Participants

Brad Milsaps; Head of Investor Relations; Truist Financial Corp

William Rogers; Chairman of the Board, Chief Executive Officer; Truist Financial Corp

Michael Maguire; Chief Financial Officer; Truist Financial Corp

Brad Bender; Chief Risk Officer; Truist Financial Corp

Ken Uston; Analyst; Autonomous Research

John Pancari; Analyst; Evercore Group LLC

Erika Najarian; Analyst; UBS Securities LLC

Mike Mayo; Analyst; Wells Fargo Securities, LLC

Betsy Graseck; Analyst; Morgan Stanley

Matt O’Connor; Analyst; Deutsche Bank Securities Inc.

Ebrahim Poonawala; Analyst; BofA Securities, Inc.

Gerard Cassidy; Analyst; RBC Capital Markets, LLC

Presentation

Operator

Greetings, ladies and gentlemen, and welcome to the Truist Financial Corporation first-quarter 2025 earnings conference call. (Operator Instructions) As a reminder, this event is being recorded.
It is now my pleasure to introduce your host, Mr. Brad Milsaps.

Brad Milsaps

Thank you, Betsy, and good morning, everyone. Welcome to Truist's first quarter 2025 earnings call. With us today are our Chairman and CEO, Bill Rogers; our CFO, Mike Maguire; our Chief Risk Officer, Brad Bender, as well as other members of Truist's senior management team.
During this morning's call, they will discuss Truist's first quarter results, share their perspectives on current business conditions and provided an updated outlook for 2025. The accompanying presentation as well as earnings release and supplemental financial information are available on the Truist Investor Relations website, ir.truist.com.
Our presentation today will include forward-looking statements and certain non-GAAP financial measures. Please review the disclosures on slides 2 and 3 of the presentation regarding these statements and measures, as well as the appendix for appropriate reconciliations to GAAP.
With that, I will turn it over to Bill.

William Rogers

Thanks for having. And good morning, everyone, and thanks for joining our call today. So before we discuss our first quarter results, let's begin as we always do with purpose on slide 4. Truist is a purpose-driven company, dedicated, inspired and building better lives and communities, which is the foundation and guide for everything we do.
In times like this, with a little more uncertainty, our purposeful approach delivered with care resonates more than ever. We're committed to being a steady, reliable and supportive partner, helping our clients with financial planning and personalized experiences from dedicated industry specialists that focus on understanding their needs.
We're here to support our clients and communities with a strong balance sheet, expert industry advice, digital capabilities and a comprehensive suite of products. Our capital position, our liquidity, our strong market share and our talented purposeful teammates delivering against a clear strategy have us well positioned for any environment.
We're going to provide some more examples of how our purposeful approach is driving our results throughout the call today.
So now turning to our results on slide 5. Market volatility and economic uncertainty have certainly increased, which has resulted in a change in our view of the operating environment. Investment banking and capital markets activity has slowed materially, and the shape of the yield curve has shifted.
As a result of these conditions, we're reducing our revenue outlook, which now assumes a flat year over year investment banking and trading revenue and slightly lower net interest income due to lower medium-term interest rates.
Given this outlook, we've also reduced our expenses for the year and are opportunistically buying back additional shares in the second quarter. But what's not changing is our focus on our five key strategic priorities aimed at driving better growth, improving profitability towards our medium-term targets, and achieving positive operating leverage.
First, we're executing against our strategic growth initiatives which include deepening and expanding existing client relationships in areas like premier banking, middle market banking, payments and wealth, all of which represents significant opportunities to capture additional share within our existing client base.
Second, we're fully committed to maintaining our expense discipline, which was once again evident in the first quarter. We continue to expect to achieve positive operating leverage in 2025 and believe that we can offset a portion of our lower revenue outlook by finding additional efficiencies in our company.
Third, although the absolute rate of expense growth will be lower, we are continuing our investments and talent and our technology platform, which is improving the client experience, driving new account production and delivering efficiencies.
One example of these investments is a new patented artificial intelligence tool called Truist Client Pulse that will give our teammates insights into friction points with clients. We'll be able to leverage real-time actionable data to effectively listen to our clients' needs and enhance their Truist experience.
What we'll never take for granted our strong track record on asset quality as we will continue to focus on maintaining strong risk discipline and controls. We have strengthened and de-risked our balance sheet over the last several years, and our credit and risk teams are fully engaged with our clients to better understand the impact of the changing economic landscape.
Finally, our relative capital advantage allows us to accomplish our strategic growth goals and return capital to our shareholders in the form of dividends and share repurchases over the next several years. As you can see, we continue to feel good about our strong foundation and our positive momentum across our banking franchise, which was evident in our first quarter results.
For the first quarter, we reported net income available common shareholders of $1.2 billion or $0.87 a share. At a high level, our solid performance in the first quarter was defined by several key themes. The positive loan and deposit growth momentum we experienced in the fourth quarter continued into the first quarter as both average loans and deposits increased late quarter.
Adjusted PPNR remained stable late quarter as we were able to offset a linked quarter decline in revenue with lower adjusted non-interest expenses, reflecting our commitment to maintaining that discipline. From a credit and capital perspective, our metrics remain strong.
Consistent with the fourth quarter of 2024, we returned $1.2 billion of capital to shareholders through our common dividend and repurchase of $500 million for our common stock during the first quarter of 2025. We've already completed $500 million of share repurchases in the second quarter of 2025 and given our strong capital position and current trading levels, we plan to target up to an additional $250 million of stock this quarter.
Before I hand the call over to Mike to discuss the quarterly results, I want to spend some time discussing the progress we're making on our strategic priorities and the positive momentum we're seeing within our business segments and with our digital initiatives on slides 6 and 7.
In consumer and small business banking, I'm encouraged by another solid quarter of consumer loan growth, net new checking account growth, and progress with our premier banking clients as we deepen relationships and acquired key new clients and households through digital and traditional channels.
Average consumer and small business loan balances increased 1.3% linked quarter due to growth in residential mortgage and direct auto and service finance with production up 47% year-over-year and pipelines continuing to increase. Importantly, we're not sacrificing our credit standards or pricing discipline to drive growth.
Consumer credit metrics remain stable and new consumer loan production spreads are accreted to the overall portfolio. Debit card spend for our consumer clients increased 4% on a year-over-year basis, with growth coming across all income bands and driven by spending areas in areas like travel and entertainment.
Net new checking account growth was once again positive in the first quarter as we added more than 39,000 new consumer and business accounts, which reflects a 40% increase over the first quarter of last year. Importantly, we are seeing growth within our premier banking segment, which was one of our key focus areas as we've highlighted previously.
During the fourth quarter, we generated nearly $1.8 billion of new deposit production in our premier managed segment, which represents a 23% year over year increase over the first quarter of 2024, driven by significant improvement in banker productivity and new hires.
As an example, we increased the number of financial plans delivered per banker by 15%, which helped drive $1.6 billion of new investment production during the quarter as those are highly correlated.
In wholesale, I'm encouraged by this quarter's loan growth, improved production and progress in key focus areas like payments and wealth. During the quarter, we saw 1% growth in average wholesale loans driven by growth from new and existing clients and increased production.
As I've mentioned previously, we have a specific focus on capturing more of the middle market. I'm very pleased with the momentum we're already experiencing in production and results. Changing market conditions have made our outlook for investment banking and trading more challenging than we originally estimated to start this year.
We did have our second-best quarter ever in debt capital markets, but lower overall M&A and equity capital markets activity resulted in growth coming in less than expected as many clients postponed planned transactions.
However, I am confident that our advice-driven business model is well suited to help our clients navigate current market conditions and continue to grow our share, given the investments we continue to make in talent, products and industry verticals.
In wealth, we launched a new digital client interface that significantly improved the client experience, increased new client and adviser acquisition, and helped drive higher net asset flows despite volatile equity and fixed income markets.
Our payments team continues to launch new services that meet our clients' needs for solutions that provide them with speed, simplicity and safety. During the first quarter, we enhanced our real-time payments capabilities, including launching Zelle disbursements, which enables wholesale clients to more efficiently pay consumers.
These enhancements, along with continued investments and talent have driven a meaningful increase in overall satisfaction scores, as well as ongoing increases in our payments penetration rate with existing clients.
Enhancing the client experience and growing our digital capabilities are important parts of our overall strategy. Let me discuss that in a little more detail on slide 7. Truist continues to demonstrate strong performance in digital with year-over-year growth across all core digital metrics.
In the first quarter of 2025, we opened 195,000 new digital accounts, which reflects a 13% increase over the first quarter of last year and includes 77,000 new to bank clients. Over 60% of our new digital clients are millennials and Gen Z, aligning with our strategy to engage clients early and build enduring relationships over time.
Truist Assist is our AI tool that supports client conversations and provides a seamless transition to a Truist teammate when an inquirer wants further assistance. Truist Assist supported over 1 million conversations in the first quarter of 2025 with more than 80% requiring no further teammate interaction, which helps drive further efficiencies in our consumer business as client behavior shift to more self-service. We expect to continue to grow our digital presence with clients as we further leverage our modern and scalable technology platform.
Now, let me turn over to Mike to discuss our financial results in a little more detail. Mike?

Michael Maguire

Thank you, Bill, and good morning, everyone. I will start with our performance highlights on slide 8. We reported first quarter 2025 GAAP net income available to common shareholders of $1.2 billion or $0.87 per share. Included in our results are $0.02 per share of restructuring charges primarily related to facilities optimization initiatives and severance.
Total revenue decreased 3.2% linked quarter as both net interest income and non-interest income declined. Adjusted expenses decreased 5.4% linked quarter, which helped hold PPNR stable and drive a 130 basis point improvement in our efficiency ratio on a linked quarter basis.
Next, I'll cover loans and leases on slide 9. Average loans held for investment increased by 1.1% on a linked quarter basis due to growth in both average commercial and average consumer loans. Average commercial loans increased $1.8 billion or 1%, primarily due to $2 billion of growth in C&I loans partially offset by a decline in CRE loan balances.
In our consumer portfolio, average loans increased $1.6 billion or 1.3% linked quarter due to growth in residential mortgage and indirect auto. End of period loans increased $2.3 billion or 0.7%. Based on our current loan pipeline and a solid start to the year, we continue to believe that we can generate low single digit end of period loan growth in 2025.
Moving now to the deposit trends on slide 10. Average deposits increased $2.2 billion sequentially, or 0.6%, driven by growth in time deposits and interest checking, which was partially offset by declines in non-interest bearing and money market and savings balances.
End of period deposits increased $13.2 billion or 3.4%, which was impacted by two larger but short-term client deposits that drove period and deposit balances higher on a linked quarter basis. Excluding the impact of these two deposits, average deposit balances would have been relatively stable on a linked quarter basis.
During the quarter, we continued to actively manage rate paid, which resulted in a decrease in our deposit costs. Specifically, total deposit costs decreased by 10 basis points sequentially to 1.79%, which implies a 30% cumulative total deposit beta.
Interest bearing deposit costs decreased by 16 basis points sequentially to 2.46%. That represents a 43% cumulative total interest-bearing deposit beta. Overall, we expect average deposit balances to remain relatively stable in the second quarter compared with the first quarter of 2025.
Next, I'll move the net interest income and net interest margin on slide 11. Taxable equivalent net interest income decreased 2.4% linked quarter or $86 million, primarily due to the impact of two fewer days in the first quarter.
Our net interest margin decreased 6 basis points on a linked quarter basis to 3.01%. For full year 2025, we expect net interest income to increase by approximately 3% versus 2024, driven primarily by low single-digit loan growth, three 25 basis point reductions in the Fed funds rate, and the benefit of fixed rate asset repricing.
As you can see on the top right-hand side of this slide, we updated our outlook for fixed rate asset repricing. We expect to reprice approximately $42 billion of fixed rate loans and securities over the remainder of 2025.
We now expect that the benefit from repricing these assets will be approximately 40 to 50 basis points lower than we previously expected in January due to lower medium-term interest rates. We also updated our swap portfolio disclosure in the bottom right-hand corner of the slide, which is relatively unchanged from the prior quarter.
Turning to non-interest income now on slide 12. Non-interest income decreased to $78 million or 5.3% versus the fourth quarter. The linked quarter decrease was primarily attributable to a $69 million decline in other income related to certain equity investments and other gains that were higher in the fourth quarter of 2024.
On a light quarter basis, non-interest income declined $54 million or 3.7%, compared to the first quarter of 2024, primarily due to lower investment banking and trading income and lower wealth management income.
Lower M&A fees were the primary driver of the year over year decline in investment banking and trading income, while wealth management income would have been slightly higher on a year-over-year basis, were it not for the impact of the sale of Sterling Capital Management in July 2024.
Next, I will cover noninterest expense on slide 13. Adjusted non-interest expense, which excludes the impact of restructuring charges decreased 5.4% linked quarter due to lower other expense, professional fees and outside processing and equipment expense.
Personnel expense remained relatively stable linked quarter as the normal seasonality associated with the first quarter personnel expenses were offset by a reduction in incentives. Adjusted expenses increased 1.5% versus 1Q '24 due to higher professional fees and outside processing expense, partially offset by lower personnel expense.
Moving to asset quality on slide 14. Our asset quality metrics remained stable on both a like and linked quarter basis, reflecting our strong credit risk culture and proactive approach to quickly resolving problem loans.
Net charge-offs increased 1 basis point to 60 basis points linked quarter, but were down 4 basis points versus the first quarter of 2024. Our loan loss provision exceeded net charge-offs, but growth in certain loan portfolios contributed to a 1 basis point decrease in our ALLL ratio to 1.58%.
Non-performing loans held for investment as a percentage of total loans increased 1 basis point linked quarter and 3 basis points on a like-quarter basis to 48 basis points. NPLs have remained in a narrow band of 45 to 48 basis points over the last five quarters.
We've been actively analyzing our exposure to consumer and wholesale clients that we believe will be most impacted by tariffs, potential reductions in government spending and more severe economic scenarios. Although this analysis is ongoing and dynamic, we have a strong understanding of our exposure, and we believe that we're adequately reserved at this time.
As a reminder, Truist had the second lowest C&I loan loss rate versus our peer group in the most recent CCAR stress tests.
Turning to capital on slide 15. On a linked-quarter basis, our CET1 ratio declined 20 basis points to 11.3% as the payment of our common dividend, our $500 million share buyback, growth in our balance sheet and the final CECL phase-in more than offset current period earnings.
Our CET1 capital ratio, including the impact of AOCI declined 10 basis points linked quarter to 9.6%, reflecting the aforementioned factors, partially offset by a $500 million decrease in AOCI due to the increase in longer-term interest rates experienced during the quarter.
We continue to believe that our strong capital position gives us unique ability to utilize our future earnings and the accretion of AOCI to fund balance sheet growth and to return a significant amount of capital to our shareholders.
Next, I'll provide additional color on our guidance for the second quarter of 2025 as well as for the full year on slide 16. For full year 2025, we now expect revenue to increase 1.5% to 2.5% relative to 2024, adjusted revenue of $20.1 billion. This compares with growth of 3% to 3.5% previously.
Our new guidance reflects our updated outlook for lower investment banking activity, increased volatility impacting our sales and trading results, lower wealth management income, which in part relies on market values and the shape of the yield curve.
The majority of the reduction in our revenue outlook is due to our expectation for lower investment banking and trading activity, which we now expect to remain relatively flat on a year-over-year basis versus our previous expectation for low double-digit growth.
In addition, lower market valuations will slightly pressure our wealth management income. The remainder of the change to our outlook is related to our latest forecast for the shape of the yield curve, which delays our ability to lower deposit costs and reduces the benefit of fixed rate asset repricing.
Our net interest income outlook continues to assume a low single-digit end-of-period loan growth and now assumes three 25 basis point reductions in the Fed funds rate, one in June, September and December compared with our previous view of reductions in just March and September. Based on these assumptions, we expect net interest income to increase 3% in 2025 versus 2024.
In terms of our outlook for adjusted expenses, we now expect full year 2025 adjusted expenses to increase by approximately 1% in 2025 versus 2024. This compares with growth of 1.5% previously. Our improved expense outlook reflects a reduction in incentives due to lower expected revenue in 2025 and other ongoing cost savings initiatives.
In terms of asset quality, we continue to expect net charge-offs of about 60 basis points in 2025, which is unchanged from our previous guidance. Finally, we expect our effective tax rate to approximate 17% or 20% on a taxable equivalent basis in 2025.
Looking into the second quarter of 2025, we expect revenue to increase approximately 1.5% relative to first quarter revenue of $4.9 billion. We expect net interest income to increase by approximately 1.5% in the second quarter, primarily driven by an additional day in the second quarter relative to the first quarter, some loan growth and the benefit from fixed asset repricing.
We expect non-interest income to increase 1% to 3%, driven primarily by higher other income. Adjusted expenses of $2.9 billion in the first quarter are expected to increase 2% to 3% linked quarter due to higher personnel expenses related to annual merit increases. As it relates to buybacks, as Bill mentioned, we plan to target up to $750 million during the second quarter.
I'll now hand it back to Bill for some final remarks.

William Rogers

Great. Thanks, Mike. So in conclusion, we're seeing solid progress in many of our key strategic focus areas, including premier banking, wealth, payments and middle market banking. Despite the market volatility, our growth mindset and strategic focus remains steadfast.
We're paying close attention to the changes in our markets, the economy and client behavior as our credit risk teams are fully engaged in working with our clients to understand the impact of these changes. We'll continue to adhere to the credit and risk discipline that has served our company and shareholders well over multiple economic cycles.
The good news is that our advice-driven business model is well positioned to succeed in a wide variety of economic scenarios given our robust capital advantage, strong liquidity profile and demographically attractive markets where we have strong share.
More importantly, our balance sheet remains open and ready to help our clients navigate the current environment. We're actively looking for opportunities to serve new and existing clients and capitalize on current and future market disruption.
Truist is retaining, expanding and adding new talent motivated by our platform, markets and the opportunity. I'm as optimistic as ever about Truist future, especially in light of the momentum I see every day inside this company.
I'd like to thank all of our teammates for their incredible purposeful focus and productivity in moving our company forward. So again, thank you for your interest and your investment in Truist.
Brad, let me turn it back over to you.

Brad Milsaps

Thank you, Bill. Betsy, at this time, will you please explain how our listeners can participate in the Q&A session. As you do that, I'd like to ask the participants to please limit yourselves to one primary question and one follow-up in order that we may accommodate as many of you as possible today.

Question and Answer Session

Operator

(Operator Instructions) Ken Uston, Autonomous Research.

Ken Uston

Thanks. Hi. Good morning, guys. Push-and-pull question. So it's nice to see the increased buyback in the second quarter relative to the first. And I'm just wondering like how much of that is just real confidence in the capital position versus a bit of an offset to what we're all seeing, and you talked about a potentially slower loan environment.

William Rogers

Yeah. Ken, our strong capital position really puts us in a position to do a couple of things. One is capitalize on growth. So the good news is we're seeing some of that be opportunistic. I'll talk a little bit about that and then weather, any storm that might be in front of us.
And this quarter was a good intersection of all three of those. We did have RWA growth that we're funding that we feel really good about that. We can support our current level of buyback and dividends, obviously, feel really, really good about that. And we just want to be opportunistic.
So we saw an opportunity with the price of our shares, utilizing this capital position to invest in Truist, and we like investing in Truist. And doing all that, we still maintain that relative capital position. So a little more opportunistic relative to current share price.

Ken Uston

Thanks. It's a better answer to a not great worded question. Second question, just on the deposit side, just kind of same context with the potential for lower rates here, how do you see your ability to control deposit costs and change up your mix of deposits as you look forward? Thanks, guys.

Michael Maguire

Hey, good morning, Ken. It's Mike. Look, I think so far so good, I'd say, on the rate paid story for us. We had a good early start when we saw the cuts last year, have taken a very client-centric approach, but also a disciplined approach in managing the environment we're in.
So obviously, we didn't get the cut. We thought we might get in May, still are making some progress, obviously, on the funding portfolio. We'd expect that to benefit obviously some more in the second half as we see our cuts, but we're doing the things you would expect.
We're looking at our -- on the consumer side, looking at our CD portfolio, managing our maturities well. We shortened our portfolio up there and touch in advance of some of the cuts and as far as mix, it's relatively stable, right? You saw DDA remix just a touch to 27% this quarter. I don't view that as a troubling trend at all. We had a little bit of movement in the portfolio.
I mentioned in our in our remarks that we had a couple of large deposits come in at the end of the quarter that crossed over the quarter as well that impacts mix but feel pretty good.

William Rogers

The only thing I might add is we invested in a lot of tools last year that allows us to be a lot more surgical in our deposit pricing. So I think the overall level of sophistication and intensity around deposit pricing continues to improve every quarter.

Operator

John Pancari, Evercore.

John Pancari

Good morning. On the loan growth side, just want to see if you can give us a little more color around what you're seeing in terms of demand. Maybe if you could talk about utilization? Are you seeing any weakening of the of the pipelines and commitments. And then also, any areas of strength where you have an opportunity, given the uncertain backdrop? Thanks.

William Rogers

Yeah. Sure, John. So it's been interesting. I mean, we feel really good about the investments that we've made over the last several quarters, and you see that showing up in this quarter's results. So let me start with that as a premise.
Commitments are up, so we feel good about that. Utilization, I would say, up slightly. So that really isn't part of the story. It's a lot more about production and pretty universal. I mean, you saw our consumer numbers which were very strong. And then within our wholesale units, I mean, it's in a lot of different areas, FIG, energy, health care, I mentioned middle market before, some of our core commercial markets doing well.
Our C&I production is up every quarter over the last five quarters. So we've got good momentum on that standpoint. Our pipelines in consumer are the best they've ever been. I mean they're really, really significant. On C&I, our pipelines are good. Pull-through could be a little bit slower. I mean, we have to look at that, but really good.
So despite all the uncertainty and volatility and all the things that we think about, our core organic production capacity, our pipelines and our markets in fairness probably contribute to this. The skill set of our teammates, the products and the things that we do, actually have us feeling good about continued loan growth.

Michael Maguire

And John, I would just add, a lot of the growth we're seeing is with new and existing clients versus necessarily an increase in utilization. So that's a good trend.

John Pancari

Great. Okay. Thank you for that. And then separately on the IB and cap market side, I know you had cited some pressures there. And I guess if you could just give us the similar type of color around what you're seeing in terms of the pipeline. Is the pipeline continued to build and you're just getting a delayed pull-through of the transactions.
Are you seeing any erosion of that pipeline, just given the wild uncertainty around the tariff debate and everything? And then one last question related to that. why wouldn't your trading businesses be benefiting from the volatility versus being negatively impacted? Thanks.

William Rogers

Yeah. So let me start with the last one first and just remind you remember what our investment banking business looks like. We're a pretty traditional investment banking business, syndication, debt capital markets, equity capital markets, M&A. Our trading business is really a client-focused trading business. So we have a low bar kind of business. So we're not doing a lot of proprietary type trading.
This is trading for our clients. So it just doesn't have the same kind of beta maybe attached to its results. The irony is I feel better about investment banking than I have ever. I mean, I think I feel really good about the talent that we've got on the field. I feel good about the investments we've made.
I don't think we've ever been better positioned the alignment with our overall corporate and commercial banking has never been better. The propensity to introduce our industry specialties, create pipelines and opportunities.
We had a really good core investment-grade debt capital markets quarter. Pipelines are just deferred as the way I would say it. So pipelines came in really strong to begin the quarter. Pipelines tend to be a little more deferred, particularly on the M&A side. Although in fairness, we've had some new mandates this quarter.
So it's not like the spicket shut off. It just seems to be a little bit deferred. We're not losing business to someone else. I think our clients are primarily pausing from that standpoint. So I think overall, industry is sort of projected to be flat. We thought that seemed to be the best place to be positioned.
If things recover, we're never better positioned. I mean, we've gained incremental share every quarter for the last several quarters. So if the market returns, we're going to return with equal to better than the market. Just right now spot, looking at investment banking, it seemed to us to be most prudent to say that that's a flat sort of forecast.

Operator

Erika Najarian, UBS.

Erika Najarian

Hi. Good morning. The first one is for Mike. You noted that underneath the revenue guide, you're expecting NII to increase 3%. If you could remind us, is that unchanged or revised from the original January outlook? And if you could give us a sense of how much of the revision would have been curve versus size of the balance sheet.

Michael Maguire

Hey. Good morning, Erika. I actually don't think we gave explicit guidance in January for the year for NII. I think it would have been implied closer to call it, [high-3s], maybe closer to 4%. So we probably have a 0.75% or so impact to NII relative to our outlook. And it's almost entirely driven by the change in the curve.
And as we talk about two-year -- pardon me, medium-term rates, where we're really looking on the curve is the difference in where the two-year is, not just today, but where implied have it throughout the course of the year. And so, the impact on the loan repricing opportunity that we've talked about as well as to a lesser extent the securities.

Erika Najarian

Got it. And just -- I apologize if you said this in the prepared remarks, and I just didn't catch it, it's been insane morning. But did you give the baseline unemployment rate for your reserve Mike, and what the weighted average is that's embedded in your first quarter reserve, please?

Michael Maguire

We didn't give you that, Erika. Brad, I'll let you -- he's here in the room with us, you want to talk a little bit about our baseline unemployment outlook.

Brad Bender

Thanks, Mike and Erika. So the way we think about the varying degrees of factors in our allowance, unemployment obviously plays into that. We use it across baseline and then the two different stress scenarios.
I'd say where we are right now is mid to high single-digits when you factor in the modeled output plus the qualitative overlays. We feel good about where it sits today. We feel like we can weather whatever is in front of us from a creditor's standpoint.

William Rogers

And then actual unemployment rate, what we're using like --

Brad Bender

So it's got [51] in the model, but then you adjust off of that at a pull level based on the asset mix.

Operator

Mike Mayo, Wells Fargo Securities.

Mike Mayo

I think you're doing what you can in terms of investing in talent, tech and transitioning from defense to offense as you said. And you did get more loan growth, but I'm still just trying to reconcile the overall guidance and somewhat upbeat comments with the uncertainty with the macro.
On the one hand, it shows like -- it seems like you're showing more realism. The curve impacts NII and aftermarket impact investment banking, and you have a little lower guide there. On the other hand, looks like you're accelerating buybacks, and your reserves are not so different.
And so, if the world is that much more difficult, why wouldn't you be increasing reserves more? Why wouldn't you be slowing down buybacks. I'm not saying to do that. I'm just trying to reconcile those thoughts. Thanks.

William Rogers

Yeah. Mike, it's a great question. So if you think about the guidance, it's really centered on two things. So a flat forecast on investment banking. Again, I hope that's wrong. I hope markets recover quickly. And as I said before, when they do, we're really, really well positioned, and we've gain marginal share in that business over time and we're well positioned.
But realistically, sitting with sort of a spot forecast and looking at overall industry that seemed prudent to us. And then the other was related to just where we are in the curve. Everything else in terms of loan production and deposit production and payments penetration, all those things, we're not changing any of that.
I mean, we still feel really good about that. And as you evidenced in the first quarter, we actually have strong momentum. So with a little more isolated to those things versus a statement around that we see some precipice in the market. And then I think as you take that a further step, all those things are considered when we set that reserve.
So I mean, I think we look at volatility and uncertainty in tariffs and potential impacts and all those things related to the reserve. And then on the share buyback, as I noted earlier, it's just an opportunistic time. And we want to -- we like Truist, and we want to invest in Truist.
We've got a strong capital position, taking a little marginal opportunistic continues to keep us in a really strong capital position to not only weather any storm, but what I hope is more to invest more in our business and the growth of our business.

Mike Mayo

I guess just as a follow-up, when I think about what could happen, it seems like that loan production and the deposits and the payments could fall off the cliff if this trade war situation goes on for too long. So I guess, do you have any frame of context in your career that gives us the lens or framework on how to view this? And also, how did the pandemic help prepare you and your clients for the impact on supply chains. Thanks.

William Rogers

Yeah. The second part of your question, I think is actually really, really insightful, and I think that's happened. I think if we look and talking to a lot of clients, they learned a lot during the pandemic in terms of managing working capital. I mean, I think it's one of these things. I believe it's one of these things when we are perplexed as an industry why utilization is lower than traditional.
I think it's because clients learned how to manage working capital really well and manage their supply chains really well. They created a lot more diversity, a lot more consistency. So I do think clients are better prepared, understand their supply chains at some multiple of what they did before, created more flexibility and optionality and particularly on larger clients, maybe give back to smaller clients.
But larger clients, I think they just have more flexibility, better understanding of their supply chain. And then we're really helping that too. I mean, we've got a really good business that helps them manage and think about how to leverage supply chains.
And then in terms of a career, it's really an unusual circumstance and that we look at and you've indicated some different data points. Our underlying business is really solid, and our client business is really solid. Our consumers are in good shape. Our business clients are in good shape.
So different maybe from other environments where you could feel softness in the underlying portfolios, you still see that right now. So I think there's reasons to be optimistic that people see themselves through this. But we just are unwilling to put all that into a forecast and into our guidance. But I think we enter into this in a very different situation where consumers and businesses are more solid and they did learn a lot in the supply chain.
On the small side, I think that's a little more challenging on the small business side because their business may not have the flexibility. So they could be impacted in one supply chain avenue from one tariff to one country analysis.
So we're looking closely at those idiosyncratic things to make sure that we're keeping an eye on those clients, helping them think through think they're where they go. But I think it is an interesting time in my career. And then back to how the whole premise started, I just don't think we've ever been better positioned to be in the athletic position to respond good momentum, as you mentioned, good talent and a capital position that allows us to weather but also take advantage of opportunities.

Operator

Betsy Graseck, Morgan Stanley.

Betsy Graseck

Hi. Good morning. Mike, I just have one quick question for you. You mentioned during the prepared remarks that you've got, I think, it's $42 billion that's rolling in 2Q through 4Q this year. And that it's rolling at a lower pickup than you had said before. Could you just tell us what the yield pickup is that you expect on this $42 billion?

Michael Maguire

Yeah. Sure, Betsy. And I have to speak in terms of averages, obviously, because across that $42 billion, you've got a meaningful portion that's loans, some securities and then even within loans, you've got a pretty wide variety of products in that bundle.
But back in January, we mentioned that we felt like, call it, 90 to 100 basis points of, I'll call it, incremental run-on versus run-off. And we think that, that's lower by 40 to 50 basis points. So almost half.
And again, our term exposure is really more in that sort of two year part of the curve. The whole curve is important to us, but especially I'd say two to five is probably as we think about that repricing opportunity, probably 75% of that opportunity is less than five years.

Betsy Graseck

Okay. But on the average, $42 billion is going to roll it on average 45 bps pickup.

Michael Maguire

No, higher than that, probably closer to like 50 to 60, plus a little. It actually changes over the year, Betsy. So our view on two as an example is this is based on implied forwards is that the two-year will probably decline a touch over the course of the year. And so, maybe in this quarter and next quarter, we're picking up, maybe it's closer to 60 to 70 and then maybe it's closer to 50 to 60 basis points later in the year.

Betsy Graseck

Got it. Okay. Thank you. Super helpful. And then just on the question on loan growth. As you think through the puts and takes here on the outlook, are you changing your lending standards?

William Rogers

No. Betsy, we're just constantly consistent in lending standards and how we think about our portfolio and how we think about our opportunities. Everything you're seeing from us is like just really strong execution within that framework.

Betsy Graseck

Okay. So lending standards don't change, but as the environment unfolds, you'll see growth from like adding new customers, I suppose. That's really the message you have for us?

William Rogers

Yeah. I've been adding new clients, expanding with existing clients, being more relevant, expanding in markets where we weren't before, building our middle market business, consumer execution, premier production, all those things in those categories.

Operator

Matt O'Connor, Deutsche Bank.

Matt O’Connor

Good morning. Can you elaborate on some of the areas that you're targeting for costs base and maybe reframe with the restructuring charges were for this quarter and how that helps going forward?

William Rogers

I'll start and maybe turn it to you on the specific on the restructuring charges and whatnot. Matt, you remember, in 2023 we started with a significant expense initiative where we went and looked at everything in our company in terms of opportunities, and you saw a lot of that in the consolidation simplification of our business creating better pull through.
So a lot of this is just realizing -- continuing to realize the benefits of those activities. So this isn't a onetime stop start kind of thing. This is a continuation of the learnings that we embedded in our system and the continuous improvement opportunities.
So there are all those same kind of categories, continuing to get the benefits of being more efficient, consolidations, spans and layers, all those traditional things that come in terms of expenses, but all that's offset against the investments that we're making.
So that's an important component here is what we're not stopping is the investments that we're making in our digital capabilities which I talked about, talent that continues wanting to be part of our platform, treasury management and payments, our risk and infrastructure.
So it's toggling all those things and allowing a little more of those expense savings to come through to help offset some of the investments that we want to continue to make. And then Michael, let you talk about the specifics on the restructuring.

Michael Maguire

Yeah. On the restructuring charges, Matt, this quarter it was predominantly some corporate facilities rationalization and then also some severance. So those were really the two notable items. I think you asked, how big of a part of our story that will be throughout the course of the year.
We don't expect there to be significant restructuring charges throughout the course of the year. I mean, I think as I said here today, I see $40 million to $50 million high side. So that helps.

Matt O’Connor

Okay. That's $40 million to $50 million for the rest of the year?

Michael Maguire

Yeah.

Operator

Ebrahim Poonawala, Bank of America.

Ebrahim Poonawala

Hey, good morning. I guess maybe, Mike, for you on capital, and apologies if you already addressed this. But when you look at the CET1 with or without AOCI, just give us a sense of -- I appreciate the sensitivity to the stock price, but how much more aggressive can you be on the pace of buybacks? And is there a CET1 target that we should keep in mind in the near term below which you don't want capital levels to go?

Michael Maguire

Yeah. Good morning, Ebrahim. Look, I think on the buyback, we feel good about the rhythm that we established, the $500 million a quarter. I think, again, that with the dividend equating to approximately our earnings, we feel like is a pretty elevated.
And as we've said, with our sort of more medium-term capital planning, something that we believe can be more sustainable. I think the $250 million incremental that we're looking at this quarter, Bill framed it well. It's opportunistic. We saw a pretty significant sell-off in the industry in the stock and so had the flexibility to frankly have a bias for action there.
But I wouldn't expect for us to necessarily continue to exercise that flexibility. In terms of a target, we talked a little bit about this earlier in the year and some of last year. It will be important for us to actually see a final sort of rule on Basel and have a better sense for an implementation timeline.
We've talked about a 10% area, operating area. I think that's still sensible based on everything that we know now. I don't think it's a moment short term where we would be eager to add a ton of leverage. So I think we sort of stay the course here with the $500 million, and we'll watch the market, and we'll adjust as it makes sense.

Operator

Gerard Cassidy, RBC.

Gerard Cassidy

Hi, Bill. Hi, Mike. Can you guys share with us -- we hear a lot of your competitors looking to the Southeast and your primary franchise as an area of expansion and growth. Can you tell us, has competition changed or intensified?
And then second, as part of that, are you seeing any aggressive lending going on from your competitors that you're obviously not willing to compete against because it's too aggressive?

William Rogers

Yeah. Gerard, I'd say one thing, having spent my entire career in these markets. They're always competitive. And they're competitive because they're great markets. So I wouldn't say anything particularly differentiated. We compete with a lot of smart competitors.
So I don't think anything out of the ordinary in terms of pricing or structure. And then as I've mentioned earlier, there are other markets where we're also expanding. I talked about Texas and Philadelphia and Ohio and other places where we have big investments too, and we're competing really, really well in those markets.
So I think just it's an overall competitive market. You've seen the results of how we fared in this competitive environment with our loan growth, production capabilities continued to improve, the investments we've made. So I think my answer would be we've never been more competitive in terms of our athletic position. And these are highly competitive markets. I mean, I don't know any other way to describe it.

Gerard Cassidy

Very good. And then as a follow-up on just loans in general. In the fourth quarter, you folks and your peers are required on a best-efforts basis to put out the exposure to loans to non-depository financial institutions.
And your numbers are not that excessive as some of your peers. Can you share with us those categories, whether it's the business credit intermediary category or private equity funds. What are you guys seeing in those kinds of categories since that's been a growth area for the industry.

William Rogers

Yeah. Brad, let me, I'll let you talk about the NDFI, and I would say, it's pretty traditional for us. But Brad, you could go in a little more detail.

Brad Bender

Yeah. Thanks, Gerard, for the question. So I'd say, look, our NDFI exposure obviously was impacted by the definitional change. The portfolio in the aggregate is about 13 different sub-sectors across 20 different asset classes. They're longtime corporate investment banking and CRE clients with our largest concentration in REITs, but we approach it with full credit risk governance model.
We've got really good limits in place. We manage contagion risk. And so, this is regular wave business for us to support our clients, and we feel really good about where our exposure sits even post the definitional change.

Gerard Cassidy

I see. And just as a follow up here, are you seeing the competitors, the private credit guys or just the non-bank lenders impacting your customers in these categories as well? Or what are you seeing on that side of it?

William Rogers

Yeah. Gerald, I think private credit certainly has been part of our ecosystem for a long time. I don't know whether it's unique to this portfolio, but certainly, a competitive force that we think through and deal with and obviously by our results, also very competitive against them as well.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Brad Milsaps for any closing remarks.

Brad Milsaps

Okay. Thank you, Betsy. That completes our next call. If you have any additional questions, please feel free to reach out to the Investor Relations team. Thank you for your interest in Truist, and we hope you have a great day. Betsy, you may now disconnect the call.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.