Truist Financial Corp

NYSE:TFC

Earnings Call Analysis

Truist's Strategic Moves Bolster Financial Stability

In the second quarter of 2024, Truist Financial completed the sale of Truist Insurance Holdings, generating a $4.8 billion after-tax gain and significantly boosting capital. This move, alongside a $27.7 billion investment securities repositioning, increased Truist's CET1 ratio by 150 basis points to 11.6%. Adjusted net income for the quarter was $1.2 billion, or $0.91 per share. Despite a slight decline in average loans and deposits, the company plans to repurchase $500 million in shares per quarter. For Q3 2024, revenue is expected to rise by 1-2%, with net interest income increasing by 2-3%.

Strategic Moves and Financial Results

In the second quarter of 2024, Truist made significant strategic moves that impacted its financial results. The company divested its remaining ownership stake in Truist Insurance Holdings (TIH) for an implied value of $15.5 billion, generating after-tax cash proceeds of $10.1 billion and a gain of $4.8 billion. This move bolstered Truist's capital by $9.5 billion, increasing its CET1 ratio by 230 basis points under current capital rules. Concurrently, the company sold $27.7 billion of lower-yielding investment securities, resulting in a loss of $5.1 billion but generating $29.3 billion for reinvestment. The majority of these proceeds were reinvested in higher-yielding securities and held in cash, significantly enhancing the company’s financial position.

Earnings Performance

Truist reported a GAAP net income available to common shareholders of $826 million or $0.62 per share for Q2 2024. However, this included a substantial net loss from continuing operations of $4 billion, influenced by a sizable $6.7 billion pretax loss on the sale of investment securities. Conversely, the discontinued operations yielded a net income of $4.8 billion, largely driven by gains from the sale of TIH. On an adjusted basis, excluding these one-time items, the company posted a net income of $1.2 billion or $0.91 per share.

Operational Highlights

Adjusted revenue in the second quarter increased by 3%, driven by a 4.5% growth in net interest income. Despite an elevated expense environment, the company’s adjusted expenses rose only by 2.6% from the previous quarter and were down by 3% year-over-year. The company also completed significant balance sheet repositioning and received regulatory approval for a substantial share repurchase program up to $5 billion through 2026, with $500 million targeted for repurchases each quarter for the rest of the year.

Investment in Digital and Operational Improvements

Truist demonstrated continued momentum in enhancing its digital engagement. Mobile app users grew by 7%, and digital transactions increased by 13% year-over-year. The company also saw a notable rise in Zelle transactions and new digital checking account openings, particularly among Gen Z and millennial clients. Enhancements in digital onboarding for small businesses resulted in higher application completion rates and increased digital engagement.

Guidance and Outlook

Looking ahead, Truist expects a moderate revenue increase of 1% to 2% in Q3 2024 from Q2’s adjusted revenue of $5 billion. Net interest income is projected to rise by 2% to 3%, and expenses are expected to grow 3% in Q3 due to higher professional fees, software, and marketing costs. The full-year 2024 guidance was updated, with revenues expected to decline by 0.5% to 1%, influenced by marginally better client deposits but offset by lower loan demand and a revised interest rate outlook with an anticipated federal funds rate cut in November.

Focus on Growth and Capital Deployment

Truist remains focused on growing core client relationships, managing expenses, returning capital to shareholders, and enhancing digital experiences. The company highlighted its robust capital position, bolstered by the TIH divestiture, allowing for strategic growth opportunities and consistent dividend payouts. Although the balance sheet repositioning is expected to replace TIH’s earnings contributions in the near term, the leadership emphasized disciplined capital deployment to enhance long-term profitability and shareholder value.

Earnings Call Transcript 2024-Q2

[Operator]

Greetings, ladies and gentlemen, and welcome to the Truist Financial Corporation Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this event is being recorded. It is now my pleasure to introduce your host, Mr. Brad Milsaps.

[Bradley Milsaps, executive]

Thank you, Betsy, and good morning, everyone. Welcome to Truist's Second Quarter 2024 Earnings Call. With us today are our Chairman and CEO, Bill Rogers; our CFO, Mike McGuire; our Vice Chair and Chief Risk Officer, Clarke Starnes, as well as other members of Truist senior management team. During this morning's call, they will discuss Truist's second quarter results, share their perspectives on current business conditions and provide an updated outlook for 2024.

The accompanying 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 appropriate reconciliations to GAAP. With that, I will now turn it over to Bill.

[William Rogers, executive]

Thanks, Brad, and good morning, everyone, and thank you for joining our call today. So before we discuss our second quarter results, let's begin with purpose on Slide 4. As you all know, Truist is a purpose-driven company, dedicated to inspiring and building better lives and communities. Purpose is the foundation for things that we do, and we believe purpose and performance are inextricably linked. I'd like to share some of the ways we brought our purpose to life last quarter. During the quarter, Truist Securities advised and served as an active joint bookrunner for Oglethorpe Power's inaugural $350 million green bond, which will be used to support their investment in Plant Vogtle, the largest producer of clean energy in the United States. .

The company is committed to reducing GHG emissions while delivering cost-effective and reliable clean energy with a diverse energy portfolio. This transaction represents only the second green-labeled bond in the U.S. where the use of proceeds are allocated to nuclear energy. We also launched a new financial education program tailored specifically for high school and college students called Truist Life, money and choices. This initiative is aimed at empowering younger generations with financial lessons and essential skills to navigate their financial futures. This is just a couple of examples of how we brought our purpose to life during the quarter. I'm very proud of the meaningful work we're doing across our businesses to have a positive impact on the lives of our clients, our teammates, our communities, and of course, our shareholders as we work to realize our purpose.

So let's turn to our key takeaways on Slide 6. On an adjusted basis, we reported net income available to common shareholders of $1.2 billion or $0.91 per share, which excludes the gain on the sale of Truist Insurance Holdings, the loss on the sale of certain available-for-sale investment securities, a charitable donation to the Truist Foundation and a few smaller items that Mike will discuss in further detail in the call.

In addition, pretax restructuring charges of $96 million, which were primarily related to the sale of TIH and severance and also negatively impacted adjusted EPS by $0.05 per share. So looking through a few discrete items in the quarter, we're pleased with our underlying results. As you can see on the slide, our solid performance was defined by several key themes. First, we grew adjusted revenue 3% on a linked quarter basis, which was driven by a 4.5% growth in net interest income due primarily to the balance sheet reposition we completed during the quarter. Second, our results show our continued expense discipline and focus on managing costs. As a result of these efforts, adjusted expenses increased by 2.6% linked quarter and decreased by 3% on a year-over-year basis. We are fully committed to delivering our objective of keeping expenses flat in 2024 versus last year.

We're also pleased that nonperforming loans remained relatively stable for the fifth consecutive quarter and then net charge-offs were within our expectations. During the quarter, we also completed the sale of our remaining stake in Truist Insurance Holdings which significantly strengthened our relative capital position and create substantial capacity for growth in our core banking businesses. In recognition of the incredibly long-term positive impact of our insurance business, we utilized a portion of the gain to make $150 million charitable contribution to the Truist Foundation to further our purpose-driven work across our banking footprint for years to come.

Simultaneously, with the closing of TIH, we repositioned a portion of our available-for-sale investment portfolio, which, along with the proceeds received from the sale of TIH is expected to provide an offset to TIH earnings contribution. Mike will provide more details on these transactions later in the call. In late June, our Board authorized the repurchase of up to $5 billion of our common stock through the end of 2026. We plan to begin repurchasing our shares during the third quarter, and we'll initially target share repurchases of approximately $500 million per quarter for the remainder of the year.

Finally, we continue to actively pursue growth opportunities in our core consumer and wholesale banking businesses. Although overall loan demand remained slow during the quarter, I'm encouraged by the underlying momentum in terms of increased wallet share within certain businesses and the talent we're attracting to our company, which I'm going to discuss a little later in the call. So before I hand the call over to Mike to discuss the financial performance in more detail, let me provide a quick update on the progress we're making in improving experiences for our clients on Slide 7. We continue to show strong and steady growth in our digital capabilities as client mobile app users grew 7%, and the digital transactions increased 13% compared to the second quarter of last year.

Transactions continue to shift towards self-service capabilities, primarily driven by strong growth in Zelle transactions, which are up 39% year-over-year. In addition, we added over 180,000 new accounts during the quarter, including nearly 70,000 new-to-bank clients through our digital channels which represents a 17% increase over the second quarter of 2023. Importantly, digital checking account production among Gen Z and millennial clients is higher by 42% on a year-over-year basis. A new more modernized small business digital onboarding experience has also resulted in new high and application completion rates, where we're also seeing increased digital engagement with our small business clients.

We've also made enhancements to enterprise platforms that have empowered teammates to deliver knowledge and care through 1.8 million caring conversations resulting in 1.4 million accepted recommendations for great Truist products and services. These enhanced offerings, coupled with strong growth in digital have resulted in higher consumer digital client satisfaction scores as we continue to focus on accelerated adoption and efficiency using our T3 strategy. Overall, I'm really proud of the continued momentum Truist is making in digital engagement. So with that, let me turn it over to Mike to discuss the financial results in more detail. Mike?

[Michael Maguire, executive]

Thank you, Bill, and good morning, everyone. Before I begin discussing our second quarter results, I'd like to spend a few moments recapping the strategic actions that significantly impacted our second quarter results. First, on May 6, we completed the divestiture of our remaining ownership stake in Truist Insurance Holdings at an implied value of $15.5 billion. At closing, we received after cash or after-tax cash proceeds of approximately $10.1 billion and recorded an after-tax gain of $4.8 billion. The sale of TIH created $9.5 billion of capital, which generated 230 basis points of CET1 under current capital rules and 254 basis points of capital under proposed fully phased in Basel III rules. Our tangible book value per share also increased by 33%. On the same day, we executed a strategic balance sheet repositioning of a portion of our available-for-sale investment securities portfolio.

We sold approximately $27.7 billion of market value, lower yielding investment securities, which resulted in an after-tax loss of $5.1 billion. The investment securities that we sold had a book value of $34.4 billion and a weighted average book yield of 2.80% for the remainder of 2024, including the impact of hedges and based on the federal funds curve at that time. Including the tax benefit, the sale of investment securities generated $29.3 billion of proceeds available for reinvestment. When coupled with the proceeds from the sale of TIH, there were $39.4 billion of proceeds available for reinvestment. Of that, we invested approximately $18.7 billion in investment securities yielding 5.27% with the remaining $20.7 billion held in cash. At the time we invested the proceeds the blended reinvestment rate on the new investment securities purchased and the cash was 5.22% for the remainder of 2024, including the impact of hedges.

As Bill mentioned, the reinvestment of the proceeds from the sale of TIH and the balance sheet repositioning completed during the quarter are expected to replace TIH's earnings contributions. These actions completed during the second quarter significantly accelerate our ability to meet increasing standards for capital and liquidity in the industry and importantly, create capacity for Truist to grow its core banking franchise and to return capital to shareholders via our strong dividend and share repurchases.

Now turning to our second quarter key performance highlights on Slide 9. We reported second quarter 2024 GAAP net income available to common shareholders of $826 million or $0.62 per share. This included a net loss of $4 billion from continuing operations or $2.98 per share and net income from discontinued operations of $4.8 billion or $3.60 per share. The net loss available to common shareholders from continuing operations of $4 billion or $2.98 per share was impacted by the following items: a $6.7 billion pretax or $3.80 per share after-tax loss on the sale of certain available-for-sale investment securities, $150 million pretax or $0.09 per share charitable contribution to the Truist Foundation, a $13 million pretax or $0.01 per share after-tax expense related to FDIC special assessment adjustment.

Net income available to common shareholders from discontinued operations of $4.8 billion or $3.60 per share was impacted by the following items. A $6.9 billion pretax or $3.60 per share after-tax gain on the sale of Truist Insurance Holdings, a $10 million pretax or $0.01 per share after tax expense due to the accelerated recognition of TIH equity-based compensation, so on an adjusted basis, we reported net income available to common shareholders of $1.2 billion or $0.91 per share. In addition to the items I just noted, we also had pretax restructuring charges totaling $96 million in the quarter, which negatively impacted adjusted EPS to common shareholders by $0.05 per share. Approximately $33 million of these pretax charges or $0.02 per share after tax negatively impacted net income from continuing operations and were primarily related to severance and real estate rationalization. The remaining restructuring charges were recorded in discontinued operations and were related to legal and other expenses associated with closing the divestiture of TIH.

Total revenue, adjusted for the losses on the available for sale investment securities increased 3% linked quarter due to a 4.5% increase in net interest income and relatively stable noninterest income. Adjusted expenses increased 2.6% linked quarter, but were down approximately 3% on a like-quarter basis. Our CET1 ratio increased by 150 basis points linked quarter to 11.6%, primarily reflecting the sale of TIH and the balance sheet repositioning I discussed earlier. In addition, net charge-offs declined 6 basis points on a linked-quarter basis, and our nonperforming loans remained relatively stable, both on a like and linked quarter basis.

Moving to Slide 10. Average loans decreased 0.7% on a sequential basis, reflecting overall weaker client demand. Average commercial loans decreased $1.3 billion or 0.7% primarily due to a 0.8% decline in C&I balances driven at least in part by capital markets activity. In our consumer portfolio, average loans decreased $1 billion or 0.9% due to runoff in our residential mortgage portfolio and the decline in indirect auto. Other consumer balances, which include our specialty lending units, experienced modest growth and benefited from seasonal strength at Sheffield and increased demand at Service Finance.

Overall, we expect client loan demand to remain relatively muted in the third quarter. Moving to deposit trends on Slide 11. Average deposits decreased 0.3% sequentially as growth in money market and savings was offset by declines in noninterest-bearing time and broker balances. Average noninterest-bearing deposits decreased 1.2% and represented 28% of total deposits, which is unchanged compared to 28% during the first quarter of 2024. During the quarter, we experienced an increase in deposit costs, albeit at a slower pace than the first quarter. Specifically, total deposit costs increased 6 basis points sequentially, 2.09%, which resulted in a 1% increase in our cumulative total deposit beta to 39%. Interest-bearing deposit cost increased 7 basis points sequentially to 2.89%, which also resulted in a 1% increase to our cumulative total interest-bearing deposit beta cost up 54%.

Moving to net interest income and net interest margin on Slide 12. For the quarter, taxable equivalent net interest income increased 4.5% linked quarter or $155 million, primarily due to the strategic balance sheet repositioning completed during the quarter. Excluding the impact of this repositioning, our net interest income would have been relatively stable on a linked quarter basis due primarily to our focus on average client deposits, which declined less than we expected. Reported net interest margin increased 14 basis points on a linked-quarter basis to 3.03%. This was due primarily to the impact of the balance sheet repositioning. The partial quarter impacted the balance sheet repositioning helped drive a 31 basis point improvement in the average yield on our investment securities portfolio to 2.77%. We estimate that our balance sheet remains positioned as relatively neutral from an interest rate perspective comparable to Q1.

Turning to noninterest income on Slide 13. Adjusted noninterest income, which excludes the losses associated with the balance sheet repositioning, decreased $8 million or 0.6% relative to the first quarter. The linked quarter decrease was primarily attributable to lower investment banking and trading income, which declined $37 million from our strong first quarter performance due to lower M&A fees, equity originations and trading income, partially offset by higher loan syndication fees. This decline was partially offset by higher mortgage banking and other income. Adjusted noninterest income increased 4.2% on a like-quarter basis as higher investment banking and trading and wealth management income were partially offset by lower service charge on deposit and other income.

On a year-to-date basis, investment banking and trading income is up nearly 30% over the same period in 2023. Now I'll cover noninterest expense on Slide 14. GAAP expenses of $3.1 billion increased $141 million linked quarter, primarily due to higher other expense related to $150 million charitable donation. Higher personnel costs, reflecting merit increases and higher professional fees. These increases were offset by lower restructuring charges and a reduction in FDIC expense due to a larger special assessment recorded in the first quarter. Excluding these items and the impact of intangible amortization, adjusted noninterest expense increased 2.6% sequentially due to higher personnel expense and professional fees.

On a like quarter basis, adjusted expenses declined to $86 million or 3%, reflecting lower head count in our continued expense discipline. Moving to asset quality on Slide 15. Asset quality remained stable on both a like and linked quarter basis, reflecting our strong credit risk culture and proactive approach to quickly resolving problem loans. During the quarter, our net charge-off ratio decreased 6 basis points to 58 basis points. The decrease in net charge-offs for the quarter reflects lower consumer losses due to normal second quarter seasonal declines and certain derisking initiatives put in place in the second half of 2022. Our loan loss provision declined $49 million linked quarter reflecting our stable credit performance, but it still exceeded net charge-offs for the quarter, resulting in a slight build to our overall loan loss allowance.

Our ALLL ratio increased to 1.57%, up 1 basis point sequentially and 14 basis points year-over-year, which reflects ongoing credit normalization and stress in the office sector. Despite the normalization, nonperforming loans remained relatively stable for the fifth consecutive quarter, while total delinquencies increased just 2 basis points on a linked quarter basis. Wholesale criticized loans declined $1 billion linked quarter to $10.8 billion. Included in our appendix is updated data on our office portfolio, which is virtually unchanged at 1.6% of total loans. However, we did increase our reserve on this portfolio from 9.3% to 9.7% during the quarter to reflect continued stress in the sector. Approximately 6.3% of our office portfolio is currently classified as nonperforming compared with 5.5% at March 31.

Approximately 90% of these loan balances are paying in accordance with the original terms of the loan. Notably, approximately 22% of our office portfolio is housed within our Community Banking and wealth segments where loan sizes tend to be more granular, guarantor support more prevalent and overall loss is lower. We expect stress to remain in the office sector and believe that the size of our portfolio is manageable and well reserved, but our position is to be very proactive in identifying and resolving issues in this portfolio.

Turning now to capital on Slide 16. Truist CET1 ratio increased from 10.1% at March 31 to 11.6% at June 30. The increase was driven by the gain on the sale of Truist Insurance Holdings and organic capital generation which was partially offset by the loss on the sale of certain available-for-sale investment securities during the quarter, which I addressed earlier. Importantly, the sale of TIH creates capacity for Truist to pursue growth opportunities in our consumer and wholesale banking businesses and to return significant capital to shareholders as evidenced by our share buyback program. Truist is well positioned to weather a wide variety of economic scenarios, which was evident in our most recent CCAR stress test results released in late June.

Specifically, Truist had the second lowest C&I loan loss rate and the third lowest CET1 erosion rate versus our peers. Our stress capital buffer will improve by 10 basis points to 2.8% effective October 1. At June 30, our CET1 ratio was 430 basis points higher than our new regulatory minimum of 7.3%, leaving us well positioned to both grow our balance sheet and return capital to shareholders. Our increased level of capital accelerates our ability to meet increasing standards for capital and liquidity in the industry as our estimated CET1 capital ratio under proposed Basel III end game rules improved 20 basis points to 9.1% at June 30, which is 180 basis points above our new regulatory minimum. And now I will review updated guidance or updated guidance on Slide 17.

Looking into the third quarter of 2024, we expect revenue to increase 1% to 2% from second quarter 2024 adjusted revenue of $5 billion. We expect net interest income to increase 2% to 3% in the third quarter, primarily driven by a full quarter impact of the balance sheet repositioning completed on May 6. We expect noninterest income to remain relatively stable on a linked quarter basis. Adjusted expenses of $2.8 billion in the second quarter are expected to increase by 3% in the third quarter due to higher professional fees, software costs and higher marketing costs. For the full year 2024, we previously expected revenues to be down 0.5% to 1.5%. We now expect total revenues to decline by approximately 0.5% to 1% in 2024. Our updated outlook is based on slightly better client deposit balance performance, partially offset by lower client loan demand and our updated view of interest rates, which now assumes just one reduction in the federal funds rate in November of this year.

Consistent with our previous expense outlook, we expect full year 2024 adjusted expenses to remain approximately flat over '23 adjusted expenses of $11.4 billion. In terms of asset quality, we continue to expect net charge-offs of about 65 basis points in 2024. As Bill previously mentioned, we are targeting approximately $500 million of share repurchases per quarter for the remainder of the year as part of our share repurchase authorization announced in late June. Finally, we expect our effective tax rate to approximate 16% or 19% on a taxable equivalent basis in both the third and fourth quarters of 2024. Now, I'll hand it back to Bill for some final remarks.

[William Rogers, executive]

Great. Thanks, Mike. So our top priorities for 2024 are unchanged. They include growing and deepening relationships with core clients, maintaining our expense discipline, returning capital to our shareholders via share buybacks and our common strong dividend. And enhancing our digital experience through T3, all while maintaining and strengthening strong risk controls and asset quality metrics. We made demonstrable progress on these priorities during the quarter, and I'm really proud of the results our teammates delivered, which included solid underlying earnings, improved momentum and sound asset quality. All this was accomplished while also completing the divestiture of Truist Insurance Holdings and repositioning our balance sheet during the quarter. .

These actions created significant capital capacity to grow our consumer and wholesale businesses and return capital to shareholders via our strong common dividend, and our recently announced repurchase authorization of up to $5 billion of our common stock. In addition, our significantly stronger balance sheet is well positioned to weather an even wider range of economic and interest rate environments. Although the balance sheet repositioning completed during the quarter is expected to replace TIH's earnings in the near term, we recognize that our increased level of capital will result in near-term dilution to our return on average tangible common equity ratio. As I've said previously, our starting point for our ROATCE is exactly that. It's a starting point.

We're going to move with pace to deploy our capital, improve our returns. We're not going to be in a rush to leverage capital to meet short-term expectations that do not have long-term positive impact on our company, clients and shareholders. We have a clear understanding of not only where we want to win, but where we want to win profitably. We'll look to share more of our plan with you as we progress through the remainder of this year. I can say that I'm encouraged that much of the profitability improvement potential we are working towards is centered on further deepening of existing client relationships and verticals and product lines that already exist at Truist. We have great confidence in our ability to further penetrate our existing client base, grow our core banking business and help new and existing clients achieve financial success by delivering our commercial, consumer payments, investment banking and wealth platform given the ongoing investments through our existing footprint and specialty areas.

In wholesale, we've invested in our investment banking and trading platform over the last several years. We've also hired experienced bankers in key industry verticals and products. These investments have resulted in greater mind share with our clients across many industry verticals and an increase in the number of lead roles across several product lines. Most recently, we've invested heavily in our payments business and have made key leadership additions as this is an area where we see significant opportunity for growth over time, not only with new clients, but also within our existing client base. We have a clear focus, high expectations and a compelling teammate value proposition. Many of our teammates have risen to this new challenge. And we have very successfully hired additional strong talent in wholesale, primarily from larger institutions who have experience and are thriving in our purpose-driven high-performance culture.

We plan to continue adding talent in wholesale with a specific focus on further building out our middle market commercial lending segment, which represents one of the largest growth opportunities within our regional business. We will primarily focus on industries that support existing corporate investment banking coverage and expertise. We're making these investments while also adhering to our expense discipline, which is helping fund investments in technology to improve the client experience and also to improve risk management. In consumer, I'm really encouraged with our momentum. Our internal client satisfaction scores continue to improve as evidenced by increased net new checking account production, increased primacy and lower attrition rates. Net new checking account production was once again positive in the second quarter as we added 38,000 new consumer and business accounts.

Importantly, we're also seeing year-over-year improvement in account attrition rates and increase primacy and usage within new account openings. As I previously mentioned, we added 180,000 new accounts during the quarter, including nearly 70,000 new-to-bank clients through our digital channels, which represented a 17% increase. In addition to an increase in account openings, we're also seeing improvement in the funding of our digital account openings with balances up 60% over the second quarter of last year. In Consumer and small business lending, we've been consistently adding new small business lenders across our footprint. In the second quarter, small business applications increased 15% linked quarter, resulting in a 10% increase in our pipeline giving us confidence that average consumer balance is excluding runoff in residential mortgages, will stabilize in the third quarter.

In conclusion, I'm pleased with the progress we've made as a company at the midpoint of this year, but we acknowledge there's more work to do as we strive to produce better results in the future. We have tremendous momentum within our company. We have momentum with our clients, and we've got great momentum with our teammates. We have an incredible franchise, energized, purposeful teammates and specialized capabilities that our clients value. We think the ability to grow our core banking business, our profitability and return significant amounts of capital to our shareholders in the form of dividends and share repurchases over the next several years is a unique differentiating factor for Truist. I am optimistic about our future. I look forward to operating our company from our increased position of financial strength.

And finally, I'd be remiss if I didn't thank all of our incredible teammates and our great leaders for their incredible purposeful focus and productivity and moving our company forward. So Brad, with that, let me hand it over back over to you for Q&A.

[Bradley Milsaps, executive]

Thank you, Bill. Betsy, at this time, will you please explain how our listeners can participate in the Q&A session. [Operator Instructions]

[Operator]

[Operator Instructions] The first question today comes from Ryan Nash with Goldman Sachs.

[Ryan Nash, analyst]

Maybe to start off with NII. It feels post restructuring, we bottomed now and you should get a step up next quarter. But can you maybe just talk about the drivers of sequential NII growth over the next few quarters? Do you expect margin improvement? And then how do you think about where the margin could be headed over the medium term? And I have a follow-up.

[Michael Maguire, executive]

Ryan, we mentioned in our comments that we do expect the NII to improve next quarter by 2% to 3%. Really, the bulk of that is driven by just the full quarter impact of the repositioning that we completed back in May. We continue to expect there to be some pressure on client deposit balances as well as loan balances. So maybe a touch conservative there. We did have some nice just to say it just some nice outperformance in the second quarter on client deposit balances, which really helped stabilize that core NII ex the bonds. But that's really sort of the story for Q2. And I think Q4 just looking out a little further, if you think about kind of rest of year trajectory, kind of more of the same, right? I mean we mentioned we've got a November cut in. We think that helps a touch, but that is the first cut, and it's pretty late. So we've got pretty modest expectations around the impact there.

And I think for us, really, what will stimulate some improvement on the NII side will just be some of the core balances of getting client loan demand increased getting -- which hopefully will generate balances as well. And I always mention this, I mean we're very focused around the company, pick your segment or LOB everybody in the company is very focused on realizing that growth opportunity once it presents itself. It's just -- and you've heard this from I think, others this week and last week, there just has really not been a lot of client activity.

[Ryan Nash, analyst]

Got it. Maybe this one for Mike or Bill, as a follow-up to Mike's comments. So it looks like loan balances are getting closer to level off, but Mike, you highlighted 3Q, you're expecting it to be muted. And my interpretation was that it doesn't sound like you're expecting a lot of growth in the fourth quarter. So maybe just flesh those expectations a little further. Bill, when do you expect it to turn positive? What do you think the drivers are? And I guess given the strength of your footprint, do you actually expect Truist to begin to outperform peers on growth at some point?

[William Rogers, executive]

Yes. Let me -- I'll start with the second part of that first, and the answer to that is yes. But it has to have growth. We've got to sort of see that coming. Clients are on the sidelines. I mean we can feel that in our conversations. Our conversations are increasingly a lot more strategic. So I feel like we actually even know more about what our clients are thinking. But they're a bit on the sidelines. Our production was up. So we saw production being up. It was really probably best in consumer, where it was up a little more significantly. Utilization is just absolutely flat, but paydowns were also up. So in our clients that are towards the larger side, they were accessing the capital markets. And the good news is, I mean, you see that in our investment banking, particularly in our DCM results. I mean, we're -- our capture rate on that is really, really high. So we sort of see the other part of that. .

Despite the pipelines being up, production being up, I just want to be careful, Ryan, about sort of like putting a stake in the ground and saying, okay, it's going to return on X. I mean, take this week at, I mean there's a lot of uncertainty out there in the world and in the market. So while clients have capacity, we're coiled spring, ready to go, position better than anybody. I think we just want to be realistic about when and if that -- well, [indiscernible], but when that's going to come back and when it's going to come back with some strength. And when it does, I think to your latter part of your question, we're in the best markets, and I think we should disproportionately grow faster.

[Operator]

The next question comes from Ken Usdin with Jefferies.

[Kenneth Usdin, analyst]

I guess as a follow-up to that line of thought, Bill, you mentioned that you'd been methodical and kind of not get yourself to just use near term. So I'm just wondering if you can kind of just remind us again, now that we've got the buyback out there now that the restructuring is done, I just gave a little more color on the loan growth. Talk about prioritization what would lead you to do kind of one more than the other in terms of moving the ball of all things excess capital related and then how that kind of leads into your pacing choices on the buyback specifically?

[William Rogers, executive]

Yes, Ken, great question. And obviously, something that's important, and we're going to be calibrating priority 1, 2 and 3 is growing our business. I mean we think we've got a great franchise, a great market. We're really well positioned. We've invested in talent. We've invested in capabilities. So I think we've got the capacity and the capability to grow in our core business. So that is absolutely going to be the primary focus. We raised capital in the most efficient way possible. You just couldn't have raised it more efficiently than how we raise capital. And we want to make sure that we deploy that also in the most efficient way possible long-term benefit for our shareholders. So I think we've put together a compelling return perspective with what Mike outlined. We're going to do about $500 million a quarter for the next couple of quarters. I would presume we'd enter next year in sort of the same kind of -- same kind of pace -- but remember, that's also on top of we've got a really strong dividend.

So in terms of total dollars returned to shareholders over the next 6 months, I mean, we have a really compelling value proposition. So we're going to calibrate that as we go along. We don't want to over-index on one and lose this incredible capital advantage we have for growth.

[Kenneth Usdin, analyst]

Got it. And then secondly, as you enjoy this incremental NII benefit, it does seem like in the second half certainly in the third quarter, expenses look to be increasing. Can you give us also a little bit of context in terms of how you're calibrating the new better revenue outlook to making those investments and the pacing just flattish, flat is a tough like overall guide to see through, but kind of at flat, it implies that third quarter and in fourth quarter expenses are going higher. Just wondering if you could provide a little context underneath that about your pacing of your investment spending to the areas you mentioned earlier.

[Michael Maguire, executive]

Ken, it's Mike. Maybe take a swing at that one. You're right. I mean, look, we think we do see growth in the third quarter on the expense side. I think that's still on a like basis, close to flat, maybe even a touch better. And I think that implies, if you think about flat, maybe a touch of growth in the fourth as well. Look, I mean, the first half of the year, we were very focused on cost discipline and frankly, following through on our commitment around flat that's still important to us. But as we've sort of gotten to the Midway mark, it's -- there have been certain projects, whether it be some marketing spend, sort of you name it, nits and nats that perhaps were delayed, and that drove some of the beat maybe even this quarter and even in last quarter. And so some of that stuff just makes a ton of sense.

And -- and as we really shift our mindset and you heard Bill talk a little bit about it in his prepared remarks around some of the hiring we're doing in middle market lending, as an example, around our payments business, some calibrating of marketing spend, et cetera, these are all factors that are driving our outlook for the second half. And so look, we feel and we've said this really since last fall, we are very, very confident and committed to being sort of 0.0 or better on expenses this year.

[William Rogers, executive]

Yes. And Ken, just to add to that. I mean when we undertook this approach in the fall of last year. I mean, we were always really clear this was going to include investments and the timing of those sort of, as Mike pointed out, come quarter-to-quarter. And we're seeing the benefit of that. I mean the investments we made in payments, investment made in talent. So the expense guidance was always coincident with that. I'll just say because I think it's really important, the discipline that we have in the company around both of those has significantly increased. So we sort of know the next dollar to invest with a lot of confidence. And we also have just incredibly strong discipline around the expense side and where the opportunities are. So I think we've got the right balance here. And as Mike said, wholly committed to a flat or better expense proposition for the remainder of this year.

[Operator]

The next question comes from Scott Siefers with Piper Sandler.

[Robert Siefers, analyst]

Mike, I know you suggested you all are relatively neutral to rate moves. I think still kind of for better or worse, a lot of investors consider us among the kind of closer to the liability sensitive side of the equation. In that vein, you anticipate just 1 rate cut in the remainder of the year, how would another 1 or 2 affect that NII guidance? Obviously, timing would be a factor. But just curious on your overall thoughts?

[Michael Maguire, executive]

Yes, Scott. Yes, so we do have the 1 cut in November. If we got 1 earlier, call it, I think the curve today has a September cut maybe December and maybe even a touch more than that. That would be a that would be a help for us. We -- look, we -- our baseline path does show benefit from down rates. I think the question, and I brought it up in sort of my earlier question, I think that Ryan asked that first cut, given how high we are and how late we expected. We're just trying to be reasonable and thinking about the benefit we'll get there. But I think you're right. I think if we got one earlier and then maybe perhaps a second, that would be a good guide.

I will say this, I think just given where we are in terms of how high we are and how long we've been here and some of the client behavior that we're able to observe. I think the more impactful catalyst will be, again, getting some of that loan demand and balance growth and client deposit growth as well. So would take it all.

[Robert Siefers, analyst]

Perfect. Okay, good. And then maybe switching gears, just a second. I was hoping you might be able to address the investment banking line down a little in the quarter, but I'd say you at least I see you're still well above recent run rate, so still a very strong number. Maybe if you could touch to or speak to sort of overall thoughts on the outlook and then maybe a thought on what you might consider as sort of a sustainable base of revenues for you all?

[William Rogers, executive]

Yes. I mean, we're the investment banking business is always going to be a little quarter-to-quarter variation. In the first quarter, we had one of the highest M&A fees in our company's history, so that sort of changed impact of that a bit. But most of [indiscernible], I feel really good about the momentum. So if you look at sort of our relevance, I mean, we're gaining share in virtually every category. The things that we're doing in terms of active book runner and lift lead transactions in ECM, half of our fees were being from active book runner, a dramatic change from where we've been in the past. Lots of left leads transactions in there and again, increased market share. And most importantly, just really good relevance. So back to sort of the comment about talent and comment about adding talent and upgrading our tool kits our commercial bankers' focus and understanding of our capabilities is just increasing exponentially. So our dialogue, as I mentioned, with our clients, is really strong.

It's all strategic dialogue versus product dialogue, which is really good. And I think for the balance of the year, I mean, I think this is the kind of momentum we ought to be able to continue in investment banking. So I think we feel good about that.

[Operator]

The next question comes from Erika Najarian with UBS.

[L. Erika Penala, analyst]

Just putting everything that you said together, Mike, maybe all address this one to you. Your net interest income was better than consensus, both mostly on the net interest margin. You mentioned that the impact of the margin from balance sheet restructuring is a partial one. If I look at the line items on noninterest income, you also beat consensus there for the quarter in terms of the core items and consensus is at down 1, which is at the low end of your revenue range. I guess, what are we missing? And I heard your response to Ryan's question about you expect balances to continue to come down in both the loan and deposit side. But if your starting point on net interest margin is higher than consensus and then you have a little bit more pull-through a month pull-through in the third quarter and your neutral to rates in September will help. I guess, are you being very conservative on what you could accomplish in the second half of the year? Because I get the conservatism from a business standpoint, but from a rate standpoint, it feels like you guys are in good shape to maybe do a little bit better.

[Michael Maguire, executive]

Yes, Erika, I appreciate the question. I mean Look, I think there was a beat on balances in the second quarter, especially if you look at it on an average basis. And so our rate paid was a touch better than we thought. And so you're right, starting position better than where we sort of would have expected to be in April. I think the pressures that we expected in the second quarter, we still believe will persist in the third, especially in terms of balances and rate paid. Another piece of this is that while we did get some benefit on our net interest margin from the bonds, like recouponing, some of the benefit as well is just on a smaller balance sheet. So we did, for example, we paid down some wholesale liabilities late in the second that will come through in the third on an average basis. So you'll see more net interest margin improvement, but it will be on a more efficient, smaller balance sheet. .

On rates, I don't want to call the ball on conservative, non [indiscernible]. We -- I think we're cautious on what benefit we'll get on the first cut or two. We we've thought about it a lot, done a lot of work and analysis. You look at sort of historically over the last, call it, 30 years, the down cycles and the betas have been slow, right? So I think that's in our thinking, too, for the rest of the year. And look, I've said this a couple of times, I think for us, the thing we feel fine about the guidance we gave. I think what would really be upside for us would be a little bit of pull through on more client activity, the ability to generate more loan volume with that will come deposits, you get that and maybe you get Scott's extra cut and early and that feels good. I mean, the hertz are obviously we've got no cuts perhaps, maybe that's not such a bad guy and then just the pressure that we've been seeing on balances, both deposits and loans.

[L. Erika Penala, analyst]

Got it. And my second question is for Bill on capital and returns. And maybe I'm just reading too much in the tea leaves because investors are very curious the authorization for the $5 billion is through 2026. You said during your prepared remarks and tell me if I'm being too ticky-tacky, but you said initially target $5 billion for the remainder of the year. And I guess investors are wondering about timing, and I know someone had already asked Ken and were you asked about capital priorities. But what's the timing in terms of that -- fulfilling that $5 billion authority? And as I think about returns, I know you'll probably tell us more during fall conference season. But initially, this franchise together with TIH had an ROTCE potential in the low 20s. With TIH out, could you still achieve like a high-teens [indiscernible] and I'm sure you will get more details for [indiscernible].

[William Rogers, executive]

Yes. Erika, just to correct one thing. We said sort of $1 billion through the remainder of this year and we'll sort of start the next year. The reason to put the authorization of up to and make it through '26 is just to give us that kind of flexibility in terms of how we think about that. So we're going to calibrate that against our growth opportunities and where we see an ability to invest in our franchise, and we're going to be disciplined about it. So -- and then as I mentioned earlier, remember, this is with a really strong dividend as well. So I think you can't talk about one without talking about the other in terms of total return to shareholders. So I think our unique capability to have a really good return to shareholders over the certainly near term and medium term from the dividend buyback is actually quite significant.

And then you put on top of that, our ability to earn and earn profitably and grow our business. So I think that's -- we're trying to look at all of this in the big mix. As it relates to our OTC specifically, yes, I mean, the past numbers of the past numbers, we sort of have to start from the business model that we have now. Again, we're going to give a little more guidance on that with a little more specificity as we get towards the end of the year, as you mentioned. I think we'll have a little more knowledge as to sort of overall capital requirements. And while [indiscernible] may not be complete, I think we might have a better picture of where we might be and what the sort of CET1 base might be that we'd operate from and think about how to put all those mixes together as it relates to growth as well. So irrespective of the target itself, the growth to the target, I think, is a really compelling proposition for Truist.

[Operator]

The next question comes from Betsy Graseck with Morgan Stanley.

[Betsy Graseck, analyst]

A bit of a follow-up on last question of Erika regarding Capital when I put together the $500 million that you're looking for the buybacks and the dividend. It looks like you're -- for the most part, returning earnings, quarterly earnings to investors, at least for the rest of this year, and RWA doesn't change. That means you've got CET1 stable where it is today. I know you probably not -- you didn't put a target CET1 out. I'm going to guess you're going to highlight that we need the capital rules to put that out there. But is that a fair conclusion that [indiscernible] is essentially what we should anticipate as we roll through the rest of this year?

[Michael Maguire, executive]

Yes, Betsy. I think that's rough out. You could see us sort of sliding sideways for a while for the reasons you mentioned. You're right. I mean you take the $500 million buyback and, call it, $700 million or so dividend, you're approximately at this is rough earnings, right? And -- and if you're right, we don't expect significant ROA improvement or decline over the period. I'll just say this. I mean you mentioned sort of CET1 target, Bill referred to it as well. I think a couple of things just to think about there. One, we like operating with a higher level of capital in today's world, one. Affords us the right, we think, strength and resiliency and ability to sort of react to the world. Importantly, we've got a growth agenda. We're focused on prosecuting. That's company-wide you feel that with any especially frontline, but really across the whole company. And then Bill mentioned sort of the capability to return capital, and that can come in various various forms. But yes, I think modeling us somewhat flat short term. But again, we -- our expectation is that we'll begin to grow our WAs next year. And -- and so that's how we're thinking about it.

[Betsy Graseck, analyst]

Right. And then on the paydowns that you experienced in the C&I book, how much of that did you capture in the capital markets business. In other words, if folks are terming out and paying down C&I. Is that -- are we seeing majority recaptured in the fee line?

[William Rogers, executive]

Yes. It's hard to do that calculation sort of perfectly and we spend a lot of time thinking about it. But if you sort of look at the overall line. This was one of our best DCM quarters in a really long time. So our capture rates are really high. It's hard to put an exact percentage on that because the there are puts and takes and what you've gotten it otherwise? And was it related to this, that or the other. But it's really high, and it's reflected in our overall DCM growth.

[Operator]

The next question comes from John Pancari with Evercore.

[John Pancari, analyst]

What it seems like just touch on credit a little bit. I know you added modestly to the loan loss reserve and looks like much of that was was on the office side. I wanted to get your thoughts there in terms of what you're seeing right now in terms of credit progression? What are the areas that you're seeing some weakening. You had some pressure on delinquencies and nonaccruals. And could that justify incremental modest additions to the reserve from here? Or could you see it stable or even some releases from this point?

[Clarke Starnes, executive]

John, this is Clarke. As Mike and Bill said, we were very pleased with the overall asset quality for the quarter. And we generally had stable delinquencies. We had flat NPLs and our losses were a touch lower, particularly in the consumer area. So we still see in the consumer side, the normalization that's occurring due to higher rates, inflation and the stimulus burn down, particularly for the lowering consumer. So we've been a little careful there even in this quarter's reserve. We added a little bit for those lower-income consumer finance areas. And then you're right, on the CRE side and the office exposure, we still just want to make sure we're addressing uncertainty there.

On the wholesale C&I side, we actually had as Bill said, lower watch list and even though we're monitoring areas like the leverage book, consumer discretionary, senior care, transportation, some of those more rate-sensitive areas. We've not had any big sector issues today to spend more episodic. So when we think about our reserves, we feel really good about the adequacy of where we are today, and it reflects what we know today. So unless there's a substantial change in the economic outlook or that level of uncertainty in areas of stress like CRE office would emerge higher, we would expect our reserve levels for the remainder of '24 to be relatively stable.

[John Pancari, analyst]

Okay. Great. And then separately, on the fee side, just I know you mentioned relatively stable in terms of the noninterest income outlook for the third quarter. Maybe can you talk about fourth quarter a little bit, how we should think about the progression into fourth quarter and into '25. And then separately, as part of that, on the investment banking side, you made some pretty solid talent acquisition, and you've cited the intent that you're investing there and the progress you've made. Can you maybe just talk to us about is the build-out ongoing? Is there a focused effort to upscale the investment banking business even more in terms of the reach and breadth of the business and maybe what the long-term revenue contribution from that business that you anticipate?

[William Rogers, executive]

Yes. Maybe I'll start with the latter, Mike, and then I'll turn it over to you for [indiscernible] that's okay. So the the build-out of investment banking business has been decades plus. So this isn't sort of a new thing and so it has been consistent. I think the way you described it is exactly right. We'll continue to build where we have relevance, where we have opportunity. And so we can be competitive and win in our markets. I think the part that gets missed though is the investment we're making around the investment banking business. So this is the investment that we're making with our commercial teams and our middle market teams and expanding their knowledge and capability to talk to clients about the things that are available to them. And so think about the the amount of clients in our commercial business that are now private equity owned and our capability to be relevant in those discussions and help them along that flight path.

So investments not just in the business itself, but it's in everything that surrounds the business and in support of. We like the pace that we're growing. And I think we've had a really good CAGR. If you sort of go back over time and look at the CAGR of that business, you'd sort of say that's a really good growth pattern. Importantly, we're doing it profitably, which is also important. So we have a really good efficiency of that business, certainly on a relative basis. And we want to keep all of those in check. I mean, we don't want to grow faster than the market. We want to grow coincident with the opportunity that we have within our markets. We want to do it profitably, and we want to do it sustainably. So we want to have a little less variability relative to that business. So it's tied to more of our core client capability than the vagaries of a particular market. Mike, there was [indiscernible].

[Michael Maguire, executive]

Yes, John, I think you asked us about the trajectory for the second half for fees. I think some -- you don't know puts and [indiscernible] to take. Our outlook is relatively stable, really for the second half, so call it stable, stable.

[William Rogers, executive]

And the upside to that is [indiscernible]. Yes. I mean the upside is this business has been. We're trying to take an approach with what we know right now.

[Operator]

The next question comes from Mike Mayo with Wells Fargo.

[Michael Mayo, analyst]

Not a new question, but it goes back to your efficiency ratio and your expense guide, and you mentioned higher in the third quarter and maybe any preview for next year or how you're thinking about that. And that's partly in the context, there's a Bloomberg story out saying that 11 of the 22 large banks fall short on operational risk according to the OCC. Now that's not confirmed by the OCC. There's no specific companies given, and I know you're not allowed to say what your regulatory ratings are. But if you or any other bank did have a deficient operational risk rating, what would that mean? Would it mean, I don't know what would that mean? Are you able to say if you had ever been in that position in the past 5 years. I know you had some operational issues that you worked through. And I also note, Bill, that your purpose is being open every day for your clients and employees and your communities. So I know you put that as a very high priority. So what degree has that hurt the efficiency in the past few years? And to what degree could that still be a drag on efficiency going ahead?

[William Rogers, executive]

Yes, Mike. You answer -- asked and answered part of your question as it relates to what will coming on and not coming on. But look, I've said very consistently actually since the day Truist was formed is the size and complexity of our organization, we're going to invest in our risk framework. We're going to invest in a durable risk framework so we can stay competitive. We can stay appropriate with our regulators. And that's always been part of this expense profile. So I think, I think even in today's prepared remarks, I mean, I'm always consistent with that. And I think everybody has got to stay in that mode.

Post of March of last year, irrespective of anybody's ratings, there was just an increased focus on creating a durable risk profile. So we're going to continue to be in that mode. I can't see that changing short term, medium term or long term. Are there peaks and valleys in that as you go up? Yes. Does it increase proportionately? Absolutely. I mean I just think that's the -- that's the price of being in our business and also the importance of creating a durable, sustainable risk framework for a company of our size and a company of our opportunity.

[Michael Mayo, analyst]

Well, the $20 billion market cap question relates to the last part of your answer is for a company of our size. So I'm just wondering, and it's an ongoing wonder to what degree does that investment in the risk framework hurt Truist disproportionately versus banks larger than your size? And how has that changed?

[William Rogers, executive]

Yes. I mean they are efficient frontiers is the way, Mike, that I like to talk about, they're [indiscernible] frontiers and where you are on the efficient frontier relative to that. Today, I feel like we're in a good place. So we're in a good place in terms of the investments that we need and should make relative to our company, our size and our ability to return and have an efficient company relative to that. So I think we're at a good place. But that efficient frontier moves. So -- you always have to be flexible and think about that in the context of where it moves, and we're conscious of that. So today, I feel like we're in a good place. .

By the way, we merged our companies because we thought we were at a different place and that, that was going to be more complex, and we needed to a company of the size and scale sort of seeing -- I mean we didn't project March of last year in fairness, but understanding that the complexity and the durability and the investments needed to create that kind of risk platform was going to be needed. So that efficient frontier, I think we're at a good place on it, but it does move.

[Michael Mayo, analyst]

And last, short follow-up. The definition of good place as it relates to 2025. I know you usually don't give guidance for a few quarters from now, but other banks have mentioned record NII, positive operating leverage, lower expenses next year. Can you give us a sneak peak of good place as it relates to 2025 financials?

[William Rogers, executive]

Yes. I mean, our sneak peek of the momentum we're creating right now. So that's the sneak peak. And we want to continue to do that. Mike, you and I've talked about that. We have a strong focus on positive operating leverage. So, all of our businesses have plans that are focused on positive operating leverage. That's what they try to build over time. The controllable -- more controllable factor over that is on the expense side right now, and I'm really pleased with the progress we're making and expect to continue to have that kind of discipline going forward. Those expenses will better reflect the revenue opportunity that we see in next year. So be assured that we've got a focus on creating that, but also be confident that we're building momentum. And I think this order is good evidence of that. And our guidance for the rest of the year is good evidence of that.

[Operator]

The next question comes from Ebrahim Poonawala with Bank of America.

[Ebrahim Poonawala, analyst]

Just a quick follow-up, Bill, on your response to Mike's question. As we think about -- I just want to make sure we understand this correctly, as we think about next year, ex any sort of revenue momentum taking sort of the top line higher, should we expect expenses -- like -- the Street is expecting about $2.9 billion to $3 billion per quarter in expense run rate continuing in '25. Is that fair to assume [indiscernible] equal absent sort of revenue growth?

[William Rogers, executive]

Yes, thanks. I'm not going to give expense guidance for next year. Just to say, confidence that we'll be focused on positive operating leverage, confident that we've got great expense discipline and expenses will more parallel the revenue opportunity. So if we see the investments that we're making better growth opportunities in our markets, we're going to take advantage of that. And if that requires a requisite expense increase, then we'll do that. But that will all be in the appropriate context a focus on positive operating leverage and efficient company that has high returns.

[Ebrahim Poonawala, analyst]

Noted. And just one quick follow-up. Maybe if you could remind us post sort of the acquisition integration, where we stand in terms of any big tech upgrades coming on the deposit and lending platforms as we think about the next year or two.

[William Rogers, executive]

Yes. I mean all that's been factored into the discussions that we have. I mean, our ability this year, particularly to invest a lot on the payment side is all predicated on the existing platforms that we have, the advent of -- the use of APIs have been really, really great opportunities to continue to invest. We had huge investments in our lending portfolios as part of the merger. So there's no like one big stair step sequenced investment. These are continuous investments in our platform and capabilities over time.

[Ebrahim Poonawala, analyst]

And is it safe to assume that from a tech platform standpoint, Truist is not at a disadvantage relative to peers who probably have not done deals and just been working on. There's an impression out there that you have a lot more sort of heavy lifting to do there, that's put you back. Sounds like that's not the case, but I just wanted to confirm.

[William Rogers, executive]

Well, the momentum we've seen in the last several quarters, the impression from our clients is that we have a really good platform. So our acquisition of clients, our performance metrics, client satisfaction scores, all the things that we look in terms of how do clients think about us is real positive and continuing.

[Operator]

We will take our last question today from Matt O'Connor with Deutsche Bank.

[Matthew O'Connor, analyst]

You kind of implied the loans and deposit balances might be down a little bit again in 3Q, if I heard that correctly, and they were down a little bit in 2Q here. Just thoughts on where they bottom. And I understand like when we're looking at industry data where there's less than 1% loan growth, like we're talking about really small numbers, but it seems like you're still kind of lagging the H8 data a little bit and it's understandable given how much has been going on in the company. And you talked about spending more in marketing and hiring people. But just thoughts on kind of where those level out and we start tracking the H8 data a little bit more.

[Michael Maguire, executive]

Matt, thanks for the question. Maybe just taking loans first, we're hopeful we'll see some relief, we were down a little less than 1% this quarter average in the third quarter. I think, again, base case is probably expected to be down, maybe not quite as much, but we'd love to see that be different, but that's sort of what we're thinking about. And then hopefully, kind of stable from there. Same on deposits, actually, deposits a little lower, perhaps in the third. We mentioned that we felt like we had some outperformance in the second quarter. We did late in the quarter, just like a lot of others, some of the just sort of seasonality and tax payments we saw balance is a little lower at the end of the quarter. That's not unusual. So we probably expect a little bit of pressure in the third quarter as well. But again, even that's stabilizing in the fourth. So I think down a touch in the third for both and then hopefully stable in the fourth.

[Matthew O'Connor, analyst]

Okay. That's helpful. And then just as you think about, call it, restarting kind of the loan deposit engine internally, you did allude to the marketing and hiring people. But what's like the process of just getting the message out to kind of existing employees? Like you got all the capital, you got [indiscernible], like you could be front-footed. And I know it takes time to kind of flip the switch, again, especially in an environment where there's still little kind of growth out there. But just touch on a couple of things you're doing to drive that.

[William Rogers, executive]

Yes, sure. Rest assured that our teammates are highly focused. And there are places that we can dial more specifically. And you've sort of seen it. Our consumer production was up 37% over a linked quarter, premier banking lending number sort of similar per branch production, those type of things. So the places that we can dial in a little bit and then on the wholesale side, it's just a lot about training, it's a lot about hiring. It's a lot about market opportunities. It's a lot about dialogue with clients. So we look at all the pitches kind of approach, and we're seeing really good activity. .

But our teammates are on offense. I may make -- let there be no confusion. I mean our teammates are on offense. They are not in a defensive position. Trust me, the shift for them happen quite quickly. There was a -- you could hear it and feel it in terms of momentum. People are attracted to come work for our franchise for some of the same reasons as we have the capital and capability to invest in the future. So rest assured that your point is right. I mean, the battleship it's hard to turn. But in terms of its direction, clear direction, clear communication and clear focus from our teams.

[Operator]

This concludes our question-and-answer session. I would like to turn the conference back over to Brad Milsaps for any closing remarks.

[Bradley Milsaps, executive]

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

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.