The subtraction beside the add-backs
In US bank Truist’s third-quarter results, I start with the route from reported earnings per share of $0.56 to the adjusted $1.16. Approximately $1.4 billion of pretax losses on available-for-sale securities is added back at $0.90 per share. Another $0.06 is added for $106 million of adverse impacts associated with the Regional Acceptance Corporation loan sale. But the positive effect of the same sale’s $581 million reserve recapture is removed: $0.36 per share is subtracted. With the rounded figures, the bridge is explicit: $0.56 plus $0.90 minus $0.36 plus $0.06 equals $1.16.[1]
That symmetry is the most useful feature of the adjustment for me. Excluding only a loss to give shareholders a larger-looking number differs from removing both the loss and the reserve benefit to compare periods. Truist’s calculation follows the latter route. Management’s aim of a simpler business is a reasonable rationale, while the economic consequences of the loan and securities sales remain in reported earnings. I use the adjusted measure to compare the remaining operation, while retaining the cost of losses on the assets sold.[1]
The quarter beneath the annual increase
Adjusted earnings per share rose from $1.04 a year earlier to $1.16, an annual increase the bank put at 12%. The same measure was $1.23 in the second quarter. Annual improvement and quarterly decline coexist. Looking at the operating base, taxable-equivalent net interest income increased from $3.667 billion to $3.707 billion and the net interest margin from 2.98% to 3%. Yet total adjusted taxable-equivalent revenue remained approximately $5.3 billion, stable over the quarter. I do not read the interest-income improvement as an equivalent expansion in revenue across the entire bank.[1]
This is where adjusted earnings become useful in my assessment: they put periods alongside one another after removing large disposal effects. The resulting comparison also extends beyond the annual growth rate. Lower earnings per share than in the preceding quarter and stable revenue leave open how much operating improvement simplification has delivered. I do not automatically convert a securities sale loss into higher future earnings. What these results show is a modest increase in interest margin and unchanged total adjusted revenue during a quarter of balance-sheet reshaping.[1]
Capital after the sale
Period-end loans and leases held for investment were $323.9 billion, down $5.9 billion from the preceding quarter. Of that decline, $5.5 billion related to the Regional Acceptance Corporation loan sale. Deposits increased to $413.2 billion. The preliminary common equity tier one ratio declined from 10.9% to 10.7%. A smaller loan portfolio, higher deposits and a lower capital ratio coexist on the same balance sheet. Read together, those figures make adjusted earnings per share too narrow a basis for my assessment of what simplification delivers to shareholders.[1]
For shareholders, the transaction has two layers: the assets retained change, and the cost of that change enters current results. The adjusted calculation makes earnings from the remaining business easier to compare. Reported profit and the capital ratio retain visibility into the cost of reallocating resources. I read the quarter without turning $1.16 alone into a badge of success. The calculation’s strength is that it also removes the positive reserve effect; the capital-allocation test concerns the return generated by the remaining business against the capital supporting it.[1]