On Thursday, Stephens raised the price target for Truist Financial (NYSE:TFC) shares to $47.00, up from the previous $43.00, while maintaining an Overweight rating on the stock. The adjustment is a direct response to Truist Financial's recent strategic financial moves, including the sale of Truist Insurance Holdings (TIH) and a balance sheet restructuring initiative.
The sale of TIH had a less significant impact on earnings than the gains from reinvestments into higher-yielding securities. According to Stephens, the reinvestment will compensate for the approximate $0.45 per share earnings lost due to the TIH sale. Additionally, the analysis now incorporates anticipated share repurchase activity for the year 2025, forecasting a total payout of 89%.
The balance sheet restructuring is anticipated to influence the Common Equity Tier 1 (CET1) ratio by approximately 100 basis points (bps), and the share buyback is expected to contribute an additional 30bps. This is forecasted to lead to a 130bps decrease in the CET1 capital ratio, from a pro forma of 12.4% following the TIH sale to a predicted year-end 2025 figure.
With Truist's capital position now considered more robust, Stephens has increased the loan growth forecast for 2025 to 4%. This projection is based on the expectation of expansion opportunities in commercial and industrial (C&I) lending, as well as selected consumer lending areas. Prior to the merger of equals (MOE) between SunTrust Banks (NYSE:STI) and BB&T Corporation, which formed Truist, loan growth averaged between 3% and 3.5% annually.
Stephens concludes that the improved return on tangible common equity (ROTCE) through the fourth quarter of 2025 should facilitate an expansion of the stock's multiple. The revised price target reflects these anticipated improvements in Truist Financial's financial performance.
InvestingPro Insights
As Truist Financial continues to navigate through strategic financial changes, current data from InvestingPro highlights some key metrics and insights. Truist has demonstrated a commitment to shareholder returns, as evidenced by its track record of raising dividends for 9 consecutive years, an InvestingPro Tip that aligns with the company's recent moves. Moreover, the company's dividend yield stands at a notable 5.18%, reflecting its strong focus on returning value to shareholders.
Analysts have revised their earnings expectations downwards for the upcoming period, indicating potential challenges ahead. Despite this, Truist's net income is expected to grow this year, suggesting that the company may have strategies in place to counteract these headwinds. The InvestingPro Data also reveals a mixed financial picture, with a P/E Ratio (Adjusted) for the last twelve months as of Q1 2024 at 10.96, which could signal an attractive valuation to some investors, especially in comparison to the industry average.
Truist's price is trading near its 52-week high, with a price percentage of 99.63% of that high, indicating strong market confidence. This, coupled with a significant price uptick over the last six months of 31.36%, may interest investors looking for companies with positive momentum. For those seeking more in-depth analysis, there are additional InvestingPro Tips available that can provide further insights into Truist's financial health and future prospects. Use coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access these valuable tips.
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