Truist Financial Analyst Downgrades Stock Citing Growing Deposit Competition, Unlikeliness Of Debt Recovery - Truist Finl (NYSE:TFC)

Stephens & Co analyst Terry McEvoy downgraded Truist Financial Corp TFC from Overweight to Equal-Weight and a $53 price target.
On average, EPS in 4Q22 exceeded consensus at 70% of the analyst's Super Regional bank coverage list, and pre-tax pre-provision net revenue (PPNR) beat consensus at 60% of them.
Year-over-year net interest income and EPS growth were 32% and 10%, respectively, in 4Q22.
Consensus 2023 PPNR was reduced on average by 2.8% for these banks.
Lower anticipated net interest income levels were responsible for most of the downward revisions. The deposit flows were negative, and betas accelerated.
The 4Q22 earnings for the Super Regional banks confirmed investor fears that deposit competition heated up in the quarter and deposit betas may exceed the prior cycle following unprecedented actions by the Fed.
In response to growing loans and shrinking core deposits, Super Regional banks increased the concentration of funding from FHLB borrowings and other forms of long-term and short-term debt at the cost of zero-costing deposits, hurting the net interest margin outlook.
Overall, credit quality trends were stable Q/Q in 4Q22 at the Super Regional banks.
The current ACL level (or estimates of the expected credit losses on financial assets measured at amortized cost) is modestly above "Day One" on average but ~200bps below the peak during the GFC.
The second fear is uncertainty over the degree to which NCOs (or the debt owed to a company unlikely to be recovered by that company) will increase in 2023 and how much reserve building needs to occur.
Most Super Regional banks reported 4Q22 annualized loan growth of over 10%, which exceeded expectations.
Commercial and industrial lending contributed to the upside in loans.
Price Action: TFC shares traded higher by 0.59% at $48.74 on the last check Tuesday.

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