Truist stock drops as it wrestles with rising deposit costs
Some of the country's biggest regional banks said Thursday that they attracted more deposits during the second quarter but paid more for them, eating into a key measure of profitability.
Truist stock (TFC) dropped 7% after the Charlotte, N.C.-based bank released its numbers. It also revised down its revenue guidance for the full year by 1%-2%, citing lower net interest income, slower loan growth, and lower investment banking revenue.
"We're clearly at an inflection point in the growth rate. So the growth rates kind of changed materially," CEO Bill Rodgers told analysts.
Truist’s deposits did rise slightly from the first quarter and exceeded analyst expectations, but the cost it paid on those deposits rose 39 basis points.
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That caused its net interest income to fall 6% from the first quarter, which was worse than expected. Net interest income measures the difference between what banks earn on their loans and what they pay for their deposits.
Truist is the nation's sixth-largest bank by assets, according to Federal Reserve data, but is still much smaller than coast-to-coast industry giants such as JPMorgan Chase (JPM) or Bank of America (BAC).
Mid-sized financial institutions came under intense investor scrutiny following the turmoil last spring that took down three sizable banks and triggered outflows across the banking system.
That scramble pushed up deposit rates across the industry as banks scrambled for funding. Many regional banks warned that it would act as a drag on results while reducing estimates for the rest of the year.
At Cincinnati-based Fifth Third (FITB), the nation’s 17th-largest bank, deposits rose from the prior quarter and the year-ago period. Its earnings per share, however, missed expectations. Its net interest income did rise but the bank trimmed its full-year forecast range.
"We're going to always plan around a more conservative outcome, because if we're wrong, everybody does well and if we're right, we're better positioned to deliver stable earnings," said CEO Tim Spence.
Its stock was up 2.7% Thursday.
Key (KEY), a Cleveland-based bank that is the 21st largest in the US, reported net income of $287 million, down 46% from a year ago and 8% from the last quarter but slightly better than what analysts feared.
Total deposits rose slightly from the previous quarter and were down slightly from a year ago. Revenue and net interest income fell 11% from a year ago to $1.6 billion and $986 million, respectively.
Its stock rose 4% Thursday.
One other regional bank reported results after the market close. Capital One (COF), based in McLean, Virginia, said its $1.4 billion in profit was down 30% from a year ago. That beat consensus expectations.
Its net interest income fell 1% from last quarter while deposits declined by 2%.
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