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The Ratings Game: Truist outlook draws questions and hiked estimates from analysts

Truist Financial Corp.’s financial projections for 2023 prompted one analyst to question whether they would be able to deliver and prompted others to increase their outlooks for the bank.

Overall, Wall Street seemed to like what it heard from Truist’s
TFC,
-0.42%

fourth-quarter guidance, as the stock rose 4.3% despite losses in the broad equities market. The stock rose 0.3% on Friday morning.

In a bullish sign for its business despite economic headwinds, Truist said it expects full-year 2023 revenue to increase by 7%, to 9%, while adjusted expenses are seen increasing by 5%, to 7%.

Analyst Mike Mayo of Wells Fargo Securities LLC asked Truist CEO William H. Rogers Jr. about his confidence in the company’s outlook for 2023.

“You’re guiding for twice as much revenue growth, you’re guiding for three times more operating leverage,” Mayo said. “What’s your degree of confidence with this 2023 guidance, given some of the pressures and the internal expenses?”

Rogers stood by the company’s outlook numbers. He said that Truist was heading into 2023 with momentum — it outperformed in its asset-liability performance, and showed stability of some of its fee businesses.

Trust’s insurance operations and investment banking are benefitting from relationships it developed with commercial clients, despite economic challenges from a potential recession and higher interest rates, he said.

“We’re expanding our capabilities and our prowess,” Rogers said. “So, while there are headwinds and we accept those and understand those, we have enough of our own tailwinds.”

Meanwhile, Citi analyst Keith Horowitz said Truist’s stock rose Thursday partly on the company’s better-than-expected outlook for pre-provision net revenue, or PPNR. He also said the stock had absorbed negative sentiment ahead of Truist’s fourth-quarter earnings.

There’s also been market speculation around the sale of a portion of Truists’s insurance business, but the company has not confirmed or denied plans to do so.

Horowitz reiterated a neutral rating on the stock and hiked his 2023 earnings outlook for Truist by 5 cents a share to $4.80 a share, compared to the analyst consensus estimate of $5.02 a share.

Looking back at the fourth quarter, Truist said its adjusted pre-provision net revenue (PPNR) grew a “strong 12%” sequentially, ahead of its guidance.

Pre-provision net revenue is a measure that adjusts net income determined in accordance with GAAP to exclude the impact of the provision for credit losses and provision for income taxes, according to Truist filings.

Based in Charlotte, N.C., Truist traces its roots to 2019 after the merger of Branch Banking and Trust Co. (BB&T) and SunTrust Banks.

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