Truist Earnings: Fee Guidance Raised, but Less Net Interest Income Growth Expected in 2026

Key Morningstar Metrics for Truist Financial

• Fair Value Estimate
  : $50.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : Medium

What We Thought of Truist Financial’s Earnings

Truist Financial’s TFC strong fee income growth of 11.6% year over year helped top-line growth in the first quarter. The bank raised its fee income growth guidance for 2026 to high single digits from mid- to high single digits but lowered net interest income guidance by 1% at the midpoint.

Why it matters: We were a bit disappointed by Truist’s 5-basis-point sequential decline in net interest margin in the first quarter, which was outsized relative to peers. While other banks have reported tight loan spreads, Truist said deposit competition and customer yield-seeking intensified for it in the quarter.

• Truist walked away from its NIM target of 3.10%-3.19% for the fourth quarter of 2026. It now expects to reach this range sometime in 2027.
• We see Truist’s attractive Southeast footprint as being particularly competitive in all aspects of banking, which should result in faster balance sheet growth. But the bank maintained average loan growth of 3%-4%, on par with nominal US GDP growth, with some headwinds in its indirect auto portfolio.

The bottom line: As we incorporate the latest results and updated guidance, we expect to increase our $50 fair value estimate for no-moat-rated Truist by the high single digits, driven primarily by a higher leverage ratio forecast, thanks to capital relief in newly proposed bank regulations. We view the shares as undervalued.

• The bank provided a new medium-term target for return on tangible common equity of 16%-18%. We view this as quite ambitious, even after an increase in our leverage ratio forecast.
• Management is also targeting an increase in the bank’s return on assets profile to 1.2% from 1.1% due to increased client primacy, more cross-selling, and better efficiency. While we think it’s the right direction, we’d like to see more progress before giving the bank credit.