Truist Financial Corp. closed a net 103 branches in the fourth quarter of 2020 and plans to close an additional 226 branches in the first quarter on its way to a total 800 branch closures targeted after the merger between BB&T Corp. and SunTrust Banks Inc. that created the company.
The bank plans to complete all the branch closures by the first quarter of 2022 and is still targeting $1.6 billion in annual cost savings to be fully realized by the end of 2022. It said it achieved about 40% of the cost savings in the fourth quarter of 2020.
Truist also gave a more complete look at its expense forecast for the merger, projecting $2.1 billion in more typical consolidation-related charges, compared with an initial expectation of about $2 billion, which includes things such as changing signs and decommissioning retired systems. The company also expects another $1.8 billion in expenses that executives described as encompassing accelerated technology upgrades, such as the development of new commercial and mortgage delivery platforms that the bank believes will provide ongoing benefits.
The $1.8 billion pool is because Truist is "doing a lot of technology projects all at once," CFO Daryl Bible said on a call to discuss fourth-quarter results. "We just thought it was fair to call out because you would never really think of doing this all at once if wasn't for the merger."
Truist has incurred about $1.9 billion of the roughly $3.9 billion in projected merger expenses so far and does not expect either category to inflate run-rate expenses.
Truist also projected that its net interest margin would tick down 2 to 4 basis points sequentially in the first quarter of 2021, after a sequential decline of 2 basis points in the fourth quarter of 2020 to 3.08%. It projected a net charge-off rate of 30 to 45 basis points in the first quarter of 2021, up from 27 basis points in the fourth quarter of 2020.
The bank lowered its credit allowance by $30 million from the third quarter to $6.2 billion in the fourth quarter of 2020, reflecting a decision to exit a $1 billion portfolio of small-ticket commercial loans and leases. The portfolio was moved to held-for-sale loans.
Truist expects to do about $3 billion of loans under the latest round of the Paycheck Protection Program, or PPP, compared with about $13 billion under the original two allotments. It expects more than 90% of new and existing PPP loans to have been forgiven by the end of 2021. PPP forgiveness reduced commercial loans by about $1.4 billion in the fourth quarter of 2020.
