time deposits, which were down linked quarter. Average non-interest bearing deposits increased 1.8% and represented 28% of total deposits, which is unchanged compared to the third quarter of 2024.
During the quarter, we continued to actively manage rate paid, which resulted in a decrease to our deposit costs. Specifically total deposit costs decreased 19 basis points sequentially to 1.89%, which implies a 29% cumulative total deposit beta.
Interest bearing deposit costs decreased by 26 basis points sequentially to 2.62%, representing a 40% cumulative total interest-bearing deposit beta. Overall, we expect average deposit balances to decrease by about 1% in the first quarter due in part to the outflow of seasonally higher municipal deposits.
Moving the net interest income and net interest margin on slide 11. Taxable equivalent net interest income decreased 0.4% linked quarter or $16 million, primarily due to the lag in deposit repricing versus earning asset repricing, which was partially offset by higher earning assets and some benefit from fixed rate asset repricing. Our net interest margin decreased by 5 basis points on a linked quarter basis to 3.07%, due primarily to the previously mentioned beta lag and a larger investment securities portfolio.
Based on our current outlook, we believe that the net interest income will decline by 2% linked quarter due primarily to the impact of two fewer days in the first quarter relative to the fourth quarter. And then we would expect it to trend higher in the second quarter of 2025 and throughout the course of the year. As you can see in the charts on the right, we expect net interest income to grow in 2025, driven primarily by low single digit end of period loan growth and the continued benefit from fixed asset repricing of our securities portfolio as well as our fixed rate loan portfolios.
During the fourth quarter, our average investment securities portfolio totaled $125 billion and carried a weighted average yield of 2.88%, that excludes the impact of pay fixed swaps. We expect to receive approximately $13 billion of cash flows from the investment portfolio throughout the course of 2025 that we anticipate reinvesting at higher yields. These securities roll off at a weighted average yield of 3.08% excluding the impact of pay fixed swaps and based on the current forward curve.
In addition, our fixed average — our average fixed rate loan portfolio totaled $135 billion and carried a weighted average yield of 5.38% during the fourth quarter. We anticipate having the opportunity to reprice approximately $42 billion of loans at higher yields during 2025 based on current maturity schedules. These maturities — maturing loans have a weighted average yield of approximately 6.36%.
Before moving on, I also wanted to note that this quarter we added additional disclosure on our swap portfolio and that’s on the bottom right-hand corner of the slide. At December 31, we had approximately $84 billion of notional received fixed swaps with a weighted average yield of 3.45%. These swaps are designated against our commercial loan portfolio and long-term debt and designed to protect net interest income from lower short-end rates.
Approximately, 45 billion of these swaps were effective at the end of the quarter. The remaining $39 billion of received fixed swaps are forward starting and will become effective over time. Based on our current portfolio at December 31, the effective receive fixed swap position peaks around $63 billion during the fourth quarter of 2025.
At December 31st, we also had approximately $30 billion of notional pay fixed swaps with a weighted average pay fixed rate at 3.39%. These swaps are designed to protect the economic value of the balance sheet as well as to manage future capital volatility through AOCI as these swaps are designated against our AFS securities portfolio. At December 31, the entire $30 billion pay fixed swap portfolio was effective with approximately half the portfolio carrying a maturity of less than three years.
Okay. Turning the non-interest income on slide 12. Non-interest income decreased to $12 million or 0.9% versus the third quarter. The linked quarter decrease was primarily attributable to lower investment banking and trading income which declined $70 million linked quarter due to lower debt and equity capital markets activity and M&A fees. The decline in investment banking and trading was partially offset by growth in other income service charge on deposits in mortgage banking income.
Although fourth-quarter investment banking trading income declined on a linked quarter basis, 2024 investment banking and trading revenues increased 46% versus 2023 and represented the highest level since 2021 due to higher transaction activity levels and continued market share gains, which helped drive a 6.2% increase in adjusted noninterest income for the full year 2024.
We remain optimistic about our ability to continue to gain share and grow not only in investment banking and trading but also in wealth and payments, where we believe there is significant opportunity to grow within our existing client base. Next, I’ll cover non-interest expense on slide 13.
Adjusted noninterest expense, which excludes the impact of restructuring charges and core deposit intangible amortization expense increased 4% linked quarter due to higher professional fees and equipment expense partially offset by lower personnel expense in the quarter.
On an annual basis, adjusted noninterest expense declined by 0.4% and our adjusted efficiency ratio remained relatively stable. Beginning with the first quarter of 2025, we will begin including core deposit and tangible amortization expense with adjusted expense to make our reporting align and be more comparable with peers.
Moving to asset quality on slide 14. Asset quality remained relatively stable on both a like and linked quarter basis. Reflecting our strong credit risk culture and proactive approach to quickly resolving problem loans. During the quarter, our net charge-off ratio increased 4 basis points to 59 basis points, due primarily to seasonally higher consumer losses. Net charge offs of 59 basis points for the year were in line with our expectation of 60 basis points.
Our loan loss provision exceeded net charge offs but growth in certain loan portfolios contributed to 1 basis point decrease in our ALLL ratio to 1.59%.
Non-performing loans held for investment as a percentage of total loans decreased 1 basis point linked quarter but increased 3 basis points on a light quarter basis to 47 basis points. NPL’s have remained in a fairly narrow band of 44 to 48 basis points over the course of the past five quarters.
Included in our appendix is updated data on our office portfolio, which is down $235 million linked quarter and represented 1.5% of total loans. Our office reserve increased from 10.4% to 11.1%.
Approximately, 5.3% of our office portfolio is currently classified as non-performing compared with 5.1% at September 30. Notably, approximately 18% of our office portfolio is housed within our commercial community banking and wealth segments where loan sizes tend to be more granular, guarantor support more prevalent, and overall losses lower.
We expect stress to remain in-the office sector and believe that the size of our portfolio is manageable and well reserved. But our position is to remain very proactive in identifying and resolving issues in this portfolio.
Turning now to capital on slide 15. On a linked quarter basis, our CET1 ratio declined 10 basis points to 11.5% due to the payout of 98% of our earnings via our common dividend and $500 million of share repurchases as well as balance sheet growth. Our CET1 capital ratio including the impact of AOCI decreased from 9.9% to 9.6%, reflecting the aforementioned factors and an increase in AOCI due to the increase in longer term interest rates experienced during the quarter.
During 2024, our CET1 ratio increased by 140 basis points, which was driven by the sale of Truist Insurance Holdings and retained earnings, partially offset by our strategic balance sheet repositioning, our common dividend, and $1 billion of share repurchases.
We continue to believe that our strong capital position gives us the unique ability to utilize our future earnings and AOCI accretion to fund balance sheet growth and to return significant amount of capital to our shareholders.
Now, I will move to slide 16 and review our guidance for 2025. Looking into the first quarter of 2025, we expect revenue to decrease 2% relative to fourth quarter revenue of $5.1 billion. We expect net interest income to decrease 2% in the first quarter, primarily driven by two fewer days in the first quarter relative to the fourth quarter and seasonally lower average deposit balances. This will be partially offset by slightly higher average loan balances.
Excluding the impact of day count. We would expect net interest income to remain relatively stable linked quarter. We expect non-interest income to decrease 2.5%, driven primarily by higher investment banking and trading revenue, partially offset by lower other income and service charges on deposits.
Adjusted expenses of $3 billion in the fourth quarter, which includes CDI amortization expense are expected to decline by 3% linked quarter as seasonally higher personnel expenses will be offset with lower other expenses and professional fees. As it relates to the buyback, similar to the fourth quarter, we’re targeting approximately $500 million of share repurchases in the first quarter of 2025.
For full year, 2025, we expect revenue to increase by 3% to 3.5% relative to 2024 adjusted revenue of %20.1 billion driven by growth in net interest income and non-interest income. Our net interest income outlook assumes a low single digit end of period loan growth and two reductions in the fed funds rate, including a cut in March and another in September.
We expect noninterest income to increase at a low single digit rate. This expected growth rate reflects the fact that certain fee revenues that were recognized in ’24 will not reoccur in 2025. These fees are related to the shared services agreement that was in place following the sale of TIH back in May and six months of revenue associated with Sterling Capital Management, which was also sold around mid-year last year.
We expect full year 2025 adjusted expenses, which include CDI amortization expense to increase approximately 1.5% in 2025 versus 2024. Our ’25 revenue and expense outlook implies positive operating leverage of 150 to 200 basis points.
In terms of asset quality, we expect our net charge offs of about 60 basis points in ’25, which is stable compared with net charge offs of 59 basis points in 2024. Finally, we expect our effective tax rate to approximate 17% or 20% on a taxable equivalent basis in 2025. I’ll now hand it back to Bill for some final remarks.

William Rogers

Thanks, Mike. So to conclude, I’m really pleased with the progress we made as a company last year and I’m confident that we have strong momentum with clients and with teammates in this year as our value proposition has just never been stronger.
First, we have an incredible franchise with leading share in high growth markets, we’ve got motivated and energized teammates and a fulsome set of specialized wholesale and consumer capabilities that our loyal clients value. That kind of relative capital position remains differentiating factor that gives us the ability to grow our core business by serving existing and new clients, invest in our infrastructure, and return considerable amounts of capital to our shareholders in the form of dividends and share repurchases over the next several years. All of which we plan to continue doing in 2025.
Third, as we execute our strategic growth and capital management priorities, we see a significant opportunity to improve our profitability over the medium term and we would expect to show progress in 2025. Our path to profitability improvementment is multifaceted and a function of decline in business growth while maintaining our cost discipline.
As I discussed earlier, much of the profitability improvement potential we plan is centered on further deepening of existing client relationships and verticals and product lines like wealth, payments, premier, investment banking that already exist at Truist.
We see opportunities to grow in markets where we have less dominant share like New Jersey, Pennsylvania, and particularly, Texas, while also further penetrating the middle market lending segment. The good news is that we see multiple paths and initiatives that with proper execution will result in improved performance, which we expect to show you in 2025.
Fourth, we plan to accomplish all of this while maintaining our expense discipline, generating positive operating leverage in 2025 and beyond, we’ll also continue to invest in talent, technology and our infrastructure.
Finally, we never take for granted our strong track record on asset quality as we’ll continue to focus on maintaining strong risk, discipline and controls. I’m as optimistic as ever about Truist future, especially in light of the momentum I see every day inside of this company, I’d like to thank all of our teammates and leaders for their incredible purposeful focus and productivity in moving our company forward. I’m so proud to be their teammate. So again, thank you for your interest and investment in Truist and Brad, let me turn it back over to you for Q&A.

Operator

(Operator Instructions) Scott Siefers, Piper Sandler.

Scott Siefers

Good morning, everyone. Thanks for taking the question. Mike, appreciate the disclosures on the swap book and the anticipated re pricing opportunities this year. It kind of sounds like after a little bit of a step back in the first quarter, there’s just a lot of programmatic opportunities.
So maybe just in sort of simple terms, maybe if you could discuss how much of the building momentum, simply sort of happens versus how much you see is dependent on the external rate environment, I guess, in particular in there and maybe how your thoughts would change if we got either more or fewer cuts than the two you’ve envisioned in the guidance.

Michael Maguire

Yeah. Good morning, Scott. Happy to do that. You know, I think about our NII trajectory and you hit, I think, the first quarter, we’re going to experience a little bit of a step back and that’s really just day count driven. But from there, we would expect to begin to see positive trend and some of that is sort of a continuous expectation that we’ll begin to see end of period balance growth occur throughout the course of the year, again, relatively modest.
The betas on the deposit side are catching up, essentially will become fully caught up in the first quarter. So we really do begin to see, I think, some benefit there. And I think as we came into the cutting cycle, that was maybe more of a question around where these betas might start. We’re very pleased by the 40% that we were able to achieve in the first quarter or — the fourth quarter and have an expectation that we’ll be in the mid 40%-plus in the first on our way to 50% next year.
So I think, that’s the primary drivers of our outlook for next year are just that some modest loan and deposit growth coupled with the fact that the betas are where they are. In terms of the fed rate path, you know, we’ve got the two cuts in now in March and September. I think if we were to see later cuts, fewer cuts, even no cuts, that would present a touch of a headwind, but I think manageable frankly, inside of our guide to the extent that the short end was a little lower and we saw maybe sooner cuts or more cuts. I think that’s a touch of a good guy. But again, we do have, I think, our sensitivity at least to the short end relatively neutral.
I mean one other factor that we’re keeping our eye on like others frankly is just the shape of the curve. You know, today’s curve is, I think, attractive and to the extent that we can hang on to a long end that does benefit the fixed loan and the securities repricing. That’s something we have our eyes on as well.

Scott Siefers

Perfect. Thank you for that color. And then within the sort of the loan balance comment, so it sounds like fairly modest — positive but modest loan growth expected. Maybe just sort of some additional broader thoughts on kind of where your customers are, how you might expect that loan demand to evolve as the year progresses.

William Rogers

As Mike noted, I mean, we’re not building a lot of loan growth into the forecast, but we started the year with some momentum. So sort of small single digit end of period kind of loan growth. What we’re seeing is the benefit of our activity. So the things that we’ve been investing in and the opportunities that we see in our markets, which are then confer to recover a little bit faster than the rest of the country. So maybe if I’ll just dissect it a little bit if that’ll be helpful.
So in the consumer side, our efforts in indirect auto, service, finance, and mortgage led to the growth there. And I expect those to continue. I mean, those are places where we’re leaning in. As I said, in my comments also not compromising on price or structure or credit. So that’s good.
And on the C&I side, we saw some production increase in the fourth quarter, particularly at the end of the fourth quarter. Utilization ticked up slightly, but I’ll just say slightly. And similarly, the commitments have gone up. The quality of the growth is significant. Middle market, significant production there. The quality of the things that we’re doing in our commercial segment or in our overall C&I segments at a 50% increase in syndicated deals. Half of those are new to Truist; half were left lead.
So the things that we’re focused on are working. So in addition to seeing a little bit of an uptick, I’m really probably most excited about the quality of what we’re putting on. And the accretive nature of those relationships long term.
In terms of client sentiment is to your question, I think clients are certainly more expansionary. I think that reflects in the commitment. So we’ve seen more increase in commitments. So I think clients are telling us that they’re building for the future in terms of opportunities to invest.
I think the real linchpin or the fulcrum point will come an M&A. So I think, depending on how much M&A we see will be an accelerate to anything that we might project. And today that’s a lot of dialogue. We have to see that show up in some more action but a lot more dialogue around all that. Hope that was helpful, Scott.

Scott Siefers

Yeah, that’s terrific. So thank you guys very much.

Operator

Ebrahim Poonawala, Bank of America.

Ebrahim Poonawala

Good morning. I just wanted to follow up, Bill, I think I heard you a couple of times call out, in particular, in New Jersey, Pennsylvania, Texas. Just talk to us in terms of the growth opportunity that you see there. Should we expect new branch openings, hiring of teams? Or could these be markets that are attractive even from a bank M&A perspective?

William Rogers

Yeah. Let me sort of go into that. I mean, remember, these are markets that we’ve been in for over a decade in most cases. So this isn’t new in terms of markets. But it is new in terms of investment and momentum and the things that we can offer those markets. So if you think about just the expansive nature of the products and capabilities.
And then we’ve just got great leaders who are bringing those to the benefit of our clients. As far as new bankers, we’re seeing that. I mean in those markets, we’ve added about 25 new bankers to our existing platforms. People are attracted to this opportunity.
In terms of production and fee income growth, I mean, they’re big numbers off a smaller basis, 80%, 70% kind of activity in those markets alone. Take Philadelphia and Texas, we did about $3.5 billion of loan production. So this is sort of new incremental on top of that. And in Texas, specifically, we added about 5,000 net new clients. so you can sort of see the impact of that.
I do think you’ll continue to see more expansion from us in there. So that’s maybe more to come and more dialogue this year as we think about the full network, not only in terms of bankers, but in branches and other types of investments we’re making in those markets.
And I think in fairness to the last part of the question, I think that will be organic. I think we’ve got really good organic momentum. So I like the opportunities that we have there. The teams on the field are really strong and areas that we’re leaning into.

Ebrahim Poonawala

That’s helpful. And I guess just sticking with that theme across the Southeast, maybe remind us again in terms of you still hear concerns around talent attrition in your market from competitors. Just give us your sense of confidence level around that these two franchises have been meshed, you feel good about defending market share or potentially growing market share from here when we think about deposits in your sort of legacy, SunTrust, BB&T markets?

William Rogers

Yes. I mean you see that in the results. So you see that in the quarter. I mean, we’ve had good momentum against the balance sheet. I talked about net new, so I do feel good about not only defending but actually leaning into the markets that we serve in these fantastic markets.
We’ve lost some teams, and we’ve added some teams. I mean, there’s a reality of that of the size company that we are. We’ve added a lot of great talent. I mean our leaders have really done a fantastic job attracting teams to the value proposition. So the teams that we have on the field and their capacity and ability to deliver against our value proposition has never been better.
So we’ve added a lot. I feel really good. As I mentioned in my comments, our focus is going to be on attracting, developing, and retaining great teammates who can deliver against this Truist value proposition. So the answer is we’re in not just a defensive but we’re in an offensive position in our markets and fully prepared, and we see the results and momentum of that.

Ebrahim Poonawala

We too. Thanks, Bill.

Operator

Matt O’Connor, Deutsche Bank.

Matt O’Connor

Good morning. Can you guys talk about how you’re thinking about targeted capital levels over time? Obviously, there’s still some potential changes coming on the regulatory side, including CCAR. But just without having all the details on that, just the thought process.
And then also just related to that, are there other opportunities to tweak the preferred stock. You had some redemptions this quarter, and obviously, that impacts the business going forward. Thanks.

Michael Maguire

Good morning, Matt. Look, we recently talked about a longer-term target in the 10% area for CET1. I don’t think we have an updated view on that thinking. Obviously, where we sit today with current rules and some expectation that there’ll be changes to rules, we’re at 11.5%. If you were to adjust that number for AOCI, we’re kind of 9.6%area.
So we’re thinking about — today’s measurement, we’re thinking about the likelihood of a new rule and think still that sort of that 10% area is a reasonable expectation for you guys to have.
Look, there’s a lot in motion right now. And I think as we see more cards turn, there will be an opportunity for us to maybe update our perspective if that’s appropriate.
On the press, we did — we’ve done some liability management over the last couple of quarters. You’ll see that continue on a total capital basis. We’re in good shape. And so just capturing some of that benefit where we see opportunity is really sort of what you saw there?

Matt O’Connor

Okay. That’s helpful. And the 10%, I assume is including the AOCI.

Michael Maguire

Yeah. And I think that’s a perspective that the rule will evolve. You know, again, I think it would be difficult to speculate on all the various other impacts. You know, there’s been a lot of discussion around the impact on RWA inflation or otherwise. But if you just were to think about AOCI especially, that’s what’s driving my guide there.

Matt O’Connor

Okay. And then just squeezing in, what’s the duration of the securities book? I know you had some ads this quarter or last two quarters, but what’s the current duration? And then I’m done. Thanks.

Michael Maguire

Yeah, obviously, the AFS portfolios, shorter just given the work we did this spring with the repositioning. So on a net basis with the payers, our AFS durations in the low 3%s, our HTM portfolio obviously is extended. It’s closer to 7% and on a net basis combined mid-4%s.

Matt O’Connor

Okay. Thank you.

Operator

Erika Najarian, UBS.

Erika Najarian

Hi, good morning. I guess my first question is for Bill. I know clearly there’s a macro aspect to the return of lending growth, and you have just modest assumptions in your net interest income outlook or revenue outlook. But maybe could you talk to us about how some of the growth might be impacted by some of the changes that you’ve made to leadership maybe and like incentive comp and the way you go to market because clearly there’s a macro aspect to it, but there also seems to be a true specific aspect where you’re sort of emerging from defense and offense.
And to that end, you made some announcements in terms of leadership. I feel like that was received fairly well by investors. But perhaps some comments on you in terms of what message would you like us to take away from the changes in leadership that you announced this week?

William Rogers

Yeah. I mean you sort of in a couple of different tributaries there. But look, overall, and I said this, I think, on the answer earlier question, I mean, the talent that we’re investing in are teammates who, I think, can really lead this organization in the future. They really know our value proposition in terms of where we’re going.
And in terms of this week, I mean, we had our — Beau departed our company. I mentioned earlier, great career, really did a lot of important things in terms of establishing the framework for the future. And then we took the opportunity to take some of those responsibilities and distribute them among some of my existing leaders.
So that gives them some more opportunity to grow and some more opportunities to expand their tool kits. I feel really, really, really good about that. And then as you mentioned, there have been some other key important leadership hires along the way that I think will be important parts of our future. So I don’t think there’s a story there other than we have a great franchise, and we’re attracting really good people to our franchise. We have existing teammates who have really expanded their tool kits. We have great leaders who really understand and know and how to attract and retain really strong talent.

Michael Maguire

And Eric, maybe I’d just add to that a little bit. I mean another dynamic, obviously, is post the sale of TIH, the capital position we find ourselves and I think also gives our teammates a lot of confidence. I mean we have a very sort of pro-growth agenda, and that’s — we’re doing a lot of senior and banker hiring in our commercial and wholesale businesses.
You’re seeing that pull through in terms of activity levels. And we’re trying to activate capital across our consumer lending platforms. And so those are very defensible, strong businesses that we think have good growth potential.
So I think there’s just a clarity of focus on growth in the client and you’re starting to see that pull through. And I think that’s going to obviously gives us a lot of confidence as we go into the year. And I think you’re right. I think our expectations for low single-digit growth are relatively modest. So we’re just focused on execution.

Erika Najarian

And the second question is a lot more boring. On slide 11, on the $45 billion in active received fixed swaps by year end, how does that progress quarterly from 12/31/24 to 12/31/25 in terms of the (multiple speakers) changing, yeah?

Michael Maguire

Yeah. It’s — so we’re $45 billion in the fourth quarter. That stage relatively consistent in the first quarter. So I think it ticks up maybe we’ve got another $1 billion effective. In the second and third quarter, I think you see a little bit of a step up. And by the fourth, you’re peaking at $63 billion.
So I think you could probably model almost straight line, Ericka, between kind of $46 billion and $60 billion. I think we see a touch more come on in the third, but. And the [$30 billion] of payers are on for the whole year. So we’re net $15 billion effective received Q1 and think of it as net $30 billion received effective Q4.
Which — and just to say it as well as to get where you’re going, if you think about sort of the impact on NII throughout the course of ’25, our expectation is that it will actually be relatively stable because as you have more of the receivers coming on in kind of the mid-3s, again, at least with our baseline view is you pick up a cut sometime in the first half and again in the second half. And so those factors really offset one another. So we see the hedge impact net relatively consistent throughout the course of ’25. And it’s really not very different than what we saw in Q4 of ’24.

Erika Najarian

Thank you. Got it.

Operator

Betsy Graseck, Morgan Stanley.

Betsy Graseck

Hi, good morning. I did want to just drill down into the expense outlook a little bit here. Maybe you could help us understand what’s the driver behind the expense declines in the first quarter Q2, down 3% and then on the outlook for the full year revenue growth, 3% to 3.5%, expense growth only 1.5%. So help us understand how you’re anticipating managing to that type of outcome, especially in an environment where capital markets is pretty strong and there’s a comp payout ratio there. Thank you.

Michael Maguire

Sure. For the quarter, the decline is just — we had some elevated professional fees in the fourth quarter. We had slightly higher other expense, some ops losses in the fourth quarter. So seeing those come off that benefit might — so is some of the change there, Betsy. We would expect, after the increase in the first, to begin to smooth out for the rest of the year.
If you look at ’25, I think your question is, is there an expectation that maybe upside in capital markets might drive us higher on full year expenses. I mean certainly, the comp correlation with certain of our businesses does tend to be more variable in wealth and in investment banking, but we think that 1.5% level captures sort of the baseline outlook that we’re providing to you. We’d be delighted to see revenue exceed our expectations based on higher market levels, activity levels and to see our expense outlook drift with it.

William Rogers

Yeah. Just to maybe add to that — in that existing guidance, I mean, we’ve had really good consistent, low double-digit kind of performance in investment banking. And I expect that to continue. So this is built into this.
And we also continue to have efficiency points. So those are offset against those. So think about this year, we had the best year in investment banking, and we were down 40 basis points of expenses. So this is an environment where we continue to have efficiencies against the investment are all oriented towards that consistency in the efficiency ratio and creating and sustaining positive operating leverage.
So we don’t want this to be a onetime thing. We want this to be a sustainable platform. So our teams look at the investment side and the savings side with the same level of intensity.

Betsy Graseck

Yes. No, I totally get it, and it’s a significant amount of operating leverage here, 1.5 percentage points at the low end of the range at 2 percentage points. So I was wondering if there’s much in the way of recouping prior investment spend with tech getting turned off, et cetera, that’s helping keep this expense outlook at 1.5% and keeping it from — creeping up to 2% or 2.5%.

William Rogers

A lot of it is — if you think about the strategy that we’ve talked about, a lot of these are investments that we’ve already made. As you think about in the merger, so we created a lot of opportunities in terms of new products and new capabilities, new consolidated platforms, et cetera, et cetera.
And the crux of our strategic focus is expanding with existing clients. So these are products and capabilities and markets and places where we’ve already invested, and it’s leveraging that investment. So it has, by its nature, high returns, so do they high ROA kind of components to it and really good leverage.

Betsy Graseck

Great. Thanks so much.

Operator

John Pancari, Evercore.

John Pancari

On the — just real quick back to the expense guide, I agree lower than we would have forecasted. Could you just remind us what are the most material areas of investment that you flagged. What are the most meaningful that are impacting your expense outlook right now? And then given where this guide is, which is notably reasonable, do you have flexibility if revenue was weaker given this guide where it stands now? Thanks.

William Rogers

Yeah. So the primary investments on the expense side are some of the things we’ve talked about. So they’re related — some are directly related to the revenue side. So Investment Bank is one we talked about has direct correlation. Also, the continued investment in the risk infrastructure as we build out our company.
I mean we’re a bigger company, and we’re continuing to grow. So we have to have a strong risk infrastructure, strong cybersecurity structure. So those will continue to be growing investments.
And then the toggles, we talked about the toggle on the upside, the toggle on the downside. I mean, we have a commitment to positive operating leverage. So if we — Mike talked about earlier, if we talk on the upside, that’s one opportunity; and if we have to take on the downside, we know how to do that as well.

Michael Maguire

John, I would just add. I mean, we’re hiring talent across the Board right now. So whether it being well the commercial or corporate or investment banking, we’re hiring premier bankers. We’re hiring area leaders.
We’re hiring people to go drive our growth agenda. We’re also investing in products. We’ve talked a lot about the opportunity we believe we have. For example, in treasury, we’re adding — we’ve invested in our trading capabilities in our investment bank. You heard Bill talk about deepening our penetration in some of our markets where we think we have an opportunity to do so.
So I think those are all areas where you’re seeing some incremental growth. But just recall, and this is for Betsy too, like we’re giving you a net number. I mean the work we were doing in ’24 to manage expenses and drive efficiency continues in 2025. So we’re looking at sourcing. We’re looking at all the various levers you would expect us to be focused on to drive that outlook.
And look, just to say it as well, just with the focus on operating leverage, we feel pretty good about the revenue outlook we’ve provided. We don’t think we’ve got heroic loan growth in our outlook. And we’ve got a pretty good curve. And so we feel pretty good as we turn the page on ’24, moving to ’25.

John Pancari

Great. All right. Thanks, Mike. And then just separately, back to the capital front. I hear you in terms of the 10% CET1 target, you’ve already guided to about another quarter of $500 million buybacks in the first quarter. Is that a reasonable pace as we look over the remainder of the year, just given your current capital position? Or could that slow a bit if loan growth picks up more meaningfully than your modest assumption at this point?

William Rogers

Yeah. John, the good news is we’ve got ample capital to sort of stay at that pace. So we’re in the, I think, unique position that we can grow and distribute capital. So I think we’ll — right now on, let’s call it, short term to medium term, I think we anticipate staying at that pace in terms of the share buyback. We’d love to have dramatic loan growth that would change that.
But the good news is that we can accommodate a good level of loan growth, and we can accommodate share buybacks. So I think we’re in a really good position to ensure the future of our company and reward shareholders along the way.

John Pancari

Got it. Okay, great. Thanks Bill.

Operator

Saul Martinez, HSBC.

Saul Martinez

Good morning guys. First of all, I just wanted to clarify the revenue guidance of 3%, 3.5%. I think the non-interest income guide is low single digits, which I assume, is 1% to 3%, which would imply NII growth is a little bit above that range. Is that right? I might be stating the obvious, but I just wanted to clarify nonetheless.

Michael Maguire

No, you’ve got it right. Maybe a couple of things on that. The NII guide, our outlook is better headline than fees. But I did mention in the prepared remarks, and it’s worth mentioning again the transactions that we completed last year, the sale of TIH and the related transition services agreement that we entered into and which generated at least in ’24, some temporary fee income and then the sale of Sterling, which is in the ’24 numbers, but of course, wouldn’t be in the ’25 numbers; that does impact that headline fee income outlook, right?
So we’re guiding with those items in ’24. So I think if you were to exclude those items that won’t reoccur in ’25, our fee outlook would actually like on the core businesses, be more like a mid-single-digit outlook.

Saul Martinez

Got it. So on a quarter basis, it’s more mid-single digits. Okay. And I guess a follow-up question, fixed rate loans, $42 billion running off at a yield of $636 million, which is higher than the portfolio yield. It seems to imply some of the higher margin loans rolling off.
But what is — what’s — how do we think about the new money rates on that $42 billion? What kind of a incremental spread are we getting there?

Michael Maguire

I think on a — we’re not changing our mix. We’re not changing our risk appetite. So I don’t want to imply that there’s a change in like the core spread. But if you’re looking at the run on yield versus the runoff yield, I think you’ve got, with today’s curve, 100 basis points or better run on rate for the fixed rate loans versus the runoff rate. And on the bonds, that’s better.

Saul Martinez

Okay. Got it. So that’s — I mean, doing the math, it’s like $400 million more or less on that $42 billion annualized. Okay. That’s helpful.

Operator

(Operator Instructions) Mike Mayo, Wells Fargo.

Mike Mayo

I guess, for a couple of years during the merger, you lost some market share in the Southeast. And now you’re going — you’ve been on more offense. And obviously, prior to here, you mentioned Pennsylvania and New Jersey when it looks like you have so much opportunity in the Southeast.
So I’m just trying to figure out why you mentioned those markets specifically now, what’s changed? And what are the mechanics in terms of turning the corner in terms of that core deposit market share, whether it’s in the Southeast or Pennsylvania, New Jersey.
And I get it, it’s all included in your expense guide. So if you’re doing a lot more marketing or branch builds or hiring, it’s all in that expense number, which we got. But maybe if you could just unpack that a little bit, how you get from the investments to the execution of better deposit share in those markets? Thank you.

William Rogers

Yeah, Mike, you saw some of the deposit growth this quarter and some of the momentum that we see on that. So we’re in — when you do a merger, we’ve exceeded what people have told us so market share challenges are from a merger. And we’re — I feel like a really strong pivot in those markets in terms of product capability, and opportunities that exist there.
So I think we’re making good progress on that front. And then you mentioned what you mentioned Texas and why you mentioned these other markets, they are also our markets. So these are not — these are places where we’ve been for a long time, and we’re continuing to expand.
And I mentioned those just in the sense of there’s also opportunities to gain really disproportionately and quickly. So not only defend and grow, but also be offensive and grow in other markets on the incremental side. So it’s just a function of trying to paint the whole picture of what is what Truist looks like.

Mike Mayo

I guess I’m just — from your decades of experience, Bill, I mean, are the banking battles heating up? It just seems like everybody’s going into everybody else’s backyard to compete. On the other hand, the crazies are off the street from — before the financial crisis. So what’s the competitive dynamics right now? Is it intense? Is it good? Is it rational?

William Rogers

Yeah, since you pointed to my decades of experience. So the decades of my experience have always been in really good markets. And those markets have always been really competitive. So I don’t think it’s particularly different in the sense that they’ve always been really competitive.
We have smart players in our markets. I think that’s an advantage because we’re one of the smart players as well. I think our capacity and ability to compete has never been better. So I think we’re positioned really well. But good markets are highly competitive. I mean, that’s the advantage of being at them.
And they grow disproportionately faster. So you can be competitive in a market and continue to grow. And that’s what I think we see in terms of that opportunity. So I don’t think we see — I guess you used the term, but I don’t think we see crazy pricing. I don’t think we see unreasonable competition.
As I said, we have really smart, large competitors, and we have a really strong value proposition to win and you see that. You see that a net new is like one of the primary examples, but you see our capacity to win against those competitors.

Mike Mayo

All right. Thank you.

William Rogers

Yeah. Thanks. Mike.

Operator

Gerard Cassidy, RBC.

Gerard Cassidy

Hi Bill. IHi, Mike. Can you guys share with us — you’ve had real success in the investment banking business. And I think it represents now about 21% of your fee revenues in 2024, up from 15% in 2023. And as a percentage of total revenues, it’s now about 9% versus about 4%.
Can you share with us where you see that going. Are you comfortable at these levels relative to the total pie or can you grow it further where it could get to 15%, maybe of total revenues or –? I’m kind of curious on how you’re looking for the growth opportunities.

William Rogers

Yeah. Gerard, thank you for the acknowledgment of the strength of the investment banking business. I mean this has been an organic build over long periods of time. We have had sort of a consistent low double-digit kind of CAGR over time, and I think we can continue to be at that pace. So I feel really good about that.
As we’ve talked about in the past, our business also is really predicated on a middle market focus, and it’s predicated on a focus on our existing client base. So I also see the opportunity for less volatility over time because we’re focused on our clients and our capability to expand into that.
Really good return characteristics. So we also run the business well. It’s an efficient business. It’s a really smart user of capital in terms of its strategy. So I think we can continue to grow this business as being a part of it. We also want the rest of the business payments, wealth, all those other components to also grow. So we don’t get disproportionate in any place because that diversity of fee income and that diversity of balance sheet are also important to the overall equation.
So a little bit steady as she goes. We’re not putting the governor on that business because we see the opportunities and we like the way that it’s built in terms of its efficient operation, really good use of capital and strategic focus against Truist as a whole.

Gerard Cassidy

Very good. And I forgot to mention, if Clarke is sitting in the room, congratulations on your retirement. Good luck. Thank you, Bill.

William Rogers

Thanks for that great comment about Clarke and well deserved as you know.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Brad Milsaps for any closing remarks.

Brad Milsaps

Okay. Thank you. That completes our call. If you have any additional questions, please feel free to reach out to the investor relations team. Thank you for your interest and trust and we hope you have a great day. Betsy, you may now disconnect the call.

Operator

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.