Truist Financial is unloading its entire near-prime auto lending portfolio, a $5.5 billion sell-off driven by soaring delinquencies that consumed roughly a third of the bank's non-performing assets.
The Charlotte, North Carolina-based bank announced the deal Tuesday at the Barclays Global Financial Services Conference in New York, just two weeks after new CEO Michael Lyons took the helm. CFO Mike Maguire told conference attendees the sale would essentially clear out all the assets held by Regional Acceptance Corp., Truist's auto-lending subsidiary that specialized in loans to borrowers with less-than-stellar credit.
The move marks the first major strategic action under Lyons, a 30-year banking veteran who left fintech firm Fiserv to take over the $556 billion-asset bank holding company on September 1. Maguire framed the exit as part of a broader, company-wide review Lyons is driving, one aimed at shedding businesses that do not fit the bank's core strengths.
The numbers behind the exit tell the story plainly. In the second quarter, Truist carried $569 million in non-performing indirect auto loans. That single category accounted for approximately one-third of the bank's total non-accruing assets, a lopsided drag on the balance sheet from one subsidiary.
Maguire was blunt about the math. At the Barclays conference, he told attendees:
"The concentration in non-performing loans and charge-offs in this business... creates an opportunity to really improve our overall credit profile."
Near-prime auto loans carry relatively high yields, but the trade-off is elevated risk. When borrowers fall behind, losses pile up fast. Regional Acceptance Corp. had become the concentrated source of that pain for Truist, and the new leadership decided the economics no longer justified the exposure.
The auto lending market has been punishing for consumers and lenders alike. With average new car payments hitting record levels, borrowers at the lower end of the credit spectrum face the steepest squeeze, and the banks holding their paper absorb the fallout when payments stop.
Maguire described Lyons's approach as a disciplined framework built on a simple premise: do fewer things, and do them well. The CFO said Lyons has brought "urgency and intensity" to a review of which Truist businesses are working and which are not.
"Mike's applying a framework that I think everybody can appreciate. In the simplest form, it's going to be focusing on fewer things that frankly leverage our strengths."
He added a sharper edge to the rationale moments later:
"To the extent that these businesses, or certainly these assets, don't fit our eye and don't fit the economics, then we're going to stop doing them."
The deal is expected to close in the third or fourth quarter of this year. Truist has not disclosed the buyer or the financial terms beyond the $5.5 billion loan volume being transferred. Whether Regional Acceptance Corp. will be dissolved entirely or simply emptied of its assets remains unclear.
Truist itself has faced consumer-side scrutiny in recent months. The bank reached a $240 million overdraft settlement with a September deadline, a reminder that the institution's challenges extend beyond its lending portfolio.
Lyons had been on the job for barely two weeks when the auto-loan exit was announced. The speed suggests the groundwork was already laid before he arrived, but the decision to pull the trigger this fast signals a CEO uninterested in slow deliberation.
The broader question is what else falls under the knife. Maguire's language, "fewer things," businesses that "don't fit the economics", points to additional divestitures or wind-downs ahead. He did not name other units under review.
For the banking industry more broadly, Truist's exit from near-prime auto lending is a data point worth watching. When a top-ten U.S. bank decides an entire lending category has become more trouble than it is worth, it raises questions about who steps in to serve those borrowers, and at what cost. Rising borrowing costs across the board are already tightening the market for consumers with weaker credit profiles.
Other major banks have drawn attention for aggressive fee structures that hit everyday customers hardest. Citizens Bank, for instance, charges customers up to $175 a day in overdraft fees, more than most major competitors. The pattern across the industry is consistent: institutions are protecting their own balance sheets first, and consumers with the thinnest margins absorb the consequences.
Meanwhile, credit-reporting problems continue to compound the pressure. Equifax recently agreed to a $2.2 million settlement over allegations it duplicated collection accounts on credit reports, the kind of error that can push a near-prime borrower further from approval and deeper into high-cost alternatives.
Truist's bet is straightforward: shed the risk now, clean up the credit profile, and redeploy capital into businesses where the bank can compete on its own terms. Whether that discipline holds, or whether the next quarterly earnings call reveals more surprises, will tell investors and customers alike what kind of institution Lyons intends to build.
A bank that dumps a third of its bad assets two weeks into a new CEO's tenure is sending a message. The question for the rest of the industry is whether they are listening.