Truist Financial Corporation (TFC) Earnings Call Transcript & Summary

Greetings, ladies and gentlemen, and welcome to the Truist Financial Corporation Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this event is being recorded. It is now my pleasure to introduce your host, Mr. Brad Milsaps.

Thank you, Rocco, and good morning, everyone. Welcome to Truist's Second Quarter 2026 Earnings Call. With us today are our Chairman and CEO, Bill Rogers; our CFO, Mike Maguire; our Chief Risk Officer, Brad Bender; as well as other members of the Truist senior management team. During this morning's call, they will discuss Truist's second quarter 2026 results share their perspectives on current business conditions and provide an update on our outlook for 2026. 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 required reconciliations to GAAP. With that, I will turn it over to Bill.

Great. Thanks, Brad, and good morning, everyone, and thank you for joining our call today. Before we discuss our second quarter 2026 results, let's begin as we always do with purpose on Slide 4. At Truist, our purpose is to inspire and build better lives and communities. And that purpose continues to guide how we serve our clients, support our teammates and create value for our stakeholders. We also want to recognize that purpose is fueled by performance and committed leadership. During the second quarter, we announced that Mike Lyons will become Truist's next President and Chief Executive Officer on September 1. At that time, I'll transition to an Executive Chair role until my planned retirement in April of next year. As a founder of Truist, I am really excited about this important next chapter in our success journey. Mike is an accomplished and respected financial services leader with a proven ability to drive growth, improve performance and create long-term shareholder value. Throughout the selection process, it was clear to our Board that he's the right leader for Truist's future. He'll be leading a strong and experienced senior team that's helped build our momentum and position the company for continued success. Mike recognizes the strength of our franchise and the significant opportunities ahead. He shares our commitment to building a high-performing company by serving our clients and teammates improving profitability and returns and delivering superior outcomes for our shareholders. I look forward to supporting Mike and our leadership team over the coming months to ensure a smooth transition and build on our momentum. So now let's turn to the results on Slide 5. First, I want to step back and highlight what these results say about the progress we're making across Truist. Over the last several quarters, we've been clear about the actions we're taking to drive stronger returns, improve efficiency and allocate capital to the highest value opportunities across the company. We continue to make deliberate choices about where we grow, where we invest and how we optimize our balance sheet. While some of these choices may create near-term trade-offs and individual growth metrics, they're producing the outcomes we intended and are driving stronger profitability and improved financial performance. Importantly, these results demonstrate that we're making meaningful progress in building a more earnings efficient and more capital efficient growth company. As you can see on Slide 5, our results show significant improvement in our profitability and returns. For the second quarter, we delivered net income available to common shareholders of $1.5 billion or $1.23 per diluted share, representing a 37% increase over the second quarter of 2025. During the quarter, we added new clients, deepened existing relationships and grew profitably in the businesses and products where we've chosen to focus. Along with our expense discipline, this contributed to more than 300 basis points of year-over-year positive operating leverage. In addition, combined with disciplined capital deployment, our return on tangible common equity improved 310 basis points year-over-year to 15.4%. These results reinforce that we remain on track to deliver our full year profitability and return objectives and provide confidence in our ability to sustain this level of performance over time. So before I hand the call over to Mike, I'd like to highlight how our strategy is translating into tangible results across our business segments and our digital strategy, and we have that on Slide 6 to 7. So let me start with Consumer and Small Business Banking. CSBB delivered another solid quarter that was consistent with our expectations and strategy to drive profitability improvement across the enterprise. Consumer behavior remained resilient during the quarter with stable liquidity, spending and credit trends that remain within our expectations. Average Consumer and Small Business loans were up 2% versus the second quarter of 2025 and as we slowed production in certain less strategic and less profitable consumer categories, which Mike will discuss in more detail later in the call. Average nonmaturity Consumer and Small Business deposits increased 2% versus the second quarter, driven by a 39% increase in new-to-bank deposit production. Average deposits per client were higher across all income segments but we did see continued client demand for higher-yielding deposit categories. Premier Banking, which serves clients with $100,000 to $1 million in combined deposits and investments and represents more than half of CSBB deposits was again a source of strength. This business delivered a 20% year-over-year increase in new deposit production balances, a 23% increase in adviser productivity and a 9% increase in financial planning activities. Our investments in Premier are also creating meaningful opportunities across the company with referrals from CSBB to Wealth Management increasing 15% over the first half of 2025. As you can see on the slide, digital also continues to be a key growth engine. Active mobile users increased 4% year-over-year to $5.4 million, while digital transaction volume increased 7% to 93 million transactions. Approximately 85% of client logins now occur through mobile, underscoring the increasing central role our mobile capabilities play in serving clients. Increasing digital engagement is not only improving the client experience, but also strengthening client economics. Digital active clients generate more revenue and higher profitability than nondigital clients. while greater self-service adoption continues to improve efficiency across the franchise. During the quarter, clients engaged with Truist to assist nearly 2 million times up 60% year-over-year, reflecting growing adoption of self-service capabilities and our continued investment in the digital client experience. Taken together, these results demonstrate our strategy to improve profitability, strengthen the returns and allocate capital towards the highest value opportunities across consumer and small business banking. Now turning to wholesale on Slide 7. In the wholesale, we also delivered another strong quarter with continued momentum across loans, deposits and fees, while maintaining a disciplined focus on relationship returns and capital efficiency. Over the past year, we've significantly expanded our client base and strengthened existing relationships across the wholesale franchise, driving broader adoption of our lending, deposit, payments, wealth management and capital markets capabilities. This deeper engagement is translating into higher revenue per client, a more attractive revenue mix and improved relationship profitability driven by an increasing share of revenue coming from noncredit sources. Average wholesale deposits increased 6%, excluding the impact of certain large M&A-related deposits in the second quarter of last year, driven by broad-based deposit growth across client segments heavily tied to our focus on driving payments and liquidity solutions. Middle market deposits, an area where we've invested heavily grew 12% year-over-year, driven by 9% growth in our legacy markets and 27% growth in expansion markets such as Texas, Pennsylvania and Ohio. Average wholesale loans increased 8% compared with the second quarter of 2025, reflecting broad-based momentum across our industry banking, middle market and commercial real estate teams as we continue to prioritize high-quality relationship-driven growth. Wholesale fee income continues to outpace balance sheet growth led by investment banking and trading and wealth management reflecting strong client activity, improved deal economics and continued momentum in our wealth franchise. Advisory revenue increased 27% year-to-date including strong growth across equity capital markets, M&A advisory and financial risk management. Overall, we remain encouraged by the breadth of growth across the franchise and the continued progress and building a more profitable and capital-efficient wholesale business. With that, let me turn it over to Mike to discuss our financial results in more detail.

Thank you, Bill, and good morning, everyone. So as Bill mentioned, we reported second quarter 2026 GAAP net income available to common shareholders of $1.5 billion or $1.23 per diluted share. Earnings per share increased 37% versus the second quarter of 2025 and 13% versus the first quarter of 2026. Revenue increased 2.2% linked quarter due primarily to higher noninterest income. Revenue increased by 5.5% versus the second quarter of 2025 due primarily to higher noninterest income, led by growth in investment banking and trading and wealth management income. GAAP noninterest expense increased 2.4% versus the first quarter of 2026, primarily due to higher personnel expense and professional and outside processing expenses. Noninterest expense increased 2.3% versus the second quarter of 2025, which helped drive 320 basis points of year-over-year positive operating leverage. Asset quality metrics remained strong and our CET1 ratio increased by 10 basis points linked quarter to 10.9%. Next, I'll cover loans and leases on Slide 9. Average loans held for investment increased $2.1 billion or 0.7% linked quarter to $329 billion driven by 1.3% growth in average commercial loans partially offset by a decline in average consumer loans. End-of-period loans increased modestly linked quarter, reflecting slight growth in both commercial and consumer. As a reminder, we expected 2026 loan growth to be driven primarily by commercial and other consumer categories with slower loan growth in residential mortgage and indirect auto. Moving to deposit trends on Slide 10. Average deposits increased 1.5% linked quarter driven by growth in all deposit categories while year-over-year growth was 1.1%, driven primarily by growth in interest checking. We continue to see healthy client deposit activity. However, deposit mix tends to be -- trends are being pressured by elevated rate-seeking behavior and migration into higher rate products. Average interest-bearing deposit costs increased by 1 basis point linked quarter to 2.10% and average total deposit cost increased 1 basis point to 1.56%. As shown in the chart on the bottom right hand side of the slide, our cumulative interest-bearing deposit beta decreased from 46% to 45%, and our total deposit beta decreased from 31% to 30% on a linked quarter basis. Moving to net interest income and net interest margin on Slide 11. Taxable equivalent net interest income increased 0.6% linked quarter or $23 million primarily due to the impact of 1 additional day in the second quarter and higher earning assets, partially offset by lower loan spreads. Our net interest margin decreased 4 basis points linked quarter to 2.98%, driven by slightly higher deposit costs lower loan spreads and a slightly larger balance sheet. As shown on the right-hand side of the slide, we now expect net interest income to increase approximately 1% to 1.5%. Our updated outlook reflects actions we have taken to improve profitability as well as certain market dynamics. First, we are continuing to optimize less strategic and lower return lending portfolios that offer limited relationship potential which has the effect of reducing NII and net interest margin, but improves ROTCE. Second, we now expect lower loan spreads than we anticipated based on 2 factors: One, we are reallocating capital from higher-yielding consumer loans into higher quality but lower yielding commercial loans where we expect to drive attractive relationship returns over time; and two, we're seeing continued broad-based market-driven compression of loan spreads. The third headwind is our outlook for a less favorable deposit mix and therefore, higher rate paid than we previously expected. These headwinds are partially offset by the benefits we expect to get from a higher medium- and long-term interest rates. As Bill discussed earlier, some of the actions that we are taking to improve profitability and returns involve trade-offs across individual metrics. For example, during the second quarter, we discontinued the origination of marine and recreational vehicle loans and we significantly reduced originations in several other less strategic and less profitable consumer lending units such as prime and nonprime auto. These actions are expected to reduce 2026 loan production across these portfolios by approximately 40% relative to 2025 production levels. Many of these portfolios are accretive to net interest income and net interest margin, but significantly dilutive to our long-term ROTC objectives and less strategic to our client-focused business model. While these actions may reduce near-term net interest income growth, they improve the overall profitability and the capital efficiency of our balance sheet, which was evident in the second quarter. We'll continue to evaluate similar actions that will enhance returns and improve capital efficiency, including further optimization of lower return and less strategic portfolios. Finally, as you can see on the right-hand side of the slide, we did update our fixed asset repricing outlook and our swap disclosure. While expected runoff in our fixed-rate loan portfolio remains largely unchanged, we do expect lower replacement volume due to the actions I just described, which is reflected in our updated NII outlook. Turning now to noninterest income on Slide 12. Noninterest income increased 5.9% compared with the first quarter, reflecting strong growth in other income primarily driven by higher income from certain equity investments. Compared with the second quarter of 2025, noninterest income increased 17%, driven by strong performance across several of our fee-based businesses. Investment banking and trading revenue increased 72%, benefiting from stronger client activity, improved deal economics and continued momentum across our capital markets platform. Wealth management income increased 8%, supported by continued growth in client assets, adviser productivity and financial planning activity. While card and treasury management fees grew only modestly, underlying business trends remain encouraging as we see healthy client pipelines and we continue to make investments in both products and talent. Consistent with the trends Bill discussed earlier, fee income growth continues to outpace balance sheet growth, reflecting deeper client relationships and a more capital-efficient revenue mix across our company. Next, I'll cover noninterest expense on Slide 13. Expense discipline remained a key focus during the quarter as we continued balancing investment in the business with our commitment to improving profitability. On a linked-quarter basis, noninterest expense increased 2.4% primarily reflecting higher incentive compensation associated with stronger business performance. Compared with the second quarter of 2025, noninterest expense increased 2.3% driven largely by higher personnel expense, partially offset by lower professional fees and outside processing costs. Importantly, year-over-year expense growth remained well below revenue growth contributing to our positive operating leverage. We continue to identify efficiencies across the company that can be redeployed into growth initiatives and the highest return opportunities such as growth in revenue-producing teammates, new products and capabilities that can improve the client experience. In addition, AI is becoming an increasingly important contributor, helping improve productivity, enhance client experience and create additional capacity that can be invested in high-value business opportunities across our franchise. Next, I'll discuss asset quality on Slide 14. Asset quality remained a source of strength this quarter with stable credit performance and continued improvement in several key portfolios. Net charge-offs declined 11 basis points linked quarter to 50 basis points, reflecting lower losses across those portfolios. Compared with the second quarter of 2025, net charge-offs were relatively stable. Our provision for credit losses totaled $395 million, modestly below net charge-offs of $414 million, resulting in a 2 basis point linked-quarter decline in allowance for loan losses to 1.51% of total loans. The modest reduction in our ALLL was primarily driven by the resolution of several commercial and commercial real estate problems -- credits during the quarter and continued improvement in sectors like office and multifamily. Nonperforming loans held for investment increased 1 basis point linked quarter to 51 basis points of total loans as higher indirect auto problem loans were partially offset by improvement in the commercial portfolio. The increase in indirect auto nonperforming loans was primarily due to a change to the nonaccrual criteria in our regional acceptance nonprime auto business, as we discussed last quarter. This does not reflect deterioration in underlying credit trends as lifetime cash flows are not expected to change. However, as these loans move to nonaccrual status, subsequent payments are applied to principal and no longer recognized as interest income. Turning to capital now on Slide 15. Our CET1 ratio increased 10 basis points linked quarter to 10.9% despite returning more than 100% of earnings to shareholders through share repurchases and through our common dividend. The increase in our CET1 ratio reflects strong capital generation and the benefits of balance sheet optimization efforts that are improving our RWA density. During the second quarter, we repurchased $1.2 billion of common stock compared with $1.1 billion in the prior quarter and $750 million in the second quarter of 2025. We continue to target approximately $5 billion of share buybacks in 2026. I'll now review our guidance for the third quarter and for full year 2026 on the following page. Looking into the third quarter of 2026, we expect revenue to increase 1% relative to second quarter revenue of $5.3 billion. We expect net interest income to increase by approximately 1.5% in the third quarter, primarily driven by an additional day and higher client deposit balances. We expect noninterest income to remain relatively stable on a linked-quarter basis. Noninterest expense of $3.1 billion in the second quarter is expected to increase by about 2% linked quarter in the third quarter. Turning to our outlook for 2026. We now expect revenue to increase 3.5% to 4% compared with our previous outlook for 4% revenue growth. This change primarily reflects the factors discussed earlier, which reduced our expected net interest income growth to 1% to 1.5% from our previous outlook of 2% to 3%. However, we are increasing our outlook for noninterest income growth to approximately 10% versus our previous estimate of high single digits, reflecting continued momentum across our fee businesses. We continue to expect GAAP noninterest expense growth of 1.75%, net charge-offs of 55 basis points and an effective tax rate of 14.5% as well as share buybacks of $5 billion for the year. Although we modestly reduced our revenue guidance, we remain confident in the EPS trajectory that we expressed earlier this year and our ability to drive ROTCE for 2026 above 14%. Now I'll hand it back to Bill for some final remarks.

Thanks, Mike. As we close, I want to reiterate the message I shared at the beginning of today's call. Across our company, we're making strategic decisions about where we grow, where we invest and how we allocate capital to improve performance and strengthen returns. The results reported today demonstrate that those decisions are producing the outcomes we intended. We're seeing stronger profitability and continued momentum across many of our key businesses. Just as importantly, the progress we're making reinforces our confidence in our ability to achieve and sustain the profitability trajectory outlined on Slide 17. As Mike mentioned, reflecting on that progress and our confidence in the path ahead, we now expect to deliver ROTC of greater than 14% in 2026. While we remain focused on delivering the commitments we've made, we believe those objectives represent milestones along the longer-term path of continuously improving our performance. One of the things that gives me confidence in that path is the strong alignment between our Board and incoming CEO, Mike Lyons about the opportunities ahead. Together, we share a common vision of building a company that consistently delivers stronger profitability, improved returns and long-term value for our shareholders. I want to thank our teammates for their incredible purposeful commitment, focus and dedication to serving our clients. I want to thank our shareholders for their continued trust and support. Given this will be my last call as CEO, I want to thank all of you who follow us for your focus and professionalism. So with that, Brad, let me turn it back over to you for Q&A.

Thank you, Bill. Rocco, at this time, 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 yourselves to 1 primary question and 1 short follow-up question in order to accommodate as many of you as possible on today's call.

[Operator Instructions] Our first question today comes from Ryan Nash at Goldman Sachs.

Bill, just wanted to say congrats on your retirement. It's been great working with you and learned a ton from you over the years, particularly on our trips that you'll definitely be missed. Maybe to kick it off, Bill, you talked about some of the trade-offs that you're making right now to grow the business. And it's clear you could see commercial loan growth end of period balances are down. On the flip side, you added a plus to the return target for the year. So can you maybe just expand on what's happening under the hood incrementally, maybe talk about each loan category? And how do you think about the focus on returns versus actually growing the company at this point?

Yes. Ryan, thanks. Also miss working with you. if you think about like let's start -- if we break down the loan categories, C&I, if you look sort of year-on-year on quarter is up just under 8%. So the places where we've continued to focus and have intentionality have good growth characteristics. And then if you break out consumer and you look at the areas like HELOC and then you look at other consumer areas like Sheffield and like Service Finance, those have also continued to grow, and we have good production in those capabilities. The other places like indirect auto, were down actually quite significantly and out down significantly in production. Our focus is on relationship based, things that also clear our profitability hurdles, so establishing these targets has really sort of come all the way through in the company. I mean I'm really, really proud of the team that they've embraced where we want to go from a profitability standpoint, clarity around strategy, sort of full alignment in the things that are important to us. And then within those categories within the commercial book, highly diversified, really good focus, really good growth in the middle market area, for example, where we've had a focus, good production, good pipelines in those areas. So if we think about just as the loan component of that, I think our team is doing a good job staying focused on the things that are accrete over time. And to your other question, I mean, it's also setting the stage and setting the platform for growth. So every incremental dollar that we add to the company on a growth platform that just has a higher return and higher earnings efficiency and capital efficiency going forward. So I would say we're not conceding long-term growth in terms of repositioning, but I think we're setting the table for the efficient growth that comes forward. Does that help?

Yes. No, that's great. And maybe if I can ask a follow-up for Mike. So Mike, you took down full year NII expectations. Maybe just unpack a little bit what's including for loan growth, the exit margin? And what are the updated thoughts on deposit costs from here?

Sure. Yes. I mean, maybe just to reiterate some of what we said already in our prepared remarks is the good news is while we do see some pressure on NII for the year, we do feel quite good about fees being in sort of the 10% area year-over-year credit this quarter looked great. and we feel good about from an expense perspective, feel good too. And so I think from a bottom line perspective, feel like we've got really nice momentum. And obviously, Bill just talked about some of the progress that we're proud of in terms of the ROTCE. The NII piece, we mentioned there's sort of 3 main headwinds. Bill mentioned when I mentioned the marine and rec vehicle business, we actually exited during the quarter. prime auto is down. We mentioned across those portfolios and a few others were down on a production basis, call it, 40% year-over-year. That's $7 billion to $8 billion of annual production that's come out of the business in 2026 versus 2025. And so -- and in our -- from our perspective, not regrettable, right? I mean those are trade-offs we're making to improve profitability. As you think about the spreads piece, there are sort of 2 components there as well, right? There's the piece that we're doing that's not necessarily happening to us. So we have been remixing and reallocating capital from some of these less strategic, lower -- less profitable portfolios into C&I. That's going to result in a lower yield typically, but we believe a higher return longer term and be the right thing for the company over time. Even within wholesale, we're seeing some remixing from into more high-grade sort of investment-grade type credits. And so that's also having an effect. So loan spreads being pressured perhaps by some conscious choices we're making. And then we do see broad-based market compression. We came into the year with an expectation that we might see some kind of a bounce off the bottom on credit spreads, maybe to the tune of 10 to 15 basis points, which would have perhaps felt a little bit conservative relative to some of what was being discussed in the industry at the time. If we hold spreads just constant from here, that would result in spreads for us at least year-over-year being down 5% to 10% versus the upside of 10% to 15%. So that's been a pretty important headwind for us and we've incorporated that into our outlook. And we do reprice quite a few loans, as you can imagine, it's beyond the fixed rate loans, but we repriced a pretty sizable portion of our floaters every quarter as well. So that's been an important factor. And then of course, deposits. We've been -- we learned a lot about deposits in the second quarter of every year. There's just seasonality around taxes and bonuses as we got deeper into the quarter and closed out June and look forward, it just became clear to us that there is just much more client preference, inertia around higher rate products. And so we're seeing that remix. We've seen some of it year-to-date, and we have an expectation that that's going to continue. And so we've incorporated that into our outlook as well. And of course, all those 3 factors are offset in part by higher belly of the curve, which does help us on the fixed rate asset repricing side. So that's the headwind on NII. Again, maybe just to finish where I started. The good news is while the components have moved around a touch, we still feel quite good about the bottom line. I think you asked about margins, I'll touch that quickly. we did see a touch of pressure on net interest margin linked quarter. About half of that was just the sort of composition of the earning asset growth. We saw bonds in cash, maybe $3 billion higher. That's obviously dilutive to our net interest margin. And then on the loan and sort of deposit funded growth, you saw a basis point higher on deposits and 3 basis points worse on loan yields. Some of that's the swaps coming on as well, impacting loan yields. But that's what took us down, the 4 basis points. We would expect that to modestly improve throughout the course of the year, modestly improve as we get the benefit of fixed rate asset repricing. Maybe -- again, we still actually feel quite good about deposit balances, both in wholesale and consumer. We're seeing nice production, it's really just mix. So we actually do think that NIM will improve in the third quarter, in part based on higher client deposit balances, but not to the same degree that we would have expected a quarter ago or certainly back in January when we had a different rate environment, and there's a lot of other factors that go into it. So I think I got your questions there, Ryan.

Yes, got them all.

Our next question today comes from John Pancari at Evercore.

Bill, it's been a pleasure and all the best in retirement. First, on the balance sheet optimization and NII. In your lowered outlook around NII, how much of that loan book rationalization that you cited is reflected in the guidance -- in that guidance? Is there more of that could impact next year's expectation as this continues to play out? And maybe also what other rationalization as possible? I know you mentioned in your prepared remarks that you're continuing to evaluate the portfolio.

John, the changes, the retrending that we've made around production balances that we mentioned as well as the exit of marine and rec are in our outlook for this year. We haven't provided and don't plan to provide guidance for '27 at this point. But in terms of what else, I would just say it's a continuous search and opportunity to make sure that we're allocating capital in the absolute most efficient way. And by the way, it's not entirely in consumer, right? There are things that we've done and we'll continue to do in wholesale around client selection, around pricing, around product design, rebalancing that are all intended to create more profitability and efficiency. So there's nothing else to say on that for now other than it's a really important initiative of ours to continue to deliver against this ROTCE improvement. And we're going to look, we're going to make smart choices. We're going to be guided by, hey, we a, what fits our strategic eye in our business model and then to profitability.

Okay. Now I know you talked about the ROTC improvement, and you mentioned confidence and above the 14% level for '26, how do these actions and your updated thoughts on updated trends in general impact your 2027, 15% expectation and in the long term, 16% to 18%. And then just one other thing kind of back to Ryan's question. If you could just update us on your loan growth and deposit growth expectations, your balance sheet assumptions underneath the NII outlook for this year, that would be helpful.

Yes, Mike. I'll take the first part, John. So yes, on the ROTC expectations for the future, this quarter, you had some unique characteristics. And keep in mind, this track is not linear, right? So quarter-to-quarter, it might change. Obviously, we have a lot more confidence in this year as we get to more than half a year through to say we'll be at 14 plus. I just don't think it's the time to change the established targets going forward. That being said, I think we certainly feel more confident in our path to a higher-performing company. So today, changed the guidance for where we are for this year. But stay on that path to higher performance and want to retain the right level of flexibility to achieve those numbers.

And I'll just add to that a little, John. I mean, obviously, we were really pleased to be in the 15% area for the quarter. It's not a linear path. We do have some factors -- as an example, you guys know this you model it well. We have some preferreds that are semi versus quarter-quarter payers. And so you do have heavier preferred in 2 of the quarters and lighter and 2 others. So that's not to say that we don't feel like we're going to be on an upward trajectory but it's not going to be a linear path, and you guys know that. In terms of deposits and loans, we still expect to see loan growth this year. Obviously, we've delivered -- sorry, pardon me, deposit growth this year. What we're seeing is low single-digit deposit growth, call it, 3% area, and this is an annual view. And just mix is what we're keeping a really close eye on. So you've seen DDA, for example, remix down from maybe, call it, 27-ish percent at the beginning of the year, maybe that resembles something closer to 25% by the end of the year and hopefully stabilizing from there. From a loan perspective, I think we said 3% to 4% earlier this year. We're still on track for that, probably high side of that. But the bulk of that, and Bill mentioned that is going to be on the C&I side, whereas consumer will be closer to flat, maybe plus 1%. So that's what's in our outlook, John.

And then I mean, Mike, to add to that. I mean, Mike mentioned this, the production engines are working. So the upfront side is working on the consumer side, our premier production for advisers up 15% on the deposit side. I talked about the loan side on the Service Finance the quality of the production is really, really high. So the quality of the wholesale deposit production is relationship based. So it's not sort of just rate base. So these are clients in which we have expanded our relationship with. We have payments related discussions with those in terms of increasing for the future. So we do have a mix opportunity, but the good news is the production engine is working, and we're adding high-quality, relationship-oriented sort of operating type deposits.

And our next question today comes from Ken Usdin with Autonomous Research.

Bill, once again, best of luck to you in the future. I was wondering if you could touch a little bit more on the deposit competition rate chasing that you mentioned in your prepared remarks. Just can you talk about just where that's coming from. Is it any different than what we've seen? Or is it just the burden of a little bit from the higher for longer environment?

Yes. I mean I think what we've seen in deposit migration to higher yielding is more client behavior than competitive pressure in fairness. I mean, I think this is a trend that we've seen that's continued. We're in a rate cycle where I don't think that's particularly unusual. Competitive environment still is highly competitive, and we're the most competitive we've ever been in terms of product and capability, and that was my comment earlier is the production engines are working well and the client expansion and the opportunities that we see are working well. I think this is just a function of client behavior.

Okay. And maybe one for Mike. Mike, would you mind just walking us through just that lingering amount of swaps that has to come on in terms of the book that's not active and the timing of kind of when the rest of that should be in the run rate?

Yes. No problem, Ken. So maybe I'll take you back to the beginning of the year and walk you through the year because as you know, this can change. In the first quarter, we had -- just -- I'll give you the receivers and maybe give you the payers too, for the offset, but we were $50 billion effective in Q1 with $24 billion of pairs. So we call it net receive $26 billion. In this most recent quarter, we were $63 billion effective, so call it plus $13 billion from Q1 payers relatively constant. So net effective $40 billion or so. That steps up on an effective rate -- effective basis for Q3 to about $80 billion and then up to $85 billion in Q4. And the payers are pretty much, call it, $23 billion for the rest of the year. So as those come on, obviously, depending on where we are from a SOFR perspective, that will add some pressure and that's incorporated. You'll see that in the loan yields. And that's the receive rate there call it, [ $340 million].

And by the end of the year, we're kind of there. I know you'll continue to work the portfolio just depending on where [indiscernible] go, but...

It wasn't a very active quarter for us in terms of any swap activity we did, just like we did in the first quarter, we took a small handful and deferred the effective start dates. I think we peak in Q1 of '27, and that's, call it, high 90s. And then I think from there, would begin to decline.

And our next question today comes from Erika Najarian with UBS.

Congratulations, Bill. I hope you enjoy your retirement. I still remember meeting you at SunTrust, and you've been great. So I hope you enjoy your retirement. You were our Chairman of the Board when you decided to name Mike Lyons as your successor. No, obviously, he was inside of P&C for some time and then had a brief stint at Fiserv. You mentioned what you found in him in terms of like his focus on growth what other characteristics did you particularly you and the Board like about Mike in terms of taking this company to the future that you see and maybe speak a little bit about sort of how you think he's going to frame the technology investments and potential challenges at the firm. And does he believe that this is a 16% to 18% ROTCE company over the medium term.

Yes. Thanks, Erika. I mean, succession planning is the most important work that our Board does. So put that in context. And we've been at this for well over a year, thinking about my time line, but more importantly, thinking about like what's the right time for the company. And are we hitting on cylinders and is this the right time for a transition. And then we spent a lot of time saying about what is the future leader of this not only company but this industry look like? And we did a lot of profile work against that. And I think that future leader not only has a lot of understanding about sort of the core businesses and business that we're in. But even as you noted, much more knowledge about technology and payment systems and where the proverbial puck is going and maybe where the ball is going now that we're in World Cup time. But -- so those were the criteria upon which we evaluated how we wanted to think about things. And I think Mike has said that like perfectly. Strong commitment to performance, great track record, really strong knowledge of the payments business probably PhD course and the technology side at Fiserv as well. So having a chance to look across a lot of spectrum and see what others are doing experience as a CEO. And then being a purposeful leader. I mean -- so remember, that's an important part of our context as well as someone who really cares about the communities we serve and cares about the teammates and focuses on our purpose. As it relates to the specific targets, I can speak for Mike and the Board, I think, as I did in my prepared comments, our goal is to be a high-performing company. So -- and I think 16% to 18% reflects that journey. So Mike came in here to lead and run a high-performing company, and I don't think there'll be any doubt about that. relative to the investments that need to be made in the journey and the place that we go, we'll have the requisite flexibility to think about how to achieve efficiencies and how to invest. I think today, we've got a really good platform of Discovery, give a lot of credit to Mike Maguire of building a platform such that the dashboard will be very clear to Mike. It won't be confusing in terms of where the opportunities are and here were to invest for the long term. But look, he's got a lot of incredible strong qualities. But look, also, he's got a great team. You can see the results. and a team that's deep. So the succession planning is not only at the CEO level, but it runs all the way through the company. So we've got a deep team sort of ready to go, fired up and everyone's committed running a high-performing company and achieving what we all see is not only the potential but the opportunity for Truist.