Greetings, ladies and gentlemen, and welcome to the Truist Financial Corporation First Quarter 2021 Earnings Conference. As a reminder this event is being recorded. It is now my pleasure to introduce your host Alan Greer of Investor Relations.

Thank you, Katie and good morning everyone. We appreciate you joining our call today. We have our Chairman and Chief Executive Officer, Kelly King; President and COO, Bill Rogers; and CFO, Daryl Bible who will highlight a number of strategic priorities and discuss Truist's first quarter 2021 results. Chris Henson, Head of Banking and Insurance; and Clarke Starnes, our Chief Risk Officer will also participate in the Q&A portion of our call. The accompanying presentation as well as our earnings release and supplemental financial information are available on the Truist Investor Relations website. Our presentation today does include forward-looking statements and certain non-GAAP financial measures. Please review the disclosures on slides two and three of the presentation regarding these statements and measures as well as the appendix for appropriate reconciliations to GAAP. We also want to note that Ryan Richards, the former Head of Director of Investor Relations has left Truist to pursue an opportunity outside of the company. If you have questions following today's call please contact me or Aaron Reeves in Investor Relations. Our contact information is on the cover of the earnings release. And with that I'll turn it over to Kelly.

Thanks Alan and good morning everybody. Thank you very much for joining our call. We had overall I consider a strong quarter with strong earnings and returns, very good expense control, strong fee income, especially in insurance and investment banking; excellent asset quality which Clarke will talk about, really good progress on merger integration, and excellent internal recognitions including an outstanding CRA rating for our community development efforts. If you're following along on slide four, we always like to focus on the most important which is our culture. As you've heard us say many times we continue to reiterate culture as the primary determinant of our long-term success. Our purpose really connects with our teammates. We've been really excited about this. Our teammates are driven to really help our clients. We really enjoy serving our communities and our shareholders. Even with COVID we've made great progress in activating our culture, created a cultural council which works every day with our EL team causing our culture to really come alive. So, we made excellent progress in terms of culture which is ultimately the driver. On slide five just a couple of points on some things that I think are good with regard to how we are serving our communities. We were very excited to be the first issuer of a social bond of the US regional banks $1.25 billion bond. It was well well-received 120 investors, very favorable pricing. We're very excited about that in terms of our ability to focus on affordable housing and other community needs. We became the lead investor for Greenwood which is very excited and innovative digital banking platform designed for Black and Latino consumers and business owners. We signed the Hispanic Promise a first-of-its-kind national pledge to prepare, hire, promote, retain, and celebrate Hispanics in…

Great. Kelly, thank you and good morning, everyone. As you can see from page 9, our clients continue to adopt digital at a rapid pace. Since last March, the population of active mobile app users has increased 11% to more than four million users. That marks an important milestone along our digital journey as a company. We're absolutely committed to meeting our clients where they are. And increasingly, these interactions are happening in the digital space. Our digital commerce data bear this out, as digital client needs have met -- digital client needs met have improved 44% since the first quarter of 2020 and represent more than one-third of total bank production of core bank products this percentage is even higher when you include LightStream and Mortgage. As we accompany clients along their digital journey we often interact with them across multiple digital products and services. Mobile Check Deposits and Zelle are two examples both of which were up significantly from a year ago and this just creates additional opportunities to deepen those relationships. Importantly, the increase in digital transaction activity allows our teammates to spend less time on manual execution and more time assessing and meeting client needs enabled by our integrated relationship management. We're also excited about the new Truist digital experience that is rolling out to our clients later this year. In order to complete the digital migration ahead of the core bank conversion, we're utilizing an innovative proprietary approach known as a Digital Straddle. The Digital Straddle allows us to migrate clients to the new digital experience in waves, reducing migration risk as Kelly discussed earlier and avoiding a onetime migration early next year. We recently launched a successful internal pilot of our new digital experience and expect to migrate our clients in a series of…

Thank you, Bill and good morning, everybody. Continuing on Slide 12. Net interest income decreased $81 million linked quarter, due to fewer days, lower purchase accounting accretion and lower earning asset yields. Reported net interest margin was down seven basis points reflecting a four basis point impact from lower purchase accounting accretion. Core net interest margin decreased three basis points, as deposit inflows resulted in higher combined Fed balances and securities. Interest sensitivity decreased slightly as the investment portfolio grew in response to the elevated liquidity. Turning to Slide 13. Non-interest income decreased $88 million, despite record income from insurance and investment banking and trading. Insurance income increased $81 million linked quarter reflecting seasonality, $28 million from recent acquisitions and $19 million due to a timing change related to certain employee benefit accounts. Organic revenue grew 6.4% due to strong new business, stable retention and higher property and casualty rates. Investment banking and trading rose $32 million, benefiting from strength in high yield investment grade and equity originations, as well as a recovery in CVA. Residential mortgage income decreased $93 million, due to lower production margins and volumes. Commercial real estate income decreased $80 million, due to seasonality and strong fourth quarter transaction activity. Other income was down $18 million, as lower partnership income was partially offset by gains from our divestiture. Continuing on Slide 14. Expense discipline remained strong in the first quarter. Non-interest expense was down $223 million linked quarter, reflecting $167 million decrease in merger-related and restructuring charges. Adjusted non-interest expense decreased $57 million, primarily due to lower professional fees and non-service-related pension costs offset by personnel expense. Personnel expense increased $34 million, reflecting higher equity-based compensation higher incentive compensation, and payroll tax resets, partially offset by lower salaries and wages. Turning to slide 15. We are…

Thanks, Daryl. And I'm going to take us to Page 20. I'm going to take this opportunity to share our progress on Integrated Relationship Management and share two examples of what we call natural fit businesses working together to benefit our clients. When Truist was formed, we said we'd create value by combining our distinctive client-focused banking experiences with greater investment in technology and a stronger mix of financial services offerings. As Kelly noted earlier, we called this approach T3 touch integrated with technology equals trust. We're confident in the strategy because it really builds on Truist's strengths. Those strengths include industry-leading client service and loyalty; an advice-based business model; differentiated offerings including Truist Securities, Truist Insurance Holdings and the Truist Leadership institute; and leading technology like our mobile banking app. Integrated Relationship Management is a framework for putting T3 into practice across Truist, through all of our lines of businesses and most importantly for all of our clients. We start with the client, understand their needs, and engage our business partners through our common technology-based referral and accountability process. As mentioned, we have natural synergies such as the relationship between Commercial Community Bank and Truist Securities. This business is by nature a little lumpy and episodic driven by client needs, but we're very pleased with our momentum. Referrals are up by a factor of three in one year and have more than doubled since the last quarter. We continue to train bankers and are increasing both the number and quality of referrals. As we share client wins, teammates gain confidence and motivation to fully leverage all the tools that we have for the benefit of their like clients. Moving to Slide 21 and discuss the effort of Truist Securities and Truist Insurance Holdings and the relationship with heritage SunTrust clients in particular. Referrals to insurance have increased more than 2.3 times compared to the first quarter of 2020 and more than 50% sequentially. We've aligned systems and trained around similar practice groups, which allows us to double down on industry expertise for our clients. I can really speak from experience if this was a real area of excitement from heritage SunTrust and this is really just in the early stages of growth. So Integrated Relationship Management is working. It's been embraced fully by our teammates. It's in support of our clients and a distinguishable benefit for our shareholders. Keep in mind, this is a long game, but you do see the beginning of this incremental opportunity in the overall insurance and investment banking results even in this quarter. So Kelly, let me turn that back over to you.

Thank you, Bill. I appreciate that. So on Slide 22, I just want to point out and reemphasize our value proposition. We believe it is a very strong value proposition driven by our purpose to inspire and build better lives and communities. We have an exceptional franchise with diverse products, services and markets some of the best in the world. We are uniquely positioned to deliver best-in-class efficiency and returns while investing in the future and you're seeing that happening already. We have very strong capital and liquidity position with very strong resilience in terms of our risk profile enhanced by the merger. So we have a growing earnings stream with less volatility relative to many of our peers over the long-term. So if you think about the quarter in all and overall and wrapping up, I'd just say again, I think it was a very strong quarter. It's a very interesting and challenging times, but look things are getting better. COVID is getting better. It's too soon to declare this over, but hospitalization rates are down and infection rates are down and vaccines are getting out really, really fast. So we're encouraged by that. The economy is clearly improving. We've said before and I would reemphasize, we believe as we head into the second half, we will have a snapback economy. This economy was not wounded before we headed into this, we simply shut it down for appropriate reasons. Now we're beginning to see the opportunities that we believe could happen, which is turning it back on as easy than it might have been under other types of economic crisis that we've seen. So Truist is positioned really, really well. We have a great culture. We have great markets. We have a great team. We have a great purpose to inspire and build better lives and communities and it's creating really engaged teammates. We have real benefits from the merger that are being realized every single day. You've heard some of those. We have very strong performance in T3 and IRM as Bill described and that's really powerful. The merger integration is on track. We are reducing risk every single day. It's all going really, really well. We believe we have the opportunity to accelerate into what I consider to be a very positive snapback economy. We fully believe our best days are ahead. Alan?

Okay. Thank you, Kelly. Katie, at this time if you would come back on the line and explain how our listeners can participate in the Q&A session.

Thank you. [Operator Instructions] We'll go first to Gerard Cassidy with RBC.

Good morning, Kelly, Bill. How are you?

Hi, Gerard.

Can you kind of share with us, if you look at the credit outlook for your company and the industry, we've seen an incredible reduction in the credit cycle because of the policies pursued by the Federal Reserve and the US government last year. Can you guys give us your thoughts on how you see credit cycles going forward? Are they permanently potentially flattened because of what we saw last year? Or is this just such an aberration that we shouldn't read into what we're seeing with this lowered flatter credit cycle?

I would say and Clarke can add some details on that, Gerard. I don't believe this eliminates ongoing long-term credit cycles. I mean, I think to believe that you would have to believe that we have somehow fixed the economy and fixed the nature of humans making decisions and humans getting greedy and humans indulging in excesses. I do not believe that has gone away nor will it go away. Once we flush through this massive amounts of stimulus into the economy, we will undoubtedly see some excesses. It will likely lead to some corrections down the road that nobody is projecting now and I don't project it in the next two, three years, but there will be some excesses created out of all this excessive money into the system. So we have had a -- heading into the pandemic, we had about a 10-year kind of steady economy. Most people would say and including myself, we were probably heading into a correction. Now we've had what will be two, three years of COVID experience. We haven't had a correction because of these excesses. That will flow in two, three years. So we'll end up with about a 15- or 16-year protracted period relatively stable ex-out the blip from COVID. But then we'll go back to fairly normal kind of economic variations in my view. Clarke, what do you think?

I agree. The credit stress was resulting from the shutdown of the economy not underlying credit considerations that you would normally see. So we've been around a long time credit cycles will come and go. [Indiscernible] involved inherent risk is going to have a credit cycle in the future. So that's why you always have to stick to your long-term underwriting principles. And you can't ever forget there will be another credit cycle [side of retailing] [ph].

Thank you.

And maybe just add to that…

Go ahead, Bill.

Gerard, maybe just add to that is, keeping our diversified balance sheet is the key to that. So, we're not going to lose our discipline and [blink] [ph] because of this cycle. And we want to anticipate a highly diversified business and a strong capital base to fulfill our value proposition.

Very good, and then, as a follow-up your franchise obviously is located in some of the stronger economies in the U.S. particularly economies that are more open than some of the coastal economies in the North. Can you share with us the outlook for, if you look beyond the current quarter and look out into the second half of the year about loan growth and loan demand, I know there's excessive liquidity? You touched on it Kelly. What do you guys see the turning points where you could see an acceleration of loan growth possibly in the third or fourth quarters of this year?

Yes. Gerard, I'll take that. I think, first of all, what you noted is exactly right about our franchise. I mean, I think, whatever happens and whenever it happens, I think, we'll be disproportionately positively benefited. So I think we'll sort of be the first in that cycle. And we see that not only in case of markets being more open but just the migration. I mean the migration of companies, and the migration of individuals. I don't think that's quite showing up in the data yet, but that's going to show up, because we absolutely, absolutely feel that. That being said, if we start so to say the second quarter is the starting period for loan growth, I think it's reasonable to think that sort of core loan growth, let's exclude PPP from that, because we're a little over weighted in PPPs. So we've got paydowns related to that. If we look at core loan growth, I think we have reasons to be positive for the latter part of the year, in virtually all of our businesses. So maybe CRE being the loan stand -- example on the opposite side. But core C&I, and then the growth in mortgage and then businesses like LightStream and indirect auto and others that are more positively inclined. I think your general premise is right. And I think we're well positioned. And I think that's the latter half of the year phenomenon.

Thank you.

Thank you. We'll take our next question from Mike Mayo with Wells Fargo Securities.

Hi. The specific question is can you give an update on the annualized cost savings as a percentage of the ultimate target? It was $640 million annualized in the fourth quarter versus the target of $1.6 billion. And along with that, you're still sticking to $29 billion of expenses by the fourth quarter. That's down, despite an increase in volume-based expenses such as for insurance and capital markets. And why is that? And if that's the case why wouldn't you be updating your ultimate merger expense saving target?

Yes, Mike. That's a great question. If you take our -- on the slide that we had in the deck and look at what our core expenses are the $3.065 billion. And if you back out the seasonality that we had in the first quarter, due to the payroll, tax resets and the equity that's about $50 million there, we're probably at $3.015 billion give or take a little bit there. We did have higher incentives. Higher incentives this quarter were really driven by our performance in revenues and just overall great performance throughout the company. So, I kind of carve that out. But from a core perspective I think, we continue to make good progress. We are totally committed to getting to the $2.940 billion that we talked about last quarter. We're on track to get there. If you noticed in our comments, we said, we're looking at these five buckets, but we're also broadening out and looking at other areas as well. And we are going to hit our targets for sure. And if we exceed those targets we will continue to make good investments in the company to continue to compete and win in the industry.

Okay. Before I use up my second question, so the $640 million annualized, have you updated that for the first quarter or no?

We say, updated it. It's -- we really just gave targets for the fourth quarter. It's going to be lumpy. But it's hard to project a trajectory down every quarter just because of you have a real business that's dynamic and moving. But we made good progress in fourth quarter to first quarter. And we will get our target by the fourth quarter this year.

Okay. And the second question since insurance is such a standout and I had our firm's insurance analyst Elyse Greenspan to ask the follow-up.

Yes. So I was hoping to get some color within insurance on the organic growth on -- it is up to 6.4% in the quarter. On the last quarter call you guys had pointed to 5% for the first half of the year. So I guess what's coming in better than you had expected? And how do you see the rest of the year progressing from here?

Sure Elyse. This is Chris Henson. We did have a very exciting organic growth number. The elements of it would be pricing retention and new business. I would say pricing was not of what I'd call a continued surprise. The balance increased around 7%. We think rates are generally going to be anticipated to continue increasing throughout 2021. Retention we did level off in retail. So we're just under 91%. We were having a little drift down. As you know we're in that time of the market where a lot of that risk gets shifted to the wholesale segment. Wholesale is actually up to 84.6%. So retention actually continued to perform just maybe a touch better. And we do continue to see that shift to wholesale. New business would be an area I would point to that might have been in a brighter spot than we would have seen a quarter ago. New business production was up 12.8% which is very solid. And what we saw in the quarter was every month that got better. February was better than January, March was better than February et cetera. And that's kind of what drove the 6.4% of organic. And I would also piggyback on the comment Bill made earlier, IRM is actually -- is real. It's having an impact. And when we say that they're linked pretty heavily to the Commercial Community Bank CIG wealth Retail Community Bank, we're actually spending time talking about that and making sure we have aligned with expectations in place and that's having a marginal impact as well. In terms of outlook, the second quarter we'd expect commissions to be up about 3%. We're moving out of the first quarter which is our second highest quarter of the year into our seasonally strongest which is Q2.…

Thank you. We'll take our next question from Betsy Graseck with Morgan Stanley.

Hi. Good morning.

Hey, Betsy.

Just the first question I just wanted to make sure I understood the expense guide for 2Q because I think you mentioned Daryl relatively flat Q-on-Q. And I wanted to understand if that was right and maybe some of the things that you're thinking about that keep it flat instead of maybe coming down a little bit.

Yes, Betsy. In my prepared remarks, we did say that we thought expenses on the adjusted basis backing out the merger and restructuring incremental MOE would come in relatively flat. I think we continue to make good progress in the buckets that we're showing and we are starting to broaden out in other areas. We will have higher revenue and fees in certain areas just because of seasonal strength in the second quarter. But net-net we feel pretty good on how the quarter is going to come in and from an expense perspective. I think we're on a good trajectory and we're going to hit our targets.

And so from what I'm hearing from the prior conversation too is that the expense improvement acceleration is picking up as you move through the year.

That would be the anticipation.

And then just separately on the revenue side. I know you haven't baked in the revenue synergies, but I just wanted to get a sense as to whether or not you could speak to what you're seeing so far in terms of picking up new accounts or expanding the product set of the accounts that you're with relative to what maybe your budgets or goals have been so far. I know COVID kind of put a wrench in that, but maybe you could speak to how you're migrating at this stage.

Yes. Betsy, it's Bill. I think as I said earlier, you see that in the core results. I mean, sort of the penetration that we're experiencing the referral volume that we're experiencing you probably see it most acutely in the results in investment banking and in insurance. But it's really sort of if you look at sort of the overall revenue line. It's really everywhere, I mean. So we've been careful about pointing out one specific revenue synergy against one specific thing because that's not the goal. The goal is to expand all of our relationships. The goal is to listen to our clients put a integrated system together have it the highly technology supported one platform with really good accountability and strong teammate by them. And that's the value proposition. So I think the real answer is just see it in the overall results. Again, I pointed out too that we're more acutely obvious, but literally in all of our businesses you see the advantages of what we're implementing as part of the Truist value proposition.

Betsy, I'll tag on to that. Sorry, Betsy, I was just going to tag on just saying in the commercial community bank for example, we saw referral activity up 15% this past quarter, which is a really good number of household growth in all the commercial segments. So I think it's a function of what Bill was saying we're just beginning to see movement sort of across the board.

Okay. Yes. That was kind of my question in particular post. As we've been reopening, do you feel like that has been picking up? And then I can hear in your answer it seems like the answer is yes.

Yes, absolutely. Yes. That's the other part of your question, yes. That's to the -- I think we're again experiencing that a little disproportionately. We're probably leading the country in terms of reopening and reactivity. And we feel that in virtually all of our businesses.

We came into the first quarter of last year with a lot of excitement. And then second quarter with COVID, we all just sort of hit a wall. But the excitement sort of perseveres through the balance of the year. We just seen I think to a degree just consistent improvement sort of month-by-month.

Okay. All right. Thank you.

Thank you. We'll take our next question from Matt O'Connor with Deutsche Bank.

Hi, Matt. Matt O’Connor: Hi. Can you guys talk a bit about your strategy of deploying liquidity in the securities? Last quarter you purchased a lot of securities a little bit less so this quarter. What's kind of just the philosophy and capacity as we look forward?

Yes. Right now Matt what we are doing is we are investing our excess liquidity that we've gotten in from our deposits. But we're averaging about $20 billion at the Fed which we think is a comfortable cushion to basically handle any volatility we might get there. The investments we're making is a combination of mortgage-backed securities and U.S. treasuries. We are averaging up a little bit on the yields that we have on the portfolio that we have out there today from that perspective. So I think the way we think about it is, we're going to have liquidity for a fair amount of time. And we're going to have cash flows. And kind of dovetailing into what Bill said earlier, the best thing that could happen to us is loan growth starts to pick up second quarter into the second half of the year. And we basically runoff some securities that are in the mid-1% ranges and we reinvest them into loans in the 2% to 4% 5% or 6% range and basically keep the balance sheet about the same size and just improve our revenue and earnings overall. So I think that would be the strategy for us to do that. If, for whatever reason that the Fed starts to shrink their balance sheet and liquidity comes out, you got to remember, we have $8 billion to $10 billion of cash flows coming off this portfolio every quarter that we can absorb anything. So, I think, we're taking good balanced risk. Our target right now is to keep net interest income, even with the runoff of purchase accounting flat for the next several quarters. And, hopefully, that will pick up towards the end of the year, as we get meaningful loan growth.

Okay. Thanks. And then, I just wanted to follow up on the last question, so you got questions regarding revenue synergies. I understand, kind of, pushing at all the businesses and not trying to necessarily, kind of, track it separately. But as we think longer term and the opportunities become a little more apparent and, I guess, I'm thinking loan growth picks up and there's some loans that legacy BBT offered that SunTrust didn't and vice versa, it would seem like the numbers could start being a little more material. And I think what I see is, over time you might provide more details on the magnitude of the synergies. So far you talked about kind of capital market pricing some of that in the fourth quarter. But bringing it all together over time is that something you'd consider?

Matt, I think, we will definitely do that. We're trying to provide timely information on those marginally important issues. But as Bill and Chris illustrated, we really have a broad-based opportunity, not just loan, deposits, all types of fee income. Now we are really just scratching the surface. The reason we keep emphasizing this IRM concept is because, that is the most powerful concept and we think we have an edge on that, because it focuses on all of the clients' needs all of the time. We build a culture where everybody works together. We built systems to allow for information to be integrated across organizational boundaries. And so, yes, you're right. I think you bet, it can be positive in terms of expected revenue enhances as we go forward, as we begin to penetrate more of our clients' needs.

Okay. Thank you.

Thank you. We'll take our next question from Erika Najarian with Bank of America.

Hi. Good morning.

Good morning.

My question is, as you think about the prospects for loan growth bouncing back for the rest of the year, could you remind us how many of your clients are either non-investment grade, or don't have a debt rating? I guess the big struggle investors have is the capital markets are wide open, private equity firms continue to be aggressive in private credit and sort of, wondering what that universe is of your clients that potentially would need a bank balance sheet in order to expand.

Yes. Erika, this is Bill. The key is to have a really balanced portfolio. So there we have a good number of clients who won't access the capital markets. That's sort of that core strength of that middle market community banking model and they'll use bank loans as their primary avenue for growth. Then you see the other side of that, but I don't think that's the only equation. If rates go up, certainly on the long end, you can see large corporates going back to bank loans. They are the most efficient way of borrowing. We've got a lot of revolvers out. Just a little bit of revolver utilization increase is a pretty significant loan driver for us. So I don't think we necessarily think about it as the non-investment grade, the investment grade in terms of a separation. We think about it in terms of the balanced portfolio and we drive it from the client needs. So, if the client wants capital markets and that's the most efficient way, we have great access and great capability and great products. For those that want to have a bank product, we've got a great portfolio of those tight middle-market clients and are able to serve them. So, I think our optimism is really predicated on just this concept of a balanced portfolio versus one versus the other. Does that make sense?

Yes, it does. And I think Bill that's a great point on loan rates rising and revolvers becoming more attractive. I think that has -- that point hasn't been made as vocally, so thank you for that. And the follow-up question is, clearly, consumers and corporates are awash with cash. Do you expect that those cash balances have to be drawn before corporates, especially re-lever? Or do you -- are your clients telling you that they're going to keep a little bit more cash on hand, given what they went through during the pandemic?

Erika, I think everybody is trying to figure out the answer to that question. You've got a consumer and business. I'll comment on business and Chris can comment on the consumer. I think, what you're going to see is that, businesses are going to end up maintaining more liquidity than you would expect, as they begin to weigh in on new credit facilities, whether it's capital markets or whether it's bank balance sheets. And the reason is because I think you're going to see leaders of businesses that -- were very unnerved with the Great Recession. And then just a few years later got very unnerved with the COVID experience. The end result of that is going to be psychologically a very reserved view. And that argues for maintaining liquidity even as you're borrowing. So, I personally expect that you're going to see borrowing increase faster than most people expect, as we head into the latter part of this year and still maintain liquidity.

Thank you.

Consumer what we're seeing -- Erika, for consumer, what we're seeing right now is checking balances are about 30% higher and savings balances are up 140%. Obviously, a lot of that's driven by stimulus. But for lending to occur, there's got to be demand. And I think, we are seeing spending now on nondiscretionary type things which -- I mean at discretionary type of thing excuse me. And I think when cash depletes, there will be more lending, but it is tough today for home equity type products as a result of all these payments.

Got it. Thank you.

We'll take our next question from Ken Usdin with Jefferies.

Thanks. Good morning everyone. I just wanted to follow up on the fee income side, I think embedded within your kind of flat revenues and flattish NII, kind of flattish fees. And Chris had talked about the plus 3-ish percent outlook for insurance. So, just wanted to understand, given that there was a gain in there too this quarter, just what are some of the other moving parts of fees as you look out? Well Daryl, you had sounded very optimistic at the beginning of the year about the outlook for fees. And just wondering what you think continues to be the other positives and then some things that might be settling back out off of recent strengths? Thank you.

Yes, Ken. From a fee perspective, I think insurance, as Chris said, will have its largest quarter of the year in the second quarter, so that will be strong. Second quarter activity is usually strong in the payments area in activity. So I think all of those will be relatively strong. I think, we're calling for tighter margins in our mortgage area. So that I think even though we'll have higher volumes, we might have lower revenues there potentially. And then if you look into the investment banking and trading areas, we did have a CVA adjustment this past quarter. For that to continue, we have to have rates continue going up. We don't really have a good prediction, if rates are going to go up or not next quarter or not. So we're just kind of saying that's relatively flat. They do have strong pipeline flow in the M&A area and other pieces. So net-net, I think they'll still be strong, but CVA was a benefit for us this past quarter. But I think overall Ken, we feel pretty good about fees. And right now, we're saying relatively flat and we'll just see how the quarter unveils and hopefully we can beat that performance.

Got it. Great. And secondly, you've teased out before this potential to relook at that 10% CET1. And obviously, getting through the rest of the pandemic would probably be priority one. But what are the other factors that you need to continue to evaluate that? And could it be a big delta? Or are you talking about just modest changes as you continue to tighten up on what this company looks like over the long term? Thanks.

Yes. So Ken you've heard us say that the relationship between capital and risk is what drives our capital decisions. Going into the merger and up to the current moment, we've judged that the risk externally were substantial. We adjusted the risk of making sure we do the merger right or material. And so as we look forward what we see is that the risk externally are mitigating, COVID is mitigating, economic risk are mitigating. So certainly it's not some huge substantial event that we don't anticipate. The external factors are mitigating meaningfully internally. As I described earlier the risks are reducing daily. And so it does set forward the opportunity for us to have some capital actions that can be attractive to our shareholders. It's hard to judge right now the materiality of that because you literally have to take it a day at a time. One thing we should have all learned is projecting out in this kind of environment six months or nine months now is just not rational, and so you have to kind of take it more carefully. But as we do, as we see risk began to continue to materially mitigate, we do have meaningful opportunity in terms of capital deployment.

Got it. Thank you, Kelly.

Thank you. We'll take our next question from John Pancari with Evercore ISI.

Good morning.

Morning.

On the margin front, I know you guided to some incremental compression in the second quarter and then in the fourth quarter saw some -- a big greater pressure than expected I think. How should we think about a bottoming of the margin? When do you think that could materialize? Should we expect that for the third quarter? And maybe give us some thoughts around what could drive that. Thank you.

Yes, John. So if you look at margin I'll start off with our core margin. Our core margin was 2.69, we're guiding that to be down mid-single digits. So I think we'll stay in the 2.60s. Given what we know, it's really a function -- this is like as hard as it's ever been in trying to forecast actually a margin number because of all this excess liquidity going on and what's happening with the loan portfolio and all that. That said, we expect to get more deposit growth as the stimulus plays out. That's going to continue to put pressure on core margin. No matter what we do with those funds right now until loan volume picks up, we're either going to put it at the fed or go to invest the dollars. So our margin -- core margin is coming down. We believe that we can probably stay in the 2.60s throughout most of this year hopefully. And if as loans pick up in the second half of the year, we might be in the higher range of 2.60s. But right now I would just say mid to lower 2.60s. And then if you just look at the GAAP, our reported margin we are running off the purchase accounting accretion. It's about three or four basis points a quarter, what it's been doing the last couple of quarters. That will continue. So we're at 3.01. And you adjust for core coming down and then you take three or four down that will come down probably end up in the 2.80s give or take by the end of the year depending on what happens with the accretion runoff. But that said and I think the important thing there is that we are focused on managing NII and we're guiding for at least flat if not better than flat NII as the year plays out.

Got it. Okay. Thanks. That's helpful. And then separately on the loan growth front you mentioned a couple of times now the likely inflection in loan growth in the -- ideally in the back half of the year it seems like. Maybe if you can help us think about that the pace of growth that could materialize in the back half. And more importantly what type of loan growth is fair to assume as we look into going into 2022? Are we talking about the low single-digit pace as being reasonable?

Yes. I think as Kelly noted earlier, I mean it's hard to project out. We had a lot of months here because there are a lot of binary events that are going on. But we just look at things like pipelines. We look at things like productions. We look at things like the impacts of those. So I do think if you look at overall and think about core and think about that base, I mean we're talking about single digit kind of growth through the latter part of the year. The things that could influence that more would be as I've mentioned earlier revolver utilization changes things like that. But I think if you look at, sort of, the core growth part I would think, sort of, averaging single-digits. And then, of course, for us you just have to remember, we have a little bit of that PPP headwind in the total loan growth. But we really think about sort of core second half of the year some type of single-digit opportunity.

Got it. Thanks, Bill. That’s helpful.

Thank you. We'll take our final question from Bill Carcache with Wolfe Research.

Thanks. Good morning. Kelly and Bill, I wanted to follow-up on your ESG commentary in the release. How have your discussions evolved with different stakeholders? Are the investments you're making in ESG a source of differentiation? Or are they stable stakes? And how are you thinking about the financial impact of ESG?

Yes. So, we feel very good about the long-term financial impacts of ESG. It's clearly the right thing to do for our communities for the economy at large. To be honest, it's bumpy right now for all of us to figure out what the near-term economic impacts are, because we're all fairly new at this. But there's no doubt that the long-term economic impacts will be very positive, not to mention the quality of life and the future for our kids and our grandkids. And so, we are really committed to a very aggressive and broad-based ESG program. You're just seeing a lot of things we're doing like our social bond. Daryl has done a lot of things already in terms of bringing our environment. We have lots more plans as we go down the road. So, it's something that we all in the corporate community need to be highly invested in and Truist is. I think it's net accretive long-term. In the short-term, it could be a little bumpy.

Yes. I think as Kelly said, I mean we view it collectively as an opportunity versus a requirement. I think that's how we want to think about it. And I think our teammates have embraced that. And I think just -- they are things that will just make us a better company and a better society.

That's helpful. Thank you. And if I may as a follow-up, a separate question for Daryl. Could you give some additional thoughts around the variability on either side of around the $2.1 billion and $1.8 billion of merger costs on slide 15? With seven quarters to go through 2022, how do you think about the potential for these to come in either better or worse? Any perspective there would be great.

Bill, I would tell you we're on track of getting about $4 billion. Last year, we did about $1.3 billion. And if you add the two numbers together, this year we'll probably be $1.2 billion, $1.3 billion as well this year as the numbers come through, and then we'll finish out and get the rest in 2022. So, I think we're just on track right now. Our main focus, to be honest with you, is to really do a great job on the conversions to make sure everybody has a really positive client experience. I mean that would be the best outcome of all, and what the cost should -- that we have in there should be able to enable that to happen.

Very helpful. Thank you.

That will conclude our question-and-answer session. I'd like to turn it back over to our speakers for any additional or closing remarks.

Okay. Thank you all for joining our call. This does complete our earnings call. We apologize to those in the queue that we didn't have time to get to your questions. We will reach out to you later today. Thank you and we hope you have a great day.

That concludes today's call. We appreciate your participation.