Across today’s banking landscape, the phrase “higher for longer” isn’t just being applied to interest rate commentary.
According to executives on Truist Financial Corporation’s second-quarter 2024 earnings call Monday (July 22), higher for longer is also the degree of investment financial institutions are increasingly pouring into their technology stacks and digital system infrastructure.
After all, as the world goes digital, banks need to keep up.
The PYMNTS Intelligence report “How the World Does Digital” noted that across 60,000 consumers studied in 2023 — a sample representative of about 800 million people living in 11 countries — 42% engage with online banking. A full 46.8% do their banking through mobile means.
“Client preferences continue to shift toward mobile,” Truist leadership said Monday, noting that the bank’s deposit growth is being fueled more and more by digital onboarding.
The company’s “enhanced account opening experience” contributed to a 42% lift over the same quarter last year in digital checking account production among Generation Z and millennials, which Truist leadership attributed to the bank’s reimagined consumer and small business deposit application experience delivering personalized account recommendations.
Per the company’s quarterly presentation, its modernized small business digital onboarding experience resulted in new highs in application completion rates, with small business digital adoption continuing to climb: active clients increased 10% YoY, averaging 30 logins per month.
Digital consumer deposit account production increased 14% YoY, with opening balances up 60% over the same period.
Still, Truist’s total revenues for the most recent quarter were down $6.5 billion, due primarily to securities losses.
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“In the second quarter, we continued to see solid momentum in our core banking businesses as evidenced by strong year-over-year growth in investment banking and trading revenue and continued expense discipline. Client deposits are stabilizing, and asset quality metrics remain within our expectations. While loan demand does remain muted, we are encouraged by an improvement in our dialogue with clients and our expanded capacity to support their needs,” Bill Rogers, Truist chairman and CEO, said Monday.
Rogers also stressed that Truist was focused on pursuing growth opportunities in “our core business” and maintaining expense and risk discipline.
During the second quarter, Truist completed the sale of Truist Insurance Holdings (TIH) and used the proceeds from the sale of the insurance subsidiary to reposition its balance sheet by paying down costlier investment securities.
Truist reported a gain on the sale of TIH of $6.9 billion ($4.8 billion after-tax), or $3.60 per share (discontinued operations), while also recording securities losses of $6.7 billion ($5.1 billion after-tax), or $3.80 per share, from the strategic balance sheet repositioning.
See also: Big Bank Earnings Show Mixed Signals on Consumer Credit Health
Truist’s average loans and leases decreased 0.7% for the quarter due to declines in the commercial and industrial, residential mortgage and indirect auto portfolios. The bank’s provision for credit losses was $451 million compared to $500 million for the first quarter of 2024, and compared to $538 million for the second quarter of 2023, per commentary from Truist CFO Mike Maguire.
The company’s earnings were $826 million, or $0.62 per share, down YoY from $1.23 billion, or $0.92 per share.
Traditional banks must overcome the challenges they face due to their legacy infrastructure and technology, and digital transformation is one such solution. But embracing digital doesn’t come without risks for financial institutions.
PYMNTS Intelligence finds that fraud’s continued predation of digital banking has been nothing short of alarming. Financial institutions are exhausting millions in a determined bid to stay one step ahead, with trust, money and reputations on the line.
Phishing (73%), electronic banking (52%) and account takeover schemes (47%) rank among the most common types of third-party fraud, per the report, “Fending Off Fraud in Digital Banking.”
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