Truist Exits $5.5B Auto Lending; Fintech CEO Lyons Targets More Divestitures

Top U.S. banks, including JPMorgan and Bank of America, raised their prime lending rate to 7% after the Federal Reserve's first rate hike since 2023. The Fed increased rates by 0.25% and signaled further hikes, aiming to combat inflation. Bank shares fell, with JPMorgan down 1% and Goldman Sachs down 4%. Higher rates boost bank earnings but may slow economic activity and reduce loan demand.

Truist Financial (TFC), U.S. Bancorp (USB), and Republic Bancorp (RBCAA) fell 3.9%, 3.8%, and 3% respectively after the Fed raised rates to 3.75%-4% and signaled more hikes, citing elevated inflation. Bank stocks declined on concerns about slower lending and economic activity. TFC is down 2.6% YTD and 13.2% from its 52-week high.

Truist Financial is exiting near-prime auto lending, selling a $5.5B loan portfolio from its subsidiary, Regional Acceptance Corp. The sale, expected to close by Q4, will generate $5.2B in net proceeds and $535M in loan loss reserve recapture. The bank aims to strengthen its balance sheet and improve credit risk profile, according to CFO Mike Maguire.

Truist Financial (TFC) agreed to sell $5.5 billion in auto loans, generating $5.2 billion in net proceeds. The sale is part of CEO Mike Lyons' strategy to exit less profitable businesses. Truist is also reviewing its securities portfolio to offset the capital impact. Analysts expect further divestitures as the bank aims for stronger growth and profitability.

PNC, USB, and Truist increased dividends, citing strong capital ratios and earnings. PNC raised its dividend 18% to $2.00 with a 9.9% CET1 ratio. USB increased its payout to $0.54 with an 18.7% return on tangible common equity. Truist offers a 4.13% yield but has the highest net charge-off ratio at 0.61%. All three banks maintained dividends despite Fed rate volatility.

Truist Financial (TFC) named Mike Lyons as its new CEO. Lyons will present a transformation plan within 90 days, focusing on post-merger performance. Investors watch for potential restructuring. TFC has a market value of $60.4b, serving retail, commercial, and wealth clients in the Southeastern and Mid-Atlantic regions.