We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Will Truist's Prime Auto Lending Exit Strengthen Its Profitability?
Read MoreHide Full Article
Key Takeaways
Truist is selling $5.5 billion of near-prime auto loans as it reviews businesses against strategic priorities.
The RAC exit is expected to reduce non-performing loans and annualized NCOs while boosting CET1 capital.
Truist plans to redeploy resources toward core banking, payments, cards, home equity and mortgage products.
Truist Financial Corporation (TFC - Free Report) is exiting the near-prime auto lending business as new CEO Mike Lyons accelerates a broader review of businesses and portfolios that do not align with the bank’s strategic priorities or profitability goals.
Truist has agreed to sell $5.5 billion of near-prime auto loans, representing substantially all the assets of its Regional Acceptance Corporation (RAC) subsidiary. The transaction is expected to be closed in late third-quarter 2026 or early fourth-quarter 2026, subject to customary closing conditions.
The sale reflects Truist’s efforts to prioritize businesses that leverage its core strengths, generate attractive economics and deepen client relationships. Chief financial officer Mike Maguire said at the Barclays Global Financial Services Conference that RAC was a “loan-only, loan-first” national business, offering limited opportunities to build broader client relationships.
RAC Exit to Improve TFC’s Credit Profile & Capital Position
RAC was approximately break-even through the first half of 2026, despite its relatively high asset yields. Maguire noted that yields of roughly 12%, combined with funding costs of around 4% and loss experience in the 7%-8% range, resulted in limited economic value for TFC.
The transaction is expected to generate $5.2 billion of net proceeds and a $535 million loan-loss reserve recapture. It is also expected to create approximately $945 million, or 22 basis points (bps), of Common Equity Tier 1 (CET1) capital. Truist plans to use the proceeds to repay wholesale borrowings, while repositioning of certain available-for-sale securities will likely offset the capital created by the transaction.
The exit is also expected to improve Truist’s credit profile, with non-performing loans projected to decline by more than 10 bps and annualized net charge-offs (NCOs) to decrease by about 10 bps. Maguire said this would represent an improvement of roughly 20% in annualized NCOs, based on Truist’s 55-bps 2026 guidance.
Truist expects these strategic actions to result in modest earnings and Return on Tangible Common Equity (ROTCE) accretion in 2027, while its $5 billion 2026 share-repurchase target remains unchanged.
Lyons Brings Greater Discipline to TFC’s Portfolio Review
The RAC exit follows Truist’s earlier decision to cease originations in marine and recreational vehicle lending and reduce originations in certain prime and non-prime auto businesses. Maguire said these actions reflect a common framework under Lyons: evaluating whether businesses fit Truist’s strategy and, if not, whether their economic contribution justifies retaining them.
Maguire said Lyons has brought a “fresh, external perspective” and greater urgency to the strategic review that began earlier in 2026. The review is focused on fewer businesses that can leverage Truist’s strengths, support its deposit franchise and complement its wholesale businesses.
While additional portfolio changes remain a possibility, the objective is not simply to shrink the balance sheet. Instead, Truist intends to redeploy resources toward profitable growth, including core commercial and middle-market banking, payments, credit cards, home equity and mortgage products.
The company continues to expect modest net interest margin (NIM) improvement in the second half of 2026, although the RAC exit is expected to reduce reported NIM by roughly 4-5 basis points net of the securities repositioning.
Our Take on TFC’s Business Streamlining Plan
Overall, the RAC exit marks an early and tangible step in Lyons’ effort to sharpen Truist’s strategic focus. The broader review will likely allow the bank to redirect capital and resources from less strategic, lower-return activities toward core relationships and businesses with greater potential to support profitable growth.
Over the past year, TFC’s shares have gained 11.1% compared with the industry’s 28.6% growth.
HSBC Holdings plc (HSBC - Free Report) is winding down its transaction services business in Germany, affecting approximately 320 positions by 2028. The move is part of the company’s broader simplification strategy to reduce exposure to lower-priority operations and redirect resources toward core franchises and higher-growth markets.
The restructuring affects around 300 positions at HSBC Transaction Services GmbH and 20 at HSBC Service Company Germany GmbH. The business provides securities processing, administration, and custody services, while HSBC’s earlier exit from private banking in Germany and planned carve-out of custody and fund administration businesses reduced the domestic processing volumes supporting the operation.
BlackRock, Inc. (BLK - Free Report) plans to explore the sale of BlackRock TCP Capital Corp.’s (TCPC - Free Report) remaining $671 million loan portfolio, potentially helping reduce exposure to stressed legacy assets and streamline its private-credit operations. The move follows credit quality concerns, portfolio markdowns and valuation pressure at TCPC.
The potential sale follows TCPC’s recent divestment of approximately $523 million of investments across 78 portfolio companies, which strengthened its balance sheet and reduced leverage. For BlackRock, exiting the remaining portfolio could limit further losses from weaker assets while allowing greater focus on its broader private-credit platform following the HPS Investment Partners acquisition.
View the Zacks #1 Rank List
Image: Bigstock
Will Truist's Prime Auto Lending Exit Strengthen Its Profitability?
Key Takeaways
Truist Financial Corporation (TFC - Free Report) is exiting the near-prime auto lending business as new CEO Mike Lyons accelerates a broader review of businesses and portfolios that do not align with the bank’s strategic priorities or profitability goals.
Truist has agreed to sell $5.5 billion of near-prime auto loans, representing substantially all the assets of its Regional Acceptance Corporation (RAC) subsidiary. The transaction is expected to be closed in late third-quarter 2026 or early fourth-quarter 2026, subject to customary closing conditions.
The sale reflects Truist’s efforts to prioritize businesses that leverage its core strengths, generate attractive economics and deepen client relationships. Chief financial officer Mike Maguire said at the Barclays Global Financial Services Conference that RAC was a “loan-only, loan-first” national business, offering limited opportunities to build broader client relationships.
RAC Exit to Improve TFC’s Credit Profile & Capital Position
RAC was approximately break-even through the first half of 2026, despite its relatively high asset yields. Maguire noted that yields of roughly 12%, combined with funding costs of around 4% and loss experience in the 7%-8% range, resulted in limited economic value for TFC.
The transaction is expected to generate $5.2 billion of net proceeds and a $535 million loan-loss reserve recapture. It is also expected to create approximately $945 million, or 22 basis points (bps), of Common Equity Tier 1 (CET1) capital. Truist plans to use the proceeds to repay wholesale borrowings, while repositioning of certain available-for-sale securities will likely offset the capital created by the transaction.
The exit is also expected to improve Truist’s credit profile, with non-performing loans projected to decline by more than 10 bps and annualized net charge-offs (NCOs) to decrease by about 10 bps. Maguire said this would represent an improvement of roughly 20% in annualized NCOs, based on Truist’s 55-bps 2026 guidance.
Truist expects these strategic actions to result in modest earnings and Return on Tangible Common Equity (ROTCE) accretion in 2027, while its $5 billion 2026 share-repurchase target remains unchanged.
Lyons Brings Greater Discipline to TFC’s Portfolio Review
The RAC exit follows Truist’s earlier decision to cease originations in marine and recreational vehicle lending and reduce originations in certain prime and non-prime auto businesses. Maguire said these actions reflect a common framework under Lyons: evaluating whether businesses fit Truist’s strategy and, if not, whether their economic contribution justifies retaining them.
Maguire said Lyons has brought a “fresh, external perspective” and greater urgency to the strategic review that began earlier in 2026. The review is focused on fewer businesses that can leverage Truist’s strengths, support its deposit franchise and complement its wholesale businesses.
While additional portfolio changes remain a possibility, the objective is not simply to shrink the balance sheet. Instead, Truist intends to redeploy resources toward profitable growth, including core commercial and middle-market banking, payments, credit cards, home equity and mortgage products.
The company continues to expect modest net interest margin (NIM) improvement in the second half of 2026, although the RAC exit is expected to reduce reported NIM by roughly 4-5 basis points net of the securities repositioning.
Our Take on TFC’s Business Streamlining Plan
Overall, the RAC exit marks an early and tangible step in Lyons’ effort to sharpen Truist’s strategic focus. The broader review will likely allow the bank to redirect capital and resources from less strategic, lower-return activities toward core relationships and businesses with greater potential to support profitable growth.
Over the past year, TFC’s shares have gained 11.1% compared with the industry’s 28.6% growth.
One-Year Price Performance
Image Source: Zacks Investment Research
Currently, Truist carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Similar Steps Taken by Other Financial Firms
HSBC Holdings plc (HSBC - Free Report) is winding down its transaction services business in Germany, affecting approximately 320 positions by 2028. The move is part of the company’s broader simplification strategy to reduce exposure to lower-priority operations and redirect resources toward core franchises and higher-growth markets.
The restructuring affects around 300 positions at HSBC Transaction Services GmbH and 20 at HSBC Service Company Germany GmbH. The business provides securities processing, administration, and custody services, while HSBC’s earlier exit from private banking in Germany and planned carve-out of custody and fund administration businesses reduced the domestic processing volumes supporting the operation.
BlackRock, Inc. (BLK - Free Report) plans to explore the sale of BlackRock TCP Capital Corp.’s (TCPC - Free Report) remaining $671 million loan portfolio, potentially helping reduce exposure to stressed legacy assets and streamline its private-credit operations. The move follows credit quality concerns, portfolio markdowns and valuation pressure at TCPC.
The potential sale follows TCPC’s recent divestment of approximately $523 million of investments across 78 portfolio companies, which strengthened its balance sheet and reduced leverage. For BlackRock, exiting the remaining portfolio could limit further losses from weaker assets while allowing greater focus on its broader private-credit platform following the HPS Investment Partners acquisition.