Goldman maintains Buy on TFC, FITB, and RF, positive on regional bank fundamental recovery and medium-term upside

Overview

This is a Goldman Sachs earnings review report on second-quarter results for Truist Financial, Fifth Third Bancorp, and Regions Financial Corp. in the Bank Americas sector. The report focuses on evaluating differences between the three companies' results and market expectations, 2026 and third-quarter guidance, loan and deposit trends, net interest income and fee income, expenses and synergies, credit quality, capital returns, and valuation. The overall conclusion is positive: although the post-earnings share-price reaction for TFC, FITB, and RF was weak or muted, Goldman believes the fundamental outlook still supports medium-term upside.

Core views

The core views are: first, although TFC's 2026 revenue and NII guidance are weaker than previously expected, the higher fee income growth outlook, loan mix optimization, and ROTCE target of above approximately 14% mean its fundamentals still have recovery potential. Second, FITB's CMA integration, expense synergies, deposit activity, and loan growth were all better than or in line with expectations, and there may be upside to 2027 loan growth and ROTCE. Third, RF's results were relatively steady, with deposit cost control, the upward path for net interest margin, loan growth, and credit normalization supporting further share-price upside.

Analysis framework

The report uses a combination of earnings review and forward-guidance comparison, comparing actual 2Q26 results with Visible Alpha consensus expectations, the companies' latest 2026 and 3Q26 guidance, peer valuation multiples, and medium-term earnings and return targets, while assessing the investment attractiveness of TFC, FITB, and RF from the perspectives of revenue, expenses, credit, loans, deposits, capital, and valuation.

Methodology notes

• Earnings comparisonActual results vs. consensus expectations

  PPNR, EPS, NII, NCO and expenses versus expectations

  In multiple sections, the report compares the three companies' 2Q26 core PPNR, EPS, net interest income, expenses, and net charge-off rates with Visible Alpha consensus expectations to assess earnings quality and market reaction.

• Valuation methodsRelative valuation and target multiples

  P/TBV, P/E and target price multiples

  TFC's target price is based on 11.5x 2027 P/E, FITB on 13.0x 2027 P/E, and RF on about 12.5x 2027 P/E; the report also compares TFC's about 1.6x P/TBV versus peers at about 1.8x, as well as FITB's and RF's 2027E P/E relative to peers.

• Factor frameworkGS Factor Profile

  Growth, Financial Returns, Multiple and Integrated

  Goldman's factor framework compares stocks' attributes versus the market and industry peers through growth, financial returns, valuation multiples, and integrated metrics; for financial stocks it mainly uses indicators such as EPS and sales growth, ROE, and P/E, P/B, and P/D.

• M&A scenarioM&A Rank

  Acquisition target probability ranking

  Goldman's global coverage uses the M&A framework to assess the likelihood of a company becoming an acquisition target, where 1 represents high probability, 2 medium probability, and 3 low probability; this report discloses the framework but does not use it as a core investment conclusion for the three companies.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Truist Financial (TFC)

  Core covered name, Buy rating maintained

  Strengths

  Fee income growth expectations have been raised to about 10%, loan mix optimization should help lift ROTCE, the 2026 ROTCE target is above approximately 14%, and valuation at about 1.6x P/TBV is below peers at about 1.8x.

  Weaknesses

  2026 revenue guidance was lowered from about 4% to 3.5%-4%, the NII outlook is weaker than previously expected, and 3Q PPNR guidance is about 1% below the market.

  Comparison

  Relative to peers, TFC's valuation is lower, reflecting the market's view that its profitability still lags; if 2027 return improvement materializes, the discount could narrow.

  Risks

  Higher-than-expected expenses, deposit outflows, higher-than-expected credit losses, and adjustments by the new CEO to the timing of the 16%-18% ROTCE target that fall short of market expectations.

• Fifth Third Bancorp (FITB)

  Core covered name, Buy rating maintained

  Strengths

  CMA integration progress is in line with or better than plan, deposit activity and expense synergies exceeded expectations, loan growth is sustainable, and the 2027 ROTCE outlook is above approximately 19%.

  Weaknesses

  3Q26 PPNR outlook has slight downside due to the timing of cost savings, and the stock underperformed KRE after earnings.

  Comparison

  FITB trades at about 11.6x Goldman's 2027E P/E, above peers at about 10.8x; the premium reflects market confidence in CMA deal momentum, leading returns, and TBV growth.

  Risks

  Expense synergy realization is slower than expected, failure to drive growth in the former Comerica commercial business, and benchmark rates falling faster than expected.

• Regions Financial Corp. (RF)

  Core covered name, Buy rating maintained

  Strengths

  Deposit costs declined from 1.72% in 1Q to 1.69% in 2Q and are expected to remain stable in the second half; the year-end NIM target is about 3.70%, while loan growth and credit performance are solid.

  Weaknesses

  Fee income guidance was adjusted to the low end of the 3%-5% growth range, and the market has concerns about buyback pace and expense linkage.

  Comparison

  RF trades at about 11.1x Goldman's 2027E P/E, close to peers at about 11.0x; if balance-sheet growth and funding cost advantages persist, valuation still has upside room.

  Risks

  Deposit beta comes in below expectations, persistent negative operating leverage, credit deterioration, and a slower-than-expected recovery in capital markets revenue.

Key data

• TFC rating and target priceBuy, 12-month target price $59The target price is based on 11.5x 2027 P/E; key risks include higher-than-expected expenses, deposit outflows, and higher-than-expected credit losses.
• FITB rating and target priceBuy, 12-month target price $66The target price is based on 13.0x 2027 P/E; 2026 core EPS is revised to $4.20, 2027 core EPS to $5.05, and 2028 core EPS to $5.55.
• RF rating and target priceBuy, 12-month target price $36The target price is based on about 12.5x 2027 P/E; 2026 core EPS is maintained at $2.60, 2027 core EPS is revised to $2.80, and 2028 core EPS to $3.10.
• TFC 2026 ROTCE outlookAbove approximately 14%Higher than the previous wording of about 14%, despite pressure on NII.
• TFC fee income outlookApproximately +10% YoY in 2026Raised from the previous expectation of high-single-digit growth, potentially driven by investment banking and trading businesses.
• FITB deposit activity performanceAbout $2.5bn growthAbove the initial expectation of about $1bn, supporting funding for subsequent loan growth.
• FITB expense synergiesBetter than the initial $850mn expectationRemaining synergies are expected to be reflected in 4Q after the Labor Day system conversion, with some upside potentially reinvested.
• RF net interest margin pathAbout 3.70% by year-end 2026The company expects 3Q net interest margin to be stable to slightly higher, with fixed-rate asset repricing creating further upward bias.
• RF credit quality2Q NCO of 42bps, below consensus expectation of 47bpsManagement guidance implies NCO in the low-40bps range in the second half, while NPA declined about 3% quarter over quarter.

Impact & implications

The investment implication is that while the market is focused in the short term on disturbances such as revenue guidance, expense timing, fee slowdown, and buyback pace, Goldman places greater weight on the sustainability of loan growth after 2026, stable deposit costs, realization of expense synergies, improving net interest margin, and higher ROTCE. If TFC's new CEO can clarify the path for return improvement after 2027, FITB continues to deliver on CMA integration and medium-term targets, and RF maintains leading funding costs and balance-sheet growth, all three companies' share prices could gain upside over time.

Risks

• All three companies face the risk that a macro slowdown leads to weaker-than-expected loan growth.
• Deposit competition could push up funding costs, compressing net interest margin and returns.
• If credit losses or nonperforming assets rise again, the path of EPS and ROTCE improvement would weaken.
• If expense synergies or cost savings are realized more slowly than expected, PPNR could be pressured.
• Weak capital markets activity could drag on fee income, particularly affecting the revenue mix of TFC and RF.
• If the rate path materially deviates from company assumptions, it could affect NII, deposit costs, and asset-sensitivity benefits.

What to watch

• TFC's new CEO's comments on return targets after 2027, the path to 16%-18% ROTCE, and business mix optimization.
• Whether TFC can deliver about 10% YoY fee income growth and offset NII pressure.
• Whether FITB's Labor Day system conversion proceeds smoothly and whether remaining expense synergies are reflected in 4Q as planned.
• Whether commercial loan growth on FITB's CMA platform accelerates and supports 2027 loan growth above market expectations.
• Whether RF's deposit costs remain stable in the second half and whether year-end NIM approaches about 3.70%.
• Whether RF's loan growth, NCO, and NPA trends continue to support the credit normalization view.
• The contribution of buyback pace, CET1, and AOCI improvement to TBV growth for all three companies.