TRUIST FINANCIAL CORP (TFC) Q2 2026 Earnings Call Transcript

Greetings, ladies and gentlemen, and welcome to the Truist Financial Corporation Q2 2026 Earnings Conference Call. Currently, all participants are in 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.

Thank you, Rocco. Good morning, everyone. Welcome to Truist's Q2 2026 Earnings Call. With us today are Chairman and CEO, Bill Rogers, our CFO, Mike Maguire, our Chief Risk Officer, Brad Binder, as well as other members of the Truist senior management team. During this morning's call, they will discuss Truist's Q2 2026 results, share their perspectives on current business conditions, and provide an update on our outlook for 2026. The company 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. Good morning, everyone, and thank you for joining our call today. Before we discuss our Q2 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. 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 Q2, we announced that Mike Lyons will become Truist's next president and chief executive officer on September 1st. 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. Now let's turn to the results on slide 5. 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 in 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 Q2, we delivered net income available to common shareholders of $1.5 billion, or $1.23 per diluted share, representing a 37% increase over the Q2 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. 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 slides 6 and 7. 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 Q2 of 2025 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 non-maturity consumer and small business deposits increased 2% versus the Q2, driven by a 39% increase in new-to-bank deposit production. Average deposits per client were higher across all income segments; 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 advisor productivity, and a 9% increase in financial planning activity. 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 non-digital clients, while greater self-service adoption continues to improve efficiency across the franchise. During the quarter, clients engaged with Truist 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 returns, and allocate capital towards the highest value opportunities across consumer and small business banking. Turning to wholesale on slide 7. In 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 increase in share of revenue coming from non-credit sources. Average wholesale deposits increased 6%, excluding the impact of certain large M&A-related deposits in the Q2 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're 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 Q2 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 in 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. As Bill mentioned, we reported Q2 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 Q2 of 2025 and 13% versus the Q1 of 2026. Revenue increased 2.2% linked-quarter, due primarily to higher non-interest income. Revenue increased by 5.5% versus the Q2 of 2025, due primarily to higher non-interest income, led by growth in investment banking and trading and wealth management income. GAAP non-interest expense increased 2.4% versus the Q1 of 2026, primarily due to higher personnel expense and professional and outside processing expenses. Non-interest expense increased 2.3% versus the Q2 of 2025, which helped drive 320 basis points of year-over-year positive operating leverage. Asset quality metrics remained strong. 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 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 costs 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 one additional day in the Q2 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 two 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. 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 rates paid than we previously expected. These headwinds are partially offset by the benefits we expect to get from 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 Q2 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 non-prime 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 ROTCE 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 Q2. 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 non-interest income on slide 12. Non-interest income increased 5.9% compared with the Q1, reflecting strong growth in other income, primarily driven by higher income from certain equity investments. Compared with the Q2 of 2025, non-interest 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, advisor 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 non-interest 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, non-interest expense increased 2.4%, primarily reflecting higher incentive compensation associated with stronger business performance. Compared with the Q2 of 2025, non-interest 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 most portfolios. Compared with the Q2 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 two basis point linked-quarter decline in allowance for loan losses to 1.51% of total loans. The modest reduction in our ALL was primarily driven by the resolution of several commercial and commercial real estate credits during the quarter and continued improvement in sectors like office and multifamily. Non-performing loans held for investment increased one basis point linked-quarter to 51 basis points of total loans. Higher indirect auto problem loans were partially offset by improvement in the commercial portfolio. The increase in indirect auto non-performing loans was primarily due to a change to the non-accrual criteria in our Regional Acceptance non-prime 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 non-accrual 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 Q2, we repurchased $1.2 billion of common stock compared with $1.1 billion in the prior quarter and $750 million in the Q2 of 2025. We continue to target approximately $5 billion of share buybacks in 2026. I'll now review our guidance for the Q3 and for full year 2026 on the following page. Looking into the Q3 of 2026, we expect revenue to increase 1% relative to Q2 revenue of $5.3 billion. We expect net interest income to increase by approximately 1.5% in the Q3, primarily driven by an additional day and higher client deposit balances. We expect non-interest income to remain relatively stable on a linked-quarter basis. Non-interest expense of $3.1 billion in the Q2 is expected to increase by about 2% linked-quarter in the Q3. 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 non-interest 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 non-interest 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 ROTCE of greater than 14% in 2026. While we remain focused on delivering the commitments we've made, we believe those objectives represent milestones along a 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. With that, Brad, let me turn it back over to you for Q&A.

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

Thank you. To ask a question, please press *1 on your telephone keypad. If your question has already been addressed and you'd like to remove yourself from queue, please press *2. As a reminder, we do ask that you please limit yourself to one question and a single short follow-up. Our first question today comes from Ryan Nash at Goldman Sachs. Please go ahead.

Morning, everyone.

Morning.

Bill, just wanted to say congrats on your retirement. It's been great working with you and I've learned a ton from you over the years, particularly on our trips, so 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; 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. 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?

Ryan, thanks, and I'll miss working with you too. If we break down the loan categories, C&I year-on-year is up just under 8%. The places where we've continued to focus and have intentionality have good growth characteristics. In consumer, areas like HELOC, and other consumer areas like Sheffield and Service Finance, those have also continued to grow with good production. The other places, like indirect auto, we're down quite significantly and now down significantly in production. Our focus is on relationship-based areas that also clear our profitability hurdles. Establishing these targets has come through the company, and I'm really proud that the team has embraced where we want to go from a profitability standpoint, with clarity around strategy and alignment on the important things. Within those categories, the commercial book is highly diversified. We've seen strong focus and growth in the middle market area where we've invested. We have good production and pipelines in those areas. As it relates to the loan component, our team's doing a good job staying focused on the things that accrete value over time. We're not conceding long-term growth; rather, we're repositioning and setting the table for efficient growth that has higher return and higher earnings and capital efficiency going forward. Every incremental dollar we add on a growth platform has a higher return profile. I would say we're setting the platform for efficient growth. Does that help?

That's great. Maybe if I can ask a follow-up for Mike. Mike, you took down full-year NII expectations. Maybe just unpack a little bit what's included for loan growth, the exit margin, and what are the updated thoughts on deposit costs from here? Thank you.

Sure. Good morning, Ryan. Maybe just to reiterate some of what we said already in our prepared remarks. The good news is, while we do see some pressure on NII for the year, we feel quite good about fees being in the roughly 10% area year-over-year. Credit this quarter looked great, and from an expense perspective we feel good too. From a bottom-line perspective, we feel like we've got really nice momentum. On NII, there are three main headwinds. First, we've optimized production in certain consumer portfolios and exited marine and recreational vehicle originations during the quarter. Prime autos are down as well. Across those portfolios we're down on a production basis, roughly 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. Those are trade-offs we are making to improve profitability. Second, loan spreads are under pressure for two reasons. One, our conscious reallocation of capital from higher-yielding consumer loans into higher-quality but lower-yielding commercial loans that we expect to deliver higher returns over time. Two, broad-based market-driven compression of loan spreads. We had expected some widening earlier in the year; instead, if spreads hold constant from here, we'd expect them to be down 5 to 10 basis points year-over-year versus an upside we had assumed earlier. That has been an important headwind for us. Third is deposits. There's seasonality in Q2, but as we closed June and looked forward, it became clear that clients have stronger preference for higher-rate products and that's remixing our deposit mix. We've incorporated that into our outlook. These three headwinds are partially offset by a higher belly of the curve helping fixed-rate asset repricing. On the NIM side, we saw a four basis point decline linked-quarter; about half of that was composition of earning asset growth with bonds and cash about $3 billion higher, which is dilutive. Then a basis point higher on deposit costs and three basis points worse on loan yields. Some of that is swaps coming on and impacting loan yields. We expect modest improvement during the year as fixed asset repricing benefits kick in. We still feel quite good about deposit balances in wholesale and consumer; it's primarily mix that's the issue. We expect NIM to modestly improve in Q3, driven in part by higher client deposit balances, but not to the same degree as earlier in the year given current dynamics. I think that covers your questions, Ryan.

Yep, got them all. Thanks, Mike. Appreciate it. Thanks again, Bill.

Thanks.

Our next question today comes from John Pancari at Evercore. Please go ahead.

Morning. 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 that guidance? Is there more that could impact next year's expectation as this continues to play out? Maybe also, what other rationalization is possible? I know you mentioned in your prepared remarks that you're continuing to evaluate the portfolio. Thanks.

Good morning, John. The retrending we've made around production balances, including the exit of Marine and Recreation, are reflected in our outlook for this year. We haven't provided guidance for 2027 at this point. As for what else, it's a continuous effort to make sure we're allocating capital in the most efficient way. It's not entirely consumer—there are actions in wholesale around client selection, pricing, and product design and rebalancing that are intended to create more profitability and efficiency. It's an important initiative to drive ROTCE improvement. We'll be guided by what fits our strategic view and by profitability.

Okay, thanks, Mike. Now I know you talked about the ROTCE improvement, and you mentioned confidence and above the 14% level for 2026. How do these actions and your updated thoughts and updated trends in general impact your 2027 15% expectation and the long-term 16% to 18%? 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'd be helpful. Thanks.

John, I'll take the first part. This quarter had some unique characteristics. The trajectory is not linear quarter-to-quarter; it may change. We have more confidence in this year, as we're more than halfway through it, to say we'll be at 14% plus. I don't think it's the time to change the established targets for the future. That said, we certainly feel more confident in our path to a higher-performing company. Today we changed guidance for this year, but we will stay on the path to higher performance and retain the right level of flexibility to achieve those longer-term numbers.

I'll add briefly. We're pleased to be in the 15% area for the quarter, but it won't be a linear path. There are timing factors—for example, preferred dividends can make certain quarters heavier. We still expect upward trajectory, but not linear. For deposits and loans, we still expect loan growth this year and have delivered deposit growth year-to-date. We're seeing low single-digit deposit growth—call it around 3% annual view. Mix is the key issue; DDA has remixed down a bit from roughly 27% at the beginning of the year to something closer to 25% by year-end. For loans, we said earlier this year 3% to 4%; we're still on track for that, probably toward the high end. Most of that growth will be on the C&I side, while consumer will be closer to flat or roughly +1%. That's what's in our outlook, John.

To add to that: the production engines are working. On the consumer side, our Premier production and advisor activity is strong. Service Finance production quality is high. Wholesale deposit production is relationship-based, not just rate-based; these clients have expanded relationships with us, including payments solutions. We're adding high-quality, relationship-oriented operating deposits.

Sure.

Got it. Thanks so much, Bill.

Our next question today comes from Ken Usdin with Autonomous Research. Please go ahead.

Hi, good morning. 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 and the rate chasing that you mentioned in your prepared remarks. Can you talk about where that's coming from? Is it any different than what we've seen? Is it just the burden of a little bit from the higher-for-longer environment? Thanks.

I think what we've seen in the deposit migration to higher-yielding products is more client behavior than competitive pressure. We're in a rate cycle where that behavior is not unusual. The competitive environment remains highly competitive, and we're very competitive in terms of product and capability. As I said earlier, the production engines are working well and client expansion is working; this is largely a function of client behavior.

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

Sure. I'll walk you through the year. In Q1, we were roughly $50 billion effective, with about $24 billion of payers—net receive about $26 billion. In this most recent quarter, we were $63 billion effective, up about $13 billion from Q1, with payers relatively constant. Net effective was about $40 billion. That steps up on an effective basis for Q3 to about $80 billion, and up to $85 billion in Q4. Payers remain around $23 billion for the rest of the year. As those come on, depending on where SOFR is, that will add some pressure and that's incorporated; you'll see that in loan yields. We didn't do a very active quarter on swaps; similar to Q1 we took a small handful and deferred effective start dates. I think we peak in Q1 of 2027, roughly in the high nineties billion, and then begin to decline.

By the end of the year, are we kind of there? I know you'll continue to rework the portfolio depending on where rates go.

It wasn't a very active quarter for us in terms of swap activity. We deferred some start dates and managed timing. We expect the effective swap position to peak in Q1 of 2027 and then decline thereafter, subject to market conditions.

Okay. Got it. Thanks, Mike.

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

Hi. Good morning. Congratulations, Bill. I hope you enjoy your retirement. I still remember meeting you at SunTrust. You've been great. I hope you enjoy your retirement. You were our chairman of the board when you decided to name Mike Lyons as your successor. Obviously, he was inside of PNC for some time and then had a brief stint at Fiserv. You mentioned what you found in him in terms of his focus on growth. What other characteristics did you and the board particularly like about Mike in terms of taking this company to the future that you see? Maybe speak a little bit about how you think he'll frame technology investments and potential challenges at the firm. Does he believe that this is a 16% to 18% ROTCE company over the medium term?

Thanks, Erika. Succession planning is the most important work a board does. We spent over a year thinking about the right timing for the company and the profile of a future leader. We evaluated the characteristics needed for that role, including deep understanding of core businesses and strong knowledge about technology and payment systems and where the market is headed. Mike fits that profile: strong commitment to performance, a track record of results, deep knowledge of payments, and relevant technology experience from his time at Fiserv. He has operating experience as a CEO and is a purposeful leader who cares about communities and teammates. Regarding targets, our goal is to be a high-performing company. I think 16% to 18% reflects that journey. Mike came here to lead and run a high-performing company; there's no doubt about that. He'll have flexibility to achieve efficiencies and invest as needed. We also have a deep team that has helped build momentum, and succession planning runs through the organization. We have a deep bench ready and committed to running a high-performing company.

Just as a follow-up, I think other investors would agree with you, Bill, that you do have a deep team. What have the conversations been like underneath the surface with top producers—the ones we don't meet on the street—given that an outsider CEO announcement can be jarring? Has there been outreach? What are those conversations like in terms of reassuring top talent they'll be part of the team going forward?

Erika, our philosophy is to re-recruit everyone every day. We recruit every day. The team sees the opportunity, the future, and what we're building that allows them to be successful in their jobs and careers. People are excited and see the potential. Having certainty also helps; now with a clear timeline for transition, people are leaning in. The best thing for top performers is a strong platform, career opportunity, and certainty, and I believe we're delivering that.

Thank you for your answers, and congratulations again. I just want to give you a shout-out, Bill, that not only you have a good reputation as a leader, but a great reputation for being a top-notch human being. You will be missed.

Well, Erika, thank you for that.

Our next question today comes from Manan Gosalia with Morgan Stanley. Please go ahead.

Hey, good morning. Bill, I'll echo the best wishes for your retirement. Congratulations. For my question, I apologize if this is repetitive, but you spoke about full-year loan spreads down 5 to 10 basis points year-on-year if you keep spreads where they are today. You spoke about mix shift in loans, the mix shift in DDA balances, and yield-seeking behavior from deposit holders. Can you put it all together and go through the assumptions baked into the new NII guide on the incremental changes to each of these components from here? I'm trying to assess comfort level on the new guide and what the risk will be.

Manan, I'll give it to you in relative proportions. The most impactful component of the three headwinds is the unfavorable deposit mix. We expect to continue onboarding new clients and to grow client deposits this year, but mix will be less favorable than we expected earlier. DDA remix is a good example; we expect DDA to be closer to 25% by year-end. The second most important factor is loan spreads. We expected some widening; instead, based on what we've seen, we expect spreads to be down 5 to 10 basis points year-over-year on a full-year basis. We reprice about $30 billion of loans a quarter: roughly $10 billion fixed and $20 billion floating, to give a sense of magnitude. The third factor is reducing production in certain consumer portfolios; that's important but smaller in-year. Those are the main components baked into the updated NII guide.

Got it. Thank you.

Due to time constraints, we do ask going forward that you please limit yourself to one question. Thank you. Our next question comes from Mike Mayo with Wells Fargo Securities. Please go ahead.

Hey, Bill. From other comments, I do think you're a great human being, but as you know, I've been extremely disappointed about the results this decade where the stock has been kind of dead money while the stock banks are up almost half and the S&P is almost double. I've been very frustrated over time. We're not here to relitigate what happened in the last decade, but as you look going forward, what do you think can be done better? What's your advice? What have you learned about investing for better growth than you've seen? Especially with population growth in your footprint almost 50% better than average. Thank you.

Mike, we want to be a high-performing company. We're aligned on that objective. The things we've talked about on this call—investments in technology, talent, and strategic clarity—are what we are doing to position the company for growth. We've made significant investments and established clear goals about what it means to be a high-performing company, and quarter by quarter we're making progress. My advice is to stay on that track. Mike Lyons will bring intensity and focus to accelerate and execute on that objective. We've made decisions over the last year that provide clarity for shareholders, and now it's time to put more foot on the accelerator.

All right. Hopefully, no one drops the baton. Thank you.

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

Good morning, Bill. Congratulations and all the best in retirement. As a follow-up to your response in terms of Mike Lyons doing the acceleration part, maybe spend a few minutes talking about that. As shareholders, we all think about whether Mike is going to be a change agent and do things differently. Should we expect him to lay out a plan tied to the acceleration you mentioned? Level-set those expectations for us as you've gone about recruiting him. What does that acceleration mean and what might Mike do differently? Or is thinking about Mike bringing meaningful change misguided? Thanks.

Ebrahim, I want to be careful about laying out Mike's plan on today's call. The strengths he brings include operating performance, payments knowledge, and technology experience. We want to set a strong platform so each incremental dollar has a higher return profile from both income and capital perspectives. Let's let Mike come in and present his plan. The board's clear mandate to Mike is to lead a high-performing company. How Mike wants to accomplish that, at what speed, and where he places emphasis, we'll let him articulate when he starts.

Got it. All the best again. Thank you, Bill.

Yeah, thanks.

Our next question today comes from Matt O'Connor at Deutsche Bank. Please go ahead.

Good morning. I was hoping you could just aggregate how much loan runoff there is from what you mentioned—the RV and marine book and prime auto that you've said is going to zero. I realize it'll be over a course of a couple of years, but how much loan runoff in aggregate from those areas have you already identified? And why make the decision now to exit or run down those books? Thank you.

I'll start. It's not really a 'why now.' We've been de-emphasizing some of these portfolios for some time and have now accelerated that approach as we've become more assertive in managing growth. I gave a sense for year-over-year production change—call it $7 billion to $8 billion across those portfolios for the year. Our indirect auto business prime is around $20 billion; Regional Acceptance Company (RAC) is about $4 billion to $5 billion, so around $25 billion of auto. Marine and RV was a smaller portfolio, about $4 billion. That production will be lower and those assets are generally short-weighted average life—roughly two and a half to three years. You'll see us remix into consumer loan products we prefer and continue production there. Relative to the headwinds we discussed, this is the smallest component in-year but an important one. We have no regrets; it doesn't fit our strategic view and it doesn't clear our profitability bar.

Just to clarify, are you right-sizing auto or planning to fully exit it? It sounds like you're exiting all the RV and marine book.

I think it's right-sizing. The business can ebb and flow depending on market competitiveness. We've also used capital efficiency tools—for example, we completed two CLNs in the prime auto portfolio. We have about an $11 billion reference pool with roughly half the loans in a CLN, which improves ROTCE by transferring unexpected losses at a low cost of capital. It's a suite of actions to remove drag, create capital flexibility for profitable growth, and return capital to shareholders.

Our next question comes from Gerard Cassidy at RBC Capital Markets. Please go ahead.

Good morning, Bill. Good morning, Mike. Bill, we've been through a few cycles together. Today with AI, it's hard to get our arms around the impact it's having other than it's positive on the economy. What are you looking at for second-order effects that could impact Truist—where at some point AI might slow in growth? Are you already setting in motion protections against secondary impacts that could materialize over the next two to four years?

Gerard, good question. We use a framework I described previously—diversity, velocity, and discipline (DVD). Ensure the portfolio is diverse so we're not over-concentrated. Maintain velocity so we understand pricing and market moves quickly. And have discipline—establish limits and live within them. There's a lot of opportunity from AI today, but we think about secondary and tertiary impacts and maintain DVD. We're watching the space closely and are conscious of both opportunities and risks, staying diversified and disciplined in our approach.

Very good. Like the others, good luck in your future endeavors. Thank you.

Thanks so much.

That concludes the question-and-answer session. I'd like to turn the conference back over to Brad Milsaps for any closing remarks.

Okay. Thank you, Rocco. 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. Rocco, you may now disconnect the call.

(Operator): You may now disconnect the call.