Truist Financial Corporation (TFC) Earnings Call Transcript & Summary

Okay. We're going to get started here. And next up, I'm pleased to have with me Bill Rogers, the President and COO of Truist. I told you I was going to get through it and we missed you last year so -- but then...

I think I had an excuse.

Yes, your life changed pretty radically just a week before our conference with the announcement of the BB&T SunTrust merger. And so it did answer a lot of questions as to why SunTrust had canceled out of the conference. So I will say we are very glad to have you back here today.

Glad to be here.

We are going to run this as a fireside chat, and I will compliment you on your Truist purple tie and the Truist purple ties of your team. So with that, let's start by just talking about your current role and how -- where you're spending your time in Charlotte.

Sure. I'm 3 months into my current role. So and I would say, right now, my answer is probably the same answer that Kelly is giving and all of our executive leadership team is we're spending a lot of time together. And we have, over the last year, we're 1 to 2 times a week, full-time collaboration, fantastic teamwork. Doing all the integration, strategic, all the stuff. So in a lot of ways, what I'm doing is very similar to what everybody else is doing on the executive leadership team. I think as time goes on, I plan to spend a little more time on technology, a little more time on innovation, a little more time on workforce of the future. Get a chance to do a little more client work, sort of checking in, making sure we're going. And then we're doing -- right now, Kelly and I had done 22 town halls. We're going to do 40. We've been in front of 10,000 teammates. We'll hit 25 or so when we get through and just purpose, mission, values, culture, it's just been fantastic. So a lot of my time has been on the road right now.

Okay. That makes a lot of sense. So while you're on the road and you're observing kind of not just your teammates, but where your clients' heads are these days and recognizing that we're in a sort of a -- the midst of a dynamic environment here. Can you talk a little bit about what you're seeing from the macro perspective? And maybe what you're seeing, what we're seeing and how you think about what you might see?

Yes. Maybe let's divide up the macro into 2 weeks ago and today. Today is a little uncertain, but maybe talk about 2 weeks ago, and the things that may walk outside and look outside this building, that's our market. So 1,000 people a day are moving into this market. 1,000 people are moving into the cities where we have great influence. Charlotte, as we've already talked about, and Atlanta and Charleston, South Carolina, Nashville, the whole state of Florida. I mean we're just in fantastic markets and we feel that. I mean we feel people are energized. They're investing. They're moving forward, they're leaning in. Consumer has been in good shape. Our clients are in good shape. You see that from the credit perspective. And then the last 2 weeks, to put a little uncertainty around that, I don't know where that will end up. I don't know what that uncertainty will mean. It could mean more liquidity. That would be sort of a natural reaction and that either comes in the form of better deposits or more draws on revolvers or people going out and issuing debt to create more liquidity and more capacity. But things going into this felt really positive and people are leaning in.

Okay. So in terms of what you're hearing and seeing from your customers and the financing demand that's out there today. And obviously, things have gotten a little bit more uncertain. But talk about the financing demand between loan demand and then debt capital markets and where you're seeing the differences.

Yes. I think the debt capital markets part of our business, particularly as it began the first this year, has been really strong. The markets have been wide -- we're wide open. People were issuing absolute rates for good, credit spreads were tighter. High receptivity, high yields at historically low rates and all that kinds of -- so I don't know where that will end up, but that has been really positive. And what we're seeing is the advantage of -- we have a lot of clients and the legacy BB&T portfolio that we're just introducing to our capability. BB&T had 3x the number of clients than legacy SunTrust. So the capacity to expand that base. So I don't know the deals we're looking at, the volume, probably has some idiosyncratic component to us just because we're expanding the denominator so significantly. But has generally been very positive.

Okay. So let's switch gears into the merger and the merger integration process a little bit. And then I'm going to come back to the revenue synergy concept that we just touched on. Talk about the process relative to where your expectations were.

Right. Well, first, I have very high expectations universally. So my expectations were very high about where we'd be. I think Kelly and I just saw the opportunity of a lifetime with bringing our 2 companies together culturally, financially in every other way. And so our expectations and my expectations are sort of on a more than one category. Now if you don't mind, I'll sort of go into a couple of those. The cultural part, as I just mentioned, we've been out with a lot of people. So I mean I've been eyeball to eyeball with a lot of teammates. And the level of excitement in the room, the -- you're talking about my purple tie, so I got a purple suit, one of our teammates the other day. So just the commitment, the energy and the leaning forward on the Truist side, I have really high expectations, and that has exceeded. I mean universally, people feel great. And then the data back it up, the retention of our talent has been really high, the retention of our top talent has been through the charts. Better today at Truist than it was at either legacy company before. And both ours were really high. So my expectations on the cultural side were high, and I feel really good about other where we're going there. On the financial side, the objectives of where we are in the integration, where we are on the strategy, where we are with the Board, all those components, also are clicking at a nice pace. We can talk about the -- some of the changes we talked about. But I feel good about the commitments we're making and the teamwork that's getting us where we need to get to.

Well, so you did just open the door to my next question, which is that decision to delay synergization. And because you have been talking about it, you, as in -- and various members of the Truist team have been talking about it for a couple of months preceding the merger closing. And so it wasn't all that surprising, but it has seemed to weigh on the stocks a little bit. Talk about the logic and when you knew that you needed to delay this or not needed, but it was the best choice to make.

Yes. And I'm going to probably take a little exception that we're delayed, but I understand that. Maybe sort of talk through the process. When we set this objective initially, we did that on the amount of due diligence we've done at the time, rules of thumb, things we all knew, experience, past experience, all that. And I think, laid out a reasonable plan. Now we spent a year plus sleeves rolled up, doing all the diligence, really getting at it, and a couple of things from that. One, and most importantly, is our commitment to the $1.6 billion has never been stronger. So I feel really good about that. The work on that I just -- I feel like that's an eminently attainable goal, and we'll be able to continue to invest in our company. So good solid piece there. When we started this process, Kelly and I committed that we wanted to have everybody to be proud. We wanted our regulators to be proud. Our community leaders, our teammates, our shareholders, our clients, want everybody to be proud. So we did a lot of listening. We went to a lot of community listening sessions. We did the event at the House Financial Services committee. I mean so we want to listen. And one of the things that we came back and hearing from our communities is we decided, let's wait a year until we close branches in overlapping markets. That seemed to be the area where we had -- that are expressing a lot of concern. We've built hundreds of years worth of goodwill in those communities, and we say, "Well, let's just be a little more cautious on that front." And we didn't know that when we started down the process. So that was a change, but that was a change from listening. And then the second was, we really started to understand the benefits of using some of the SunTrust systems other than being a sort of all BB&T system. That would be the easiest, that's the less risk, that would be the prior -- what most BB&T in the prior acquisitions because 99% of the time, it probably was a better system and a better choice. And in this case, that wasn't always the case. So we said, in deference to the clients and teammates and moving forward, we ought to make some SunTrust selections in here so we advance. So we have a high common denominator strategy. In fairness, we probably didn't know as many of those that we would have. We got our technology teams, client teams have all been working over the last year. So we've made some of those selections. And some of those selections then mean there's a little more resourcing. There's a little more time. And it takes longer to do that, and we want to create the capacity to do that. So there really was a client reaction and a community reaction. And we feel that the long-term payback of those decisions is -- far exceeds a quarter to 2 quarters or whatever it may be, of shifting.

Understood. Understood. So let's talk about the brand then and how you build a brand on top of the purple tie so well I mean...

Yes. Right. You have to start somewhere.

Yes, you do. You have to start somewhere. So BB&T and SunTrust, you both had strong recognizable brands. I might argue that SunTrust was kind of increasingly recognizable and recognizable nationwide, right? You were building national businesses. And I'm curious, how do you recreate this not just within your own people, I mean, you can start with your own people, but the cost of building a brand and the decision to really take this on as, in my view, a key risk to the integration process?

Right. We -- this was a key point of the discussion of a merger of equals. There are lots of decisions to make about truly being a merger of equals. And the litmus test is what we wanted is all winners, not winners and losers. And so to make the decision to take 100 years' worth of -- hundreds of years with the respective brands and put those in the middle of the table. We did not do that lightly. I -- trust me, so we got a lot of pushback from our teams, are sure we want to do this. There's a great brand, huge brand equity in SunTrust, huge brand equity in BB&T. I've just been in some BB&T markets. And trust me, there's great brand equity there as well. And to be able to put those in the middle, I think, it probably made us important a statement about how we felt about what a merger of equals was. Now it's hard to quantify what the expense was because you were going to redo half anyway, whatever you did. So it was a merger of equals. So you were going to have half the branches, you are going to -- but the thought just take 1 element, the thought of being able to take all of our branches now and reskin them, rethink how they look, how they feel so it's not just changing the sign out. It's what are all the different archetypes of the branches that we want to have. So we've sort of shifted from, "Gosh, that was a really tough decision. That was an expensive decision." to "That's an opportunity." And the opportunity to create and take this momentum from these 2 great brands we had and translate that to Truist. And internally, you're joking about my purple tie and all. But internally, oh, my gosh, our teammates are way ahead of us. They are all in, they are fired up. They're ready to go. And from the market side, it will take a while. I mean we're starting in places that -- on the national branding side, we've had a great partnership with the Braves and we'll have Truist Park. So that will be part of that intro. Some of our businesses, I'll be leading. As they convert, some of them will be leading in Truist, so we'll have an opportunity to filter that in, for lack of better words, as we go along in the next 18 months.

Okay. In terms of the revenue synergies, you touched on those at the start with the ability to bring SunTrust and its capability to BB&T in its entirety. So let's talk about that is -- that and insurance, of course, from BB&T into Suntrust. They're really the most obvious opportunities. And I realize it's still pretty early, with the merger having closed only a couple of months ago. But let's talk about how those capabilities are being kind of brought to bear in the new markets.

Yes, a couple of things. I've started to shift even from thinking about it as capabilities to executional prowess. How did you do it? Not what did you do, but how did you do it? And both companies have built incredible cultures of one team efforts, great partnerships. I call you, you return my call. These things sound simple, but they take a lot of culture. You've got to get incentive aligned. You have to have management buy in -- everybody has a set a culture of how we work. And we work on the benefit of the client. And it all starts from there. It will emanates backwards. And that exists in both companies tremendously. So I think it starts with executional prowess, and I learned a lot on the BB&T side, and I'm sure Kelly has learned a lot about some of the respective executional prowesses. And then it's what you put forth against that. So we couldn't share a specific client list during the process, but we could train. So we've spent the last year doing significant training. I can assure you the SunTrust teammates know more about insurance than you could ever imagine, because we've been able to do that, we do a lot of training. So when the starting gun went off on December 6, they were ready to go. So as soon as they changed client list, they knew what to do. They knew who to call, they develop relationships, they develop partnerships. And as we've been out -- I mean, I've just seen tremendous execution already. I guess it's all anecdotal and it will build over time. And -- but just the SunTrust teammates introducing the insurance, the great partnerships, huge professionalism, great culture, same thing on the capital market side. We're in prospects and in opportunities we wouldn't have been otherwise in heritage BB&T markets. We're bringing product specialists that didn't exist before where BB&T had an incredible at-work product, which is a huge deposit generator for that business. We're bringing that across. We've already done a couple of transactions. We've created the digital platforms to allow that to happen. So I feel great about the process. And just like the branding, whatever -- our teammates are ahead of us. They're ready. I mean they want to serve clients, that's what they live to do. And if they have more capability and more opportunity to do that, they're ready to go.

So I'm curious, you were, in my view, quite smart at the merger announcement date not to put any dollar amount target on revenue synergies because it wouldn't have been welcomed terribly warmly by the investment community, who tend to be skeptical on that front. But now you're 2 months into the actual merger having closed. You have trained your employees. Are there at least internal targets -- you may not be ready to share them yet, but I assume you've now put some quantifiable target on the potential revenue synergies here, given some really obvious opportunities?

Yes, and I'll make this little shift because it's actually part of the cultural component, is putting targets is not the way to go back. It's putting introductions and what are we doing for clients. And the outcome is what the targets are related to. So that's just an example of the difference in the cultural shifts. So have we put demands on our teammates on what we want in terms of introductions? How we're going to work this. What's the process? What are the cultural dynamics? What are the expectations? Yes. So that process is underway and have started. And we're also learning. So we don't -- we want to be careful about over or undershooting those. So we're starting with a process to being a very much learning mode. As we get through the year, there'll be more intensity around those and there'll be more clarity around those. But I don't think we're going to ever have sort of a revenue synergy number. Because I think that's a -- I think the expectation should be, if we really do our job, we're in these great markets, we're executing against those, then our top line revenue should be disproportionately benefiting from that. And I think we'd rather lean into that category rather than trying to parse it and saying 1% came from this and this many units came from that is the whole benefit of the merger showing up in the place that you want to show it up. Is it showing up in client satisfaction, client penetration, and ultimately, in the top line growth of the company?

Okay. I think that's completely fair. And you might not want to put capital markets targets on anything right now. Any house sells?

Well -- and it's the same thing with loan targets and those types of things. Because it's really about -- it's about advice targets and introductions. And if those don't result in top line growth, then you're just -- you're not doing your job there. We're not executing as we should.

Yes. You do want to incent the right behavior.

Right. And incentives have got to be part of that. It has to be team-based incentives that are client- and shareholder-focused.