Advertisement

‘The main question:’ Does Truist’s $750M in cost cuts and major layoffs go far enough?

Is it enough?

That’s the $750-million question facing Truist bank, which disclosed this week it would make three-quarters of a billion dollars in expense cuts in the coming months, including “sizable” layoffs at the Charlotte-based bank.

Truist did not say how many of its workers would lose their jobs, but said the dismissals would happen between the third quarter of this year and the first quarter of 2024. CEO Bill Rogers delivered the presentation about the bank’s plans at a Barclays Global Financial Services Conference on Monday.

The job cuts would result in about $300 million in savings, according to the bank. Additional savings would come from $200 million in technology modernization and optimization, and $250 million from consolidating business operations over the next 12 to 18 months.

Rogers also detailed plans to consolidate the leadership team to have fewer layers of management. In 2019, Atlanta-based SunTrust and Winston-Salem-based BB&T merged in a $66 billion deal to form Truist, and chose Charlotte for the new bank’s headquarters city.

All of the changes have multiple goals, Truist said, including: simplify the business; accelerate franchise growth; lower growth of expenses; improve its capital position; and align compensation to shareholder return.

But Wells Fargo Securities analyst Mike Mayo, in a research note Monday after Truist detailed its plans but before Rogers spoke at the conference, said, “The main question w/(Truist’s) new reorg is whether it goes far enough with a target to reduce expense growth... Yet, it at least shows mgmt is taking tougher actions.”

As of June 30, Truist had assets of $555 billion, making it the seventh largest U.S. bank by asset total.

Truist CEO Bill Rogers delivered a presentation about the bank’s plans cost-cutting plan that include layoffs during a Barclays Global Financial Services Conference.
Truist CEO Bill Rogers delivered a presentation about the bank’s plans cost-cutting plan that include layoffs during a Barclays Global Financial Services Conference.

Truist’s struggles

Mayo has been vocal about the challenges facing Truist.

Investors are at “a boiling point” after the company’s most recent earnings call, Mayo told American Banker last week. Truist reported net income of $1.2 billion in the second quarter ending June 30, compared to $1.5 billion a year ago.

Mayo said Truist has one of banking’s best footprints, but hasn’t capitalized on that potential. “We expect this to change given increased pressure by investors and management’s own comments that it needs to improve the rate of expense growth,” he stated.

Another analyst, Bob Michele with JPMorgan, told Bloomberg TV that Truist is starting to address cost pressures by laying people off.

A couple weeks ago, Janney Montgomery Scott director of research Chris Marinac told Business North Carolina that Truist contends it met its targets for merger-related expense cuts. But inflation rates and COVID-era wage hikes forced the bank to spend more than it anticipated to spur revenue growth, Marinac said.

On Monday, he told the Winston-Salem Journal that Truist’s new initiatives could be a short-term catalyst for the stock.

Truist stock ended the trading day on Tuesday at $30.01 after starting the day at $30.37.

Some analysts question if Truist’s $750 million cost-cutting plan is enough.
Some analysts question if Truist’s $750 million cost-cutting plan is enough.

Truist’s planned layoffs

As of last year, the bank employed more than 50,000 workers throughout the U.S., including more than 3,000 people in the Charlotte area. Truist declined to say Tuesday how many jobs will be lost companywide or in Charlotte.

“As we continue to transform Truist to focus on our strengths and drive long-term growth and profitability, we’re hiring in some areas and rightsizing in others through natural attrition and planned staffing reductions,” Truist said in a statement to The Charlotte Observer on Tuesday.

The bank did not respond directly to any questions about its layoff plans.

In his report, Mayo said he suspects job losses “will be more higher-paying middle levels of management.”

Still, with all of the cost cutting that Truist has outlined, Mayo questioned “why more savings don’t reach the bottom line... The hope is that mgmt may be trying to under-promise.”