# Truist Financial (TFC) Financial Model Free Excel 3-statement financial model and company analysis for Truist Financial. - Canonical: https://finamodel.com/companies/truist-financial - Industry: Banking - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/TFC.xlsx ## Model Purpose This model evaluates the equity valuation and capital return capacity of Truist Financial Corporation to help an equity research analyst determine a target price and assess the bank's earnings power following the divestiture of its insurance brokerage business. ## Company Overview Truist Financial Corporation is a top-10 United States commercial bank headquartered in Charlotte, North Carolina, formed by the 2019 merger of BB&T and SunTrust. The bank provides a wide range of financial services, including retail and commercial banking, wealth management, investment banking, and specialised lending. The company operates through two primary business segments alongside a corporate function: Consumer and Small Business Banking (CSBB), Wholesale Banking (WB), and Other, Treasury & Corporate (OT&C). Truist operates a traditional spread-based and fee-based banking business model, relying heavily on its dense branch network in the high-growth Southeast and Mid-Atlantic regions. The bank holds a strong competitive position, often ranking in the top three for deposit market share in its core metropolitan statistical areas. In May 2024, Truist completed a transformational divestiture, selling its remaining stake in Truist Insurance Holdings (TIH) for an implied enterprise value of $15.5 billion. This generated approximately $10.1 billion in after-tax cash proceeds, which the bank used to execute a strategic balance sheet repositioning by selling $27.7 billion of lower-yielding investment securities and reinvesting the proceeds to improve future net interest margins. ## Revenue Deep Dive ### Net Interest Income (NII) - **Segment name:** Net Interest Income (Taxable-Equivalent Basis) - **Revenue driver formula:** Average Earning Assets x Net Interest Margin (NIM) - **Historical growth rate:** Highly variable based on the Federal Reserve interest rate cycle; recently stabilised after a period of compression. - **Key growth levers and headwinds:** Loan volume growth, deposit beta (how quickly deposit costs rise relative to benchmark rates), and the reinvestment yield on the securities portfolio. - **Pricing dynamics:** Floating rate commercial loans reprice immediately with SOFR, while fixed-rate mortgages and auto loans drag on asset yields. Deposit pricing is highly competitive. - **Revenue recognition notes:** Interest income is recognised over the life of the loans using the effective interest method. - **Seasonality:** Day count conventions mean the first quarter (90 days) typically has lower NII than the fourth quarter (92 days). ### Noninterest Income - **Segment name:** Noninterest Income - **Revenue driver formula:** Sum of fee income lines (Investment banking and trading + Wealth management income + Card and payment related fees + Service charges on deposits). - **Historical growth rate:** 2% to 4% normalised growth, excluding the divested insurance business. - **Key growth levers and headwinds:** Capital markets activity drives investment banking fees, while equity market valuations drive wealth management assets under management (AUM) fees. Regulatory pressure on overdraft fees is a structural headwind for deposit service charges. - **Pricing dynamics:** Wealth management fees are typically a fixed percentage of AUM. Investment banking fees are transaction-based. - **Revenue recognition notes:** Recognised when the performance obligation is satisfied, often at the point of transaction execution. - **Seasonality:** Investment banking and wealth management often see higher activity in the fourth quarter. ## Cost Structure ### Interest Expense - **Line-by-line breakdown:** Interest on deposits, interest on short-term borrowings, interest on long-term debt. - **Gross margin range:** For a bank, this is represented by the Net Interest Margin (NIM), which has ranged between 2.90% and 3.15% over the last three years. - **Key input costs:** The Federal Funds rate and competitive pressure for retail and commercial deposits. - **How COGS scales with revenue:** Interest expense scales directly with the volume of interest-bearing liabilities and prevailing interest rates. ### Noninterest Expense (Operating Expenses) - **Personnel Expense:** The largest component, covering salaries, bonuses, and benefits. It scales with headcount and revenue production (variable compensation in wealth and investment banking). - **Equipment and Software Expense:** Capitalisation of software development and depreciation of branch technology. - **Professional Fees and Outside Processing:** Costs for third-party consultants, legal, and core banking system processing. - **Restructuring / one-time charges:** Truist incurred significant merger-related charges post-2019 and restructuring charges in 2023/2024 related to a $750 million cost-cutting programme and branch closures. ### Margin Profile - **Efficiency Ratio:** Noninterest Expense divided by Taxable-Equivalent Revenue. Truist's adjusted efficiency ratio typically runs between 54% and 57%. - **Margin trend:** Improving. The sale of TIH and subsequent balance sheet repositioning, combined with strict expense discipline, has positioned the bank for positive operating leverage. - **Segment-level margins:** Wholesale Banking typically operates at a lower efficiency ratio (better margin) than the branch-heavy Consumer and Small Business Banking segment. ## Balance Sheet Structure - **Total assets:** Approximately $531 billion as of late 2024. - **Key asset categories:** Loans and leases held for investment (approx. $306 billion), Available-for-sale (AFS) securities, and Held-to-maturity (HTM) securities. - **Goodwill & intangibles:** Historically high due to the BB&T and SunTrust merger, but significantly reduced following the deconsolidation of TIH intangibles. - **Working capital profile:** Not applicable for a bank. Instead, focus on the Loan-to-Deposit ratio, which typically runs between 75% and 80%, indicating strong core funding. - **PP&E:** Represents bank branches and corporate offices. The bank has been actively consolidating its branch network to reduce physical footprint costs. - **Right-of-use assets:** Material due to leased branch locations, but declining as branches are closed. ## Capital Expenditure & Investment - **Capex as % of revenue:** Not a standard banking metric. Instead, banks focus on software capitalisation and branch investments. - **Maintenance capex vs. growth capex:** Primarily driven by digital banking platform enhancements and cybersecurity investments. - **Major capex programmes underway:** Modernising the core banking infrastructure and expanding digital capabilities for Gen Z and millennial client acquisition. - **M&A pattern:** Historically a serial acquirer, but currently focused on organic growth and capital return following the massive BB&T/SunTrust merger and the TIH divestiture. ## Debt & Capital Structure - **Total debt:** Primarily consists of deposits ($390 billion), supplemented by short-term borrowings and long-term senior/subordinated debt. - **Capital Ratios:** Common Equity Tier 1 (CET1) ratio is the critical metric, sitting at approximately 11.5% post-TIH sale, well above regulatory minimums. - **Credit rating:** Investment grade (typically A-tier across major agencies). - **Maturity profile:** The bank manages interest rate risk by matching the duration of its assets (loans/securities) with its liabilities (deposits/debt). - **Share repurchase programme:** Highly active. The bank returned $3.8 billion to shareholders in 2024 and authorised a new $10 billion programme in late 2025. - **Dividend policy:** Truist maintains a strong dividend, with a total payout ratio (dividends plus buybacks) often exceeding 90% of net income. ## Cash Flow Characteristics - **Operating cash flow conversion:** Not a relevant metric for banks. Analysts focus on capital generation (Net Income minus dividends) and changes in Risk-Weighted Assets (RWA). - **Major non-cash items:** Provision for credit losses (PCL), depreciation, and amortisation of intangibles. - **Working capital cash flow impact:** Changes in loan and deposit balances drive the actual cash movements at the bank. - **Cash tax rate vs. GAAP effective tax rate:** The effective tax rate is typically lower than the statutory rate (around 18% to 20%) due to investments in low-income housing tax credits and tax-exempt municipal securities. ## Sheet Structure 1. **Assumptions**: Hardcoded drivers for macroeconomic rates, loan growth, deposit growth, NIM, fee income growth, and efficiency ratio. 2. **Income Statement**: Consolidated statement of income, separating NII and Noninterest Income, and explicitly excluding discontinued operations (TIH). 3. **Average Balances & Yields**: The critical NIM build. Shows average balances for earning assets and interest-bearing liabilities, alongside their respective yields and costs. 4. **Segment Financials**: Revenue and net income broken out by Consumer and Small Business Banking (CSBB), Wholesale Banking (WB), and Other, Treasury & Corporate (OT&C). 5. **Loan Book & Asset Quality**: Roll-forward of loans held for investment, non-performing assets, net charge-offs, and the Allowance for Credit Losses (ACL). 6. **Balance Sheet**: Period-end consolidated balance sheet. 7. **Capital & RWA**: Calculation of Risk-Weighted Assets, Tier 1 Capital, and the CET1 ratio. Tracks share repurchases and dividends. 8. **Valuation**: Dividend Discount Model (DDM) and Residual Income model, which are the standard valuation methods for financial institutions. ## Key Financial Relationships 1. "Net Interest Income = (Average Earning Assets x Asset Yield) - (Average Interest-Bearing Liabilities x Cost of Funds)" 2. "Net Interest Margin = Net Interest Income / Average Earning Assets" 3. "Provision for Credit Losses = Net Charge-Offs + Change in Allowance for Credit Losses" 4. "Allowance for Credit Losses (End of Period) = Allowance (Beginning of Period) + Provision for Credit Losses - Net Charge-Offs" 5. "Efficiency Ratio = Noninterest Expense / (Net Interest Income + Noninterest Income)" 6. "Return on Average Tangible Common Equity (ROATCE) = (Net Income - Preferred Dividends + Amortisation of Intangibles) / Average Tangible Common Equity" 7. "CET1 Capital = Total Equity - Preferred Stock - Goodwill - Intangible Assets + AOCI Adjustments" 8. "CET1 Ratio = CET1 Capital / Risk-Weighted Assets" 9. "Total Payout Ratio = (Common Dividends Paid + Share Repurchases) / Net Income Available to Common Shareholders" 10. "Earnings Per Share = Net Income Available to Common Shareholders / Weighted Average Diluted Shares Outstanding" ## Cross-Sheet Dependencies - The **Average Balances & Yields** sheet is the engine of the model. It feeds Net Interest Income directly into the **Income Statement**. - The **Loan Book & Asset Quality** sheet calculates the Provision for Credit Losses, which feeds into the **Income Statement**, and the ending loan balances, which feed into the **Balance Sheet**. - The **Income Statement** generates Net Income, which flows into the **Capital & RWA** sheet to calculate retained earnings and capital ratios. - The **Capital & RWA** sheet determines how much excess capital can be used for share repurchases, which feeds back into the **Income Statement** by reducing the share count for EPS calculations. - Circularity risk: Share repurchases reduce equity, which impacts average equity, which impacts ROATCE. To avoid circularity, base share repurchases on beginning-of-period capital or use a toggle to break the loop. ## Sign Convention - Assets and Liabilities are entered as positive numbers on the balance sheet. - Revenue and Income items are positive. - Expense items (Interest Expense, Noninterest Expense, Provision for Credit Losses) are entered as positive numbers and subtracted in the relevant total formulas. - Net Charge-Offs are entered as positive numbers. - Contra-assets (like the Allowance for Credit Losses) are entered as positive numbers but subtracted from Gross Loans to reach Net Loans. ## Things Most Likely to Go Wrong - Including historical Truist Insurance Holdings (TIH) revenue in forward projections. The model must strip out TIH from historical run-rates to accurately forecast the core banking franchise. - Failing to account for the $27.7 billion balance sheet repositioning in Q2 2024. The model must reflect the lower securities balance and the higher reinvestment yield going forward. - Confusing period-end balances with average balances. Net Interest Margin is calculated using average balances, not period-end balance sheet figures. - Incorrectly modelling the Provision for Credit Losses. The provision is not just net charge-offs; it must include the build or release of reserves based on loan growth and macroeconomic forecasts. - Ignoring the impact of share repurchases on the share count. Truist is aggressively buying back stock, which significantly boosts EPS even if net income growth is flat. - Miscalculating tangible book value by failing to deduct both goodwill and other intangible assets from common equity. - Applying a standard DCF model. Free cash flow is meaningless for a bank. The builder must use a Dividend Discount Model or Residual Income model. - Forgetting to deduct preferred stock dividends from net income to arrive at Net Income Available to Common Shareholders. ## Validation Checks - "Net Interest Margin should be in the 2.90% to 3.15% range; flag if outside this band." - "Efficiency Ratio should be between 54% and 58%; flag if expenses are growing significantly faster than revenues." - "CET1 Ratio must remain above the regulatory minimum plus management buffer (flag if below 10.0%)." - "Loan-to-Deposit ratio should remain between 75% and 85%." - "Balance sheet must balance: Total Assets = Total Liabilities + Total Equity in every period." - "Net Charge-Off ratio should be between 0.30% and 0.60% of average loans under normal economic conditions." - "Total payout ratio (dividends + buybacks) should not exceed 100% of net income for extended periods without flagging a capital drain." - "Effective tax rate should be between 18% and 21%." ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Loan Growth (Annual) | 2.0 | % | Reflects moderate commercial and consumer demand in the current rate environment. | | Deposit Growth (Annual) | 1.5 | % | Based on recent Q4 2024 average deposit growth trends. | | Net Interest Margin (NIM) | 3.07 | % | Actual reported NIM for Q4 2024, reflecting stabilised deposit costs. | | Noninterest Income Growth | 3.0 | % | Normalised growth rate for wealth and investment banking, excluding divested insurance. | | Efficiency Ratio | 56.0 | % | Aligns with management's focus on expense discipline and recent adjusted actuals. | | Net Charge-Off Ratio | 0.50 | % | Reflects normalised credit losses in a stable macroeconomic environment. | | Effective Tax Rate | 19.0 | % | Historical average reflecting benefits from tax-advantaged investments. | | CET1 Target Ratio | 11.0 | % | Management's target operating level, providing a buffer over regulatory minimums. | | Quarterly Dividend per Share | 0.52 | $ | Maintained dividend level to support yield for income-focused investors. | | Annual Share Repurchases | 2.0 | $B | Conservative estimate based on the active multi-billion dollar authorisation. | | Cost of Equity (Ke) | 10.0 | % | Standard discount rate for a large-cap regional bank with a stable risk profile. | | Terminal ROATCE | 14.0 | % | Management's medium-term target for return on average tangible common equity. | ## Data Sources & Benchmarks - **Filings:** SEC EDGAR for Truist Financial Corporation (TFC) 10-K, 10-Q, and 8-K filings. The Investor Relations page (ir.truist.com) is critical for the Quarterly Performance Summary supplements. - **Peers for benchmarking:** U.S. Bancorp (USB), PNC Financial Services (PNC), Bank of America (BAC), and Fifth Third Bancorp (FITB). - **Industry data:** Federal Reserve H.8 data for weekly commercial bank balance sheet trends; FDIC Quarterly Banking Profile for industry-wide margin and credit quality benchmarks. - **Consensus estimates:** FactSet or Bloomberg for forward-looking EPS, NIM, and PCL estimates. ## Sources - Truist Financial Corporation Q4 2024 Earnings Release and Presentation (January 2025). - Truist Financial Corporation 2024 Annual Report on Form 10-K. - Truist Financial Corporation Press Release: "Truist completes sale of Truist Insurance Holdings and executes strategic balance sheet repositioning" (May 2024). - FDIC 2025 Truist Resolution Plan Public Section. --- ## Frequently asked questions ### What kind of financial services does Truist Financial Corporation provide? Truist Financial Corporation is a top-10 United States commercial bank offering a wide range of services. These include retail and commercial banking, wealth management, investment banking, and specialised lending. ### How does Truist Financial generate its revenue? Truist operates a traditional spread-based and fee-based banking business model. It relies heavily on its dense branch network located in the high-growth Southeast and Mid-Atlantic regions of the United States. ### What are the key assumptions used in the Truist Financial (TFC) financial model? The financial model for Truist Financial includes key assumptions such as a Revenue Growth rate of 0.2 and COGS as a percentage of revenue at 0.55. Additionally, the model assumes a Tax Rate of approximately 34.22% and Capex as a percentage of revenue at about 3.81%. ### What is the primary purpose of the Truist Financial (TFC) equity valuation model? The model aims to evaluate Truist Financial Corporation's equity valuation and capital return capacity. This helps equity research analysts determine a target price and assess the bank's earnings power following its recent divestiture. ### Can I download an Excel financial model for Truist Financial (TFC)? Yes, an Excel financial model for Truist Financial (TFC) is available for download. This model provides a forecast horizon from FY2026 through FY2030 for analysis. ### What was the significance of Truist Financial's recent divestiture of Truist Insurance Holdings? In May 2024, Truist completed the divestiture of its remaining stake in Truist Insurance Holdings, generating approximately $10.1 billion in after-tax cash proceeds. These funds were strategically used for balance sheet repositioning, including selling $27.7 billion of lower-yielding securities. [Interactive forecast calculator](https://finamodel.com/companies/truist-financial/forecast)