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Truist (TFC) Declares SCB, Rewards Shareholders With Buyback Plan

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Per the Federal Reserve, following the clearance of the 2024 annual stress test, Truist Financial Corporation’s (TFC - Free Report) preliminary stress capital buffer (SCB) requirement is 2.8%. This excludes the impact of the sale of Truist Insurance Holdings and the balance sheet repositioning that occurred on May 6.

While the company’s final SCB requirement will be determined on or before Aug 31, 2024, the new SCB requirement, once finalized, will be in effect from Oct 1, 2024, to Sep 30, 2025.

TFC’s board of directors has authorized a share repurchase program worth $5 billion through 2026, expected to begin in the third quarter of 2024.

Earlier, management had said that share repurchases were not a priority as the company was seeking to maintain higher capital levels. However, now, since the divestiture of the remaining stake in its insurance subsidiary is complete, TFC is in a position to resume buybacks.

Moreover, subject to approval from its board of directors, Truist plans to maintain its current quarterly common stock dividend of 52 cents per share.

While TFC hiked its quarterly dividend by 8.3% in 2022, the bank maintained the quarterly dividend at 52 cents, even after the clearance of the 2023 stress test.

Driven by a strong capital position and earnings strength, the company is expected to sustain enhanced capital distributions in the future.

Bill Rogers, the chairman and CEO of TFC stated, “Truist's 2024 annual stress test results again demonstrate the benefits of our diverse business mix and prudent and disciplined risk management culture. The net impact from the sale of TIH and the balance sheet repositioning, completed in May 2024, solidify Truist's strong liquidity and capital positions, increasing our first-quarter 2024 pro-forma CET1 ratio to 11.4%.”

Notably, the stress tests, mandated under the Dodd-Frank financial services law, were introduced in the aftermath of the 2008 financial crisis. They help evaluate banks' capital adequacy, liquidity and risk management practices under adverse hypothetical scenarios, such as a deep recession and/or a sharp decline in asset prices.

This time, all of Wall Street’s 31 banks cleared the Fed’s stress test. Thus, the banks are in a position to return excess capital to shareholders via dividends and share repurchases.

To name a few, JPMorgan (JPM - Free Report) and Morgan Stanley (MS - Free Report) are enhancing capital distribution plans post clearance of the test. JPM approved a new common share repurchase program totaling $30 billion, beginning Jul 1, 2024. MS has renewed a multi-year common equity share repurchase program of up to $20 billion, effective from the third quarter of 2024, with no specified expiration date.

At present, TFC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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