Truist Financial Corporation (NYSE:TFC) Q4 2024 Earnings Conference Call January 17, 2025 8:00 AM ET

Company Participants

Brad Milsaps - IR
Bill Rogers - Chairman and CEO
Mike Maguire - CFO

Conference Call Participants

Scott Siefers - Piper Sandler
Ebrahim Poonawala - Bank of America
Matt O'Connor - Deutsche Bank
Erika Najarian - UBS
Betsy Graseck - Morgan Stanley
John Pancari - Evercore
Saul Martinez - HSBC
Mike Mayo - Wells Fargo
Gerard Cassidy - RBC

Operator

Greetings, ladies and gentlemen, and welcome to the Truist Financial Corporation Fourth Quarter 2024 Earnings Conference Call. Currently, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

As a reminder, this event is being recorded. It is now my pleasure to introduce your host, Mr. . Brad Milsaps.

Brad Milsaps

Thank you, Betsy, and good morning, everyone. Welcome to Truist's fourth quarter 2024 earnings call. With us today are our Chairman and CEO, Bill Rogers; our CFO, Mike Maguire; and Chief Risk Officer, Brad Bender; as well as other members of Truist's senior management team.

During this morning's call, they will discuss Truist's fourth quarter results, share their perspectives on current business conditions, and provide an updated outlook for 2025. The accompanying presentation as well as our earnings release and supplemental financial information are available on the Truist Investor Relations website, ir. truist.

com. Our presentation today will include forward-looking statements and certain non-GAAP financial measures. Please review the disclosures on Slides 2 and 3 of the presentation, regarding these statements and measures, as well as the appendix for appropriate reconciliations to GAAP.

With that, I'll turn it over to Bill.

Bill Rogers

Thanks, Brad, and good morning, everyone, and thank you for joining our call today. So before we get started, I want to take a moment to introduce Brad Bender. Brad recently became our Chief Risk Officer.

He brings extensive experience across a number of Truist areas, including risk operations, technology and consumer lending to his role. Brad is off to a great start. He'll continue to carry forward Truist's strong credit culture and risk discipline.

Clarke Starnes, I'm really happy, is working closely with Brad on the transition. I'm incredibly grateful for Clarke's impactful 40-plus-year career at Truist, most recently serving as our Chief Risk Officer. Also want to thank Beau Cummins for his significant contributions to our company following his announced departure this week.

Since 2005, Beau has purposely served as an instrumental leader at Truist, most recently as Vice Chair and Chief Operating Officer. Both he and Clark played crucial and formative roles in the merger of equals to create Truist and setting the course for our future. I just can't tell you how much I appreciate their leadership during this time at Truist.

They were fantastic partners. I just wish them all the best in their new chapters in their lives. All right.

So, let's -- before turning to fourth quarter results, let's begin, as we always do at Truist, with purpose. We are a purpose driven company dedicated to inspiring and building better lives and communities, which is the foundation and guide for how we conduct our business. So one example in the fourth quarter was our response to Hurricane Helene.

The impact of the Hurricane on Western North Carolina was truly unprecedented. Truist has deep roots in the region, and our team was quick to respond, but they were also compelled to play a pivotal role in the area's long-term recovery, aligned with our purpose to inspire and build better lives and communities. We announced a three-year $725 million commitment to address critical needs, including a focus on small business, housing, and infrastructure projects.

By listening to the needs of the community and leveraging our expertise, our capital partnerships, we believe we can be a catalyst for recovery and growth. So now turning to our results on Slide 5. For the fourth quarter, we reported net income available to common shareholders of $1.2% billion or $0.91% a share. For the year, we reported GAAP net income of $4.5% billion or $3.36% a share and adjusted net income of $5 billion or $3.69% per share.

Mike, is going to provide some more details on quarterly and annual results later in the call. 2024 was an important year for Truist, and I'm proud of the results our teammates delivered, which included executing on several important strategic initiatives, delivering solid underlying earnings, maintaining sound asset quality metrics and positioning us with strong momentum as we enter 2025. Our solid performance was defined by several key themes.

First, 2024 ended on a strong note with annual adjusted revenue finishing at the high end of our expectations and annual expenses declining 40 basis points. Our adjusted efficiency ratio of 56.3% remained relatively stable on an annual basis, reflecting on ongoing expense discipline and focus on managing cost. In addition, on a linked quarter basis, average deposit balances increased 1.5% and average loan balances were stable.

End-of-period loans experienced a little over 1% growth as we saw an increase in loan demand due to the results of our focused initiatives in the latter half of the quarter. These factors, along with our continued discipline around rate paid on deposits, resulted in net interest income exceeding our expectations for the quarter. Investment banking and trading revenue increased 46% for the year versus 2023, as we continue to add talent and expertise to an already strong platform that continues to gain market share.

Credit metrics remain solid as nonperforming loans held-for-investment declined $38 million linked quarter, while net charge-offs increased 4 basis points in the fourth quarter, resulting in losses for the year coming in line with our expectations. Our CET1 capital ratio finished the year at 11.5%, which is up 140 basis points versus 2023, due to the gain on the sale of Truist Insurance Holdings in 2024 earnings, partially offset by the strategic balance sheet repositioning completed in May and $3.8% billion of capital we returned to shareholders through our common dividend and the repurchase of $1 billion of our common stock. The execution of these important strategic initiatives and resulting relative capital advantage leaves us well positioned to grow our balance sheet and return capital to shareholders through our common dividend and our share repurchase program.

In 2025, we're focused on five key areas, all aimed at driving better growth, positive operating leverage, and improved profitability. First, last year was a testament to the attractiveness of our platform, attracting, developing and retaining top talent will continue to be our priority. Second, we see a material opportunity to deepen existing client relationships within our attractive footprint, especially in areas like premier banking, wealth and payments, all of which represent significant opportunities to capture additional share within our existing client base.

Third, we also see growth potential beyond the markets where we have strong share, especially in states like New Jersey, Pennsylvania and Texas, where we have smaller but faster growing market share. These are not new markets, but areas where we have invested significantly and have great momentum deploying our full Truist capabilities. We're also optimistic about further expanding into certain verticals in the middle market where we can bring the expertise we provide to larger companies in our investment bank to mid-sized companies all across the country.

Fourth, we'll continue to invest in our technology platform, which is improving the client experience, driving new account production and delivering efficiencies. Finally, we plan to accomplish all of this while maintaining our expense discipline, driving positive operating leverage, and investing in important areas like our risk infrastructure and cybersecurity. Maintaining our momentum and executing against these strategic priorities will be the key to driving positive operating leverage this year and showing progress towards our mid-teens medium-term ROATCE target.

Before I hand the call over to Mike to discuss our quarterly results, I want to spend a little bit of time discussing the progress we're already making on our strategic priorities and the positive momentum we're seeing within our business segments and with our digital initiatives on Slide 6 and 7. In Consumer & Small Business Banking, I'm encouraged by our momentum as we experienced an increase in loan production in key focus areas within our lending portfolio and we continue to acquire key new clients and households, both through our digital and traditional channels. Average consumer loan balances increased 1.2% linked-quarter due to the growth in residential mortgage, indirect auto, and important platforms like Sheffield and Service Finance as we experienced a 5% linked-quarter increase in consumer loan production during the quarter.

Importantly, we're not sacrificing our credit standards or pricing discipline to drive growth. Credit metrics remained relatively stable and new consumer loan production spreads are accretive to the overall portfolio. Net new checking account growth was once again positive for the year as we added 104,000 new consumer and business accounts.

Not only are we adding new households, but primacy rates and client retention also continue to increase due to improvements to the client experience and ongoing enhancements to our digital offerings during the year. In Wholesale, I'm encouraged by the underlying momentum in terms of improved production, increased wallet share within certain businesses and the talent that we're attracting to our Company. During the quarter, we saw a 3% growth in average Wholesale deposits, including growth in non-interest-bearing demand.

Although average Wholesale loans declined linked-quarter, end-of-period balances increased 50 basis points. We saw increased production and higher commitments in certain key focus areas as clients are in a more offensive posture. As I previously noted, 2004 represented the strongest capital market share we've reported since 2021.

We experienced record performance in investment-grade issuance, equity capital markets, asset securitization and project finance, while also gaining share in verticals like financial institutions, consumer retail and healthcare. Our leaders made key new hires through 2024 in commercial banking, corporate banking, investment banking, wealth, payments, and a leader of our new middle-market initiative. These new experienced teammates are attracted to our purposeful and results oriented culture and complement our great teams.

As I mentioned earlier, we have a specific focus on building out our middle-market commercial segment. I'm very pleased with our focus and momentum we're already experiencing in production and results. We also continue to enhance our wholesale digital capabilities by improving the client experience.

During the quarter, we launched Electronic Bill Presentment, which is a next-generation product that gives clients greater control over their billing and payments operations. Enhancing the client experience and growing our digital capabilities are important parts of our strategy, which I'll discuss in more detail on Slide 7. Throughout the year, we've invested in our digital platforms to attract new clients to Truist with a focus on shifting existing client behaviors to self-service, which drives operational efficiency.

As a result of these efforts, we showed strong and steady growth in our digital capabilities as we experienced year-over-year growth in all core metrics, while also achieving favorable client experience satisfaction scores. We opened over 730,000 new digital loan and deposits accounts during the year, including nearly 275,000 new-to-bank clients through our digital channels, which represents a 31 increase over the previous year. We surpassed over 7.1% million active digital users on our platform.

Client mobile app users grew 7% and digital transactions increased 13% year-over-year. In addition to an increase in account openings and higher digital adoption rates, we're also seeing improvement in the funding of our digital account openings with balances up significantly over 2023, including growth and balances for Millennial and Gen Z clients. Investing in the digital client experience continues to be a priority for our Company in 2025 and beyond.

We expect to continue growing our digital presence with clients as we further leverage our modern and scalable technology platform. So with that, let me turn it over to Mike, to discuss our financial results in more detail. Mike.

Mike 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 core -- quarter -- 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 to 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-fix 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 received fixed swap position peaks around $63 billion during the fourth quarter of 2025. At December 31, 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 to noninterest income on Slide 12.

Noninterest income decreased $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 and 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 non-interest 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 noninterest 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 intangible 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 a 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 like quarter basis to 47 basis points. NPLs have remained in a fairly narrow band of 44 basis points 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. So 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 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 noninterest 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 noninterest 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 non-interest income to increase at a low single-digit rate. This expected growth rate reflects the fact that certain fee revenues that were recognized in 2024, 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 includes CDI amortization expense to increase approximately 1.5% in 2025 versus 2024. Our 2025 revenue and expense outlook implies positive operating leverage of 150 basis points to 200 basis points.

In terms of asset quality, we expect net charge-offs of about 60 basis points in 2025, 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.

Bill 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. Second, our relative capital position remains a 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 improvement is multifaceted and a function of client and 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 in verticals and product lines like wealth, payments, premier, and 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 while 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, we'll turn it into Q&A.

Brad Milsaps

Thank you, Bill. Betsy, at this time, will you please explain how our listeners can participate in the Q&A session. As you do that, I'd like to ask the participants to please limit yourself to one primary question and one follow-up in order that we may accommodate as many of you as today as possible.

Operator

We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Scott Siefers with Piper Sandler. Please go ahead.

Scott Siefers

Good morning, everyone. Thanks for taking the question. Mike, I appreciate the disclosures on the swap book and the anticipated repricing opportunities this year.

Kind of, it sounds like, after a little bit of a step back in the first quarter, there's just a lot of programmatic opportunity. 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, maybe how your thoughts would change if we got either more or fewer cuts than the two you've envisioned in the guidance.

Mike Maguire

Yes. Good morning, Scott. Happy to do that.

I think about our NII trajectory and you hit it, 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, pardon me, the fourth quarter, and have an expectation that we'll be in the mid 40%s 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, 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, I think, like others, frankly, is just the shape of the curve. 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, it -- 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.

Bill Rogers

Yes. Scott, it's Bill. As Mike noted, I mean we're not building a lot of loan growth into the forecast, but we're starting the year with some momentum.

So sort of small single-digit end-of-period kind of loan growth. 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 I think can fares recover a little bit faster than the rest of the country.

So maybe like, 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 segment sort of 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 left 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 as your question, I think clients are certainly more expansionary.

I think that reflects in the commitment. So we've seen more increasing commitment. 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 in M&A. So I think depending on how much M&A we see, I think we'll be an accelerate to anything that we might project. And today, that's a lot of dialog.

We have to see that show-up and some more action, but a lot more dialogue around all that. Hope that was helpful, Scott.

Scott Siefers

Yes. That's terrific. Bill and Mike, thank you guys very much.

Bill Rogers

Great.

Operator

The next question comes from Ebrahim Poonawala with Bank of America. Please go ahead.

Ebrahim Poonawala

Good morning. I just wanted to follow up on Bill. I think I heard you a couple of times call out, in particular, New Jersey, Pennsylvania, Texas.

Just talk to us in terms of the growth opportunity set 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.

Bill Rogers

Yes. 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 of 80%, 70% kind of activity.

In those markets alone, sort of 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 dialog 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 could still hear concerns around talent attrition in your markets 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 [indiscernible] markets.

Bill Rogers

Yes. I mean, you see that in the results. 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 of 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

Great to hear. Thanks, Bill.

Operator

The next question comes from Matt O'Connor with Deutsche Bank. Please go ahead.

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.

Mike Maguire

Hey, 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'll be an opportunity for us to maybe update our perspective if that's appropriate. On the Pref, 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.

Mike Maguire

Yes. I think that's a perspective that the rule will evolve. Again, I think it would be difficult to speculate on all the various other impacts.

There's been a lot of discussion around the impact on RWA inflation or otherwise. And -- but if you just were to think about OCI 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 adds this quarter or last two quarters.

Mike Maguire

Yes.

Matt O’Connor

So what's the current duration and the [indiscernible].

Mike Maguire

Yes. The -- obviously, the AFS portfolio is 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-4s.

Matt O’Connor

Okay. Thank you.

Operator

The next question comes from Erika Najarian with UBS. Please go ahead.

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, but -- 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 Truist 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.

Bill Rogers

Yes. I mean you sort of went a couple of different attributaries there. But look, overall, when I said this, I think, in the answer to other question, I mean, the talent that we're investing in our 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 Beau, departed our Company. I mentioned earlier, great career. He 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 opportunities to grow and some more opportunities to expand their toolkits. 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 toolkits. We have great leaders, who really understand and know and how to attract and retain really, really strong talent.

Mike Maguire

And Erika, 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 in, 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 through from 12/31/24 to 12/31/25. In terms of [indiscernible] traditional changing you have.

Mike Maguire

Yes. Yes. It's -- so we're $45 billion in the fourth quarter.

That stays relatively consistent in the first quarter. So I think it ticks up maybe we've got another $1 billion effective. In the second quarter 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, Erika, between kind of $46 billion and $60 billion. I think we see a touch more come on in the third, but -- and then $30 billion of payers are on for the whole year. So we're net $15 billion effective receive Q1, and think of it as net 30 receive effective Q4.

Erika Najarian

Got it. Thanks.

Mike Maguire

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 2025, our expectation is it will actually be relatively stable because as you have more of the receivers coming on in kind of the mid 3%s, you're -- again, at least with our baseline view is 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 2025, and it's really not very different than what we saw in Q4 of 2024.

Erika Najarian

Thank you. Got it.

Operator

The next question comes from Betsy Graseck with Morgan Stanley. Please go ahead.

Betsy Graseck

Hi, good morning.

Bill Rogers

Good morning, Betsy.

Betsy Graseck

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, Q-Q, 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.

Mike Maguire

Sure. For the quarter, the decline is just -- we had 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 through -- after the increase in the first to begin to smooth out for the rest of the year.

If you look at 2025, 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 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.

Betsy Graseck

And embedded within [Multiple Speakers].

Bill Rogers

Yes. Just to maybe add to that, Betsy. I mean, so, 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 in expenses. So this is an environment where we continue to have efficiencies against the investment, all oriented towards that consistency and the efficiency ratio and creating and sustaining positive operating leverage. So we don't want this to be a one-time 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 at 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%. I mean, that was --.

Bill Rogers

A lot of these -- think about the strategy we've talked about, a lot of these are investments that we've already made. So if you think about in the merger, so we created a lot of opportunities in terms of new products and new capabilities, existing 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 in markets and places, where we've already invested and it's leveraging that investment. So it has by its nature high return sort of high ROA kind of components to it and really good leverage.

Betsy Graseck

Great. Thanks so much.

Bill Rogers

Yes.

Operator

The next question comes from John Pancari with Evercore. Please go ahead.

John Pancari

Good morning.

Bill Rogers

Hey, John.

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, like, do you have flexibility if revenue is weaker given this guide where it stands now. Thanks.

Bill Rogers

Yes. 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 Banking is one we talked about, has a 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 and the toggle on the downside.

I mean, we have a commitment to positive operating leverage. So if we -- Mike talked about earlier. If we toggle on the upside, that's one opportunity. And if we have to toggle on the downside, we know how to do that as well.

Mike Maguire

Yes. John, I would just add. I mean we're hiring talent across the board right now.

So whether it'd be in wealth or 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, where 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 2024 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 2024 and move into 2025.

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 in 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.

Bill Rogers

Yes. 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're, 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

The next question comes from Saul Martinez with HSBC. Please go ahead.

Saul Martinez

Hey, good morning, guys. First of all, 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.

Mike Maguire

No, you've got it right. The -- maybe a couple of things on that. The NII guide in 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 2024, some temporary fee income and then the sale of Sterling, which is in the 2024 numbers, but, of course, wouldn't be in the 2025 numbers, that does impact that headline fee income outlook, right. So we're guiding with those items in 2024. So I think if you were to exclude those items that won't reoccur in 2025, 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 core 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 6.36%, which is higher than the portfolio yield. It seems to imply some of the higher-margin loans are rolling off.

But what is the -- what's -- how do we think about the new money rates on that $42 billion. What kind of an incremental spread are we getting there.

Mike 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 run-off 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 run-off 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. Thank you.

Operator

Due to time constraints, please limit yourself to one question. The next question comes from Mike Mayo with Wells Fargo. Please go ahead.

Mike Mayo

Fine. So, 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 I was surprised to hear 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.

Bill Rogers

Yes. Mike, you saw some of the deposit growth this quarter and some of the momentum that we see on that. So we're in a -- when you do a merger, we've exceeded what people have told us sort of how the 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, so why do you mention Texas and why do you mention these other markets.

They're 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 just -- it's just a function of trying to paint the whole picture of what Truist looks like.

Mike Mayo

I guess just -- from your decades of experience, Bill, I mean, are the banking battles heating up. It just seems like everybody is 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 rationale.

Bill Rogers

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 -- I think -- 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 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.

Bill Rogers

Yes. Thanks, Mike.

Operator

The last question today comes from Gerard Cassidy with RBC. Please go ahead.

Gerard Cassidy

Hi, Bill. Hi, 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 -- kind of curious on how you're looking for the growth opportunities.

Bill Rogers

Yes. Gerard, just -- 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.

Bill Rogers

Well, thanks for that. 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 earnings call.

If you have any additional questions, please feel free to reach out to the Investor Relations team. Thank you for your interest in Truist. And we hope you have a great day.

Betsy, you may now disconnect the call.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.