Truist Financial: Limited Upside Despite Loan Repricing

We initiate on TFC with a Hold rating and $41 price target. Truist Financial Corporation is a

diversified regional banking and financial services company with a significant geographic footprint that is highly entrenched across the Southeastern and Mid-Atlantic U.S. The company stands at a crossroads where coming structural tailwinds (most notably, $42B of fixed-rate loan re-pricing and a looser regulatory backdrop) outweigh, if not fully overcome, persistent operational headwinds. As we see it, higher yielding assets replace legacy low-rate stuffers for a NII infusion through 2026, but competing interests (elevated deposit betas, regulatory capital drag) keep underlying profitability below peer momentum. As such, our forecast factors in an effective earnings trough in FY25E, with EPS declining to $3.20 before rebounding 12.5% to $3.60 FY26E (full 18% below Street FY26E, as fee income lags and expense discipline results in just a shallow positive operating leverage). Attenuated fundamentals, a near-term revenue environment stuck in the doldrums, and share buybacks contributing the majority of per-share growth all support our 11.5x FY26E target multiple, which is below the long-term average and at parity with the regional bank peer set that is still in the credit normalization throes. We recognize the market's propensity to discount structural reversals in loan yields and regulatory relief, but see limited upside without a meaningful positive surprise from non-interest income and/or deposit costs. Rate of change risk (margin compression persists), and uncertainty on the pace of credit normalization, remain substantial relative to the pending