Why Truist Financial Corp (NYSE: TFC) Stock Is Volatile

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Truist Financial Corp (NYSE: TFC) stock fell over 1.5% on 16th October, 2020 (as of 11:01 am GMT-4; Source: Google finance) after the company posted lower than expected results for the third quarter of FY 20. The company’s reported net interest margin declined by 3 basis points, on the back of lower purchase accounting accretion. Core net interest margin expanded 5 basis points, which represents the first increase since the first quarter of 2019. Core margin benefited from strong DDA growth, lower funding costs, lower COVID-related deferred interest. However, lower yields on loans and securities remain a headwind.

During the quarter, the company used excess reserves to purchase $5 billion of high-quality securities, improving the yield on those assets by approximately 100 basis points. The asset sensitivity increased in the third quarter, and the company intends to stay slightly asset sensitive.

Moreover, the capital ratios expanded for the second straight quarter and are strong relative to regulatory requirements. The reported CET1 ratio increased to 10% from 9.7% last quarter. The company had also issued $925 million of preferred stock to strengthen the Tier 1 and total capital ratios. The recent assigned stress capital buffer of 270 basis points remained in effect until September when a revised stress capital buffer will be provided. The company plans to submit the capital plan in early November as required by the Federal Reserve. Further, the company’s liquidity remains strong with an LCR ratio of 117% and liquid asset buffer of 18.6%. The access to secured funding sources is strong with more than $200 billion of cash, securities and secured borrowings. The parent company is sufficient to cover 22 months of contractual and expected outflows with no inflows.

Additionally, the company experienced strong growth in digital banking. Truist had opened up 56,000 net new accounts versus 15,000 last quarter, on the back of digital and increased branch traffic. For the 12 months through August, the company has experienced a 21% rise in digital sales, 8% increase in active mobile users, 23% increase in mobile check deposits and a 5% increase in statement suppression.

TFC in the third quarter of FY 20 has reported the adjusted earnings per share of 97 cents, beating the analysts’ estimates for the adjusted earnings per share of 89 cents. The company had reported the adjusted revenue growth of  $5.57 billion in the third quarter of FY 20, beating the analysts’ estimates for revenue of $5.39 billion.

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