Truist Financial Corp. has agreed to sell $5.5 billion of its auto loans to Apollo Global Management Inc., marking a significant step by new CEO Mike Lyons to refine the bank's business strategy. This transaction will allow Truist to completely exit the near-prime auto lending sector, which had been managed through its subsidiary, Regional Acceptance Corp. The sale is projected to generate $5.2 billion in net proceeds for Truist and release $535 million from loan-loss reserves.
This strategic divestiture is anticipated to bolster Truist's credit profile by reducing non-performing loans and charge-offs. Specifically, the bank expects the sale to decrease net charge-offs as a share of total loans by approximately 10 basis points annually. Additionally, it will lead to a reduction in non-performing loans by more than 10 basis points as of June 30, 2026. Truist’s CFO noted that while these loans were high-yield, they also suffered from significant delinquencies and charge-offs, with non-performing indirect auto loans reaching $569 million in Q2, representing about one-third of the company's total non-accruing assets.
The sale is also expected to result in a $945 million increase in CET1 capital, contributing 22 basis points. The bank plans to use the proceeds to repay wholesale borrowings, enhancing its funding profile. Although the pre-tax earnings from the Regional Acceptance Corp. business were roughly breakeven through the first six months of 2026, the sale is projected to modestly improve Truist's earnings and return on tangible common equity (ROTCE). The overall financial guidance for Q3 and 2026 remains unchanged, excluding the impact of these strategic actions.
Analyst Gerard Cassidy of RBC Capital Markets views this move as part of CEO Mike Lyons's broader strategy, suggesting that further divestitures are likely as Lyons works to reposition Truist for stronger growth and profitability over the next three years. This decision aligns with previous actions by Truist, such as discontinuing Marine/RV lending and de-emphasizing national prime auto lending, reflecting a sharper strategic focus on core, more profitable businesses. The bank noted that the near-prime auto business, despite its high yield of around 12%, had elevated loss experiences (7% to 8% area), making the economics unfavorable after considering funding costs.
