Truist Financial has reached an agreement to divest $5.5 billion of auto loans, a transaction the bank says will produce approximately $5.2 billion in net proceeds and mark its exit from near-prime auto lending. The sale is being presented as a component of a broader effort by senior management to refocus the firm's consumer-lending mix and leave lower-margin, non-core operations behind.
The bank, headquartered in Charlotte, North Carolina, said the deal is expected to close this year and will be paired with a repositioning of its securities portfolio to offset the capital that is created by the loan sale.
Truist's finance chief, Mike Maguire, characterized the internal review with heightened pace. "There’s a lot of urgency and intensity that’s been added to this evaluation that really started earlier this year," he said at the Barclays Global Financial Services Conference on Tuesday.
Executives point to prior moves that began altering the company's consumer-lending footprint. During the second quarter, Truist discontinued marine and recreational vehicle loans and reduced originations in several other less profitable consumer lending units, including prime and non-prime auto.
Analysts say the bank's combination of a revised deposit strategy and additional asset sales is likely as CEO Mike Lyons seeks to reposition Truist Financial Corp for better growth and profitability over a multiyear horizon. "In addition to implementing a more robust deposit gathering strategy, we also believe further divestitures are likely as Lyons repositions TFC for stronger growth and profitability over the next three years," RBC analyst Gerard Cassidy said.
Truist framed the $5.5 billion auto-loan sale as one element within an ongoing strategic review intended to streamline its business mix. Management has signaled both an intention to reduce exposure to less profitable consumer credit segments and to redeploy capital through adjustments to its securities holdings.
Key transaction details
- Sale amount: $5.5 billion of auto loans.
- Expected net proceeds to Truist: $5.2 billion.
- Market exit: the sale will mark Truist's exit from near-prime auto lending.
- Timing: the transaction is expected to close this year and will be paired with a repositioning of the securities portfolio.
The bank has not disclosed further financial specifics beyond the projected net proceeds and has indicated the strategic review remains ongoing.