Truist Financial in Charlotte, N.C., will get out of near-prime auto lending by selling substantially all assets of its unit, Regional Acceptance.
Truist will unload $5.5 billion in auto loans to an undisclosed buyer between now and the end of the year, according to a disclosure made ahead of the company’s appearance at a banking conference.
The unit’s pretax earnings were roughly break-even during the first half of this year. Truist said its third-quarter and full-year outlook remain unchanged, excluding the impact of the sale and other related strategic actions.
The transaction is expected to generate $5.2 billion in net proceeds and a $535 million loan-loss reserve recapture that represents the difference between the purchase price and the loan amount net of reserve. Combined with a reduction in risk-weighted assets, the deal will create $945 million of CET1 capital, partially offset by after-tax transaction-related costs.
Truist said it expects the sale to improve credit quality by reducing non-performing loans by more than 10 basis points as of June 30 and net chargeoffs by roughly 10 basis points annually.
Truist said capital could be redeployed by repaying wholesale borrowings and repositioning certain available-for-sale securities.
Truist framed the exit as consistent with a broader push to sharpen its strategic focus, following an earlier decision to discontinue marine/RV lending. A wider strategic review is ongoing.