Truist Sets Aside $844M For Bad Loans Amid Weak Q2 Consumer Business

Charlotte, North Carolina-based Truist Financial Corp. on Thursday (July 16) became the latest bank to report some good news in its second-quarter results, but there is also a lot of evidence that the consumer-banking business is being pummeled by COVID-19.

CEO Kelly King said he was pleased overall with the bank’s second-ever earnings report since BB&T Corp. and SunTrust merged to create the nation’s sixth-largest commercial bank.

While he called the second quarter “challenging,” he lauded Truist’s growth in assets, strong investment banking performance, solid results on residential mortgages and record quarter for insurance brokerage. Truist said it was also the No. 3 lender in the U.S. Small Business Administration’s Paycheck Protection Program (PPP) based on gross funding.

But the bank also braced itself for a blow from the weakened U.S. economy, adding $844 million to loan-loss reserves during the second quarter on top of the $893 million it set aside in the first period. “While asset-quality ratios remained relatively stable, we provided $844 million for credit losses given economic uncertainty and the stressed environment. This affords strong coverage for expected credit losses in the future,” King said.

Those losses were already beginning to appear in Truist’s second-quarter results, though not in a terribly dramatic form. Net charge-offs were 0.39 percent of average loans and leases, up three basis points compared to the prior quarter, per the earnings report.

The bank also said it was quite active in providing loan payment accommodations for clients hit hard by the pandemic, offering help in $21.2 billion of commercial loans, $13.8 billion of consumer loans and $211 million of credit card loans as of June 30.

All told, the bank’s adjusted net income came in at $1.1 billion (82 cents a share) on $5.9 billion of revenue. That beat analyst forecasts of about 73 cents per share on adjusted earnings of about $5.5 billion of revenue.

Truist is just the latest bank to report a weak consumer business but strength in other business lines during the second quarter. JPMorgan Chase, Goldman Sachs and Wells Fargo have all had similar results.