Weekly Real Estate News
Truist Financial took a $1.447 billion pretax loss on the sale of available-for-sale securities in the third quarter and signed an agreement to sell $7.7 billion of unsecured consumer loans to Carlyle. The moves are part of a restructuring that changes the bank’s funding and investment profile while leaving its substantial mortgage business in place.
The Charlotte-based bank disclosed the developments in its October 16 earnings release filed with the Securities and Exchange Commission. Its agreement with Carlyle, signed October 14, covers substantially all assets of LightStream, Truist’s unsecured personal lending platform. The transaction has not closed; Truist expects to complete it during the fourth quarter, subject to closing conditions.
Truist earned 56 cents per diluted share on a reported basis, down from $1.04 a year earlier. Adjusted diluted earnings were $1.16 per share, up 12% year over year. The adjusted measure excludes specified restructuring-related items, and the difference between reported and adjusted results is particularly important in a quarter marked by significant securities losses.
Why the bank is repositioning securities
The bank completed the sale of its Regional Acceptance Corporation loan portfolio before repositioning its available-for-sale securities. In the securities transaction, Truist sold investments with a relatively low yield and reinvested in higher-yielding securities. The sales crystallized losses that had previously been reflected in the value of its holdings rather than in current-period earnings.
Management described the changes as a way to improve prospective profitability and allocate resources to businesses offering stronger returns. That benefit is forward-looking, while the reported loss is already realized. The eventual economic payoff depends on funding costs, the reinvestment portfolio’s performance and market conditions.
Truist reported net interest income of approximately $3.66 billion, compared with $3.62 billion in the second quarter. Noninterest income, however, fell to approximately $84 million from $1.64 billion in the preceding quarter, reflecting the impact of the securities restructuring. Its earnings materials and quarterly performance schedules provide the reconciliation between reported and adjusted measures.
LightStream agreement would remove unsecured loans
The $7.7 billion LightStream agreement represents a planned exit from a consumer lending business rather than a sale of home mortgages. Truist said the pending disposition would reduce exposure to unsecured consumer credit and free resources for other uses. Because the transaction remains subject to closing, its anticipated capital and funding effects are not yet completed outcomes.
The sale follows the completed Regional Acceptance transaction, involving another consumer lending operation. Taken together, the decisions show Truist narrowing parts of its lending footprint while preserving its broader banking and mortgage franchises.
Residential mortgages continue to grow
Average residential mortgage balances reached approximately $57.29 billion in the quarter, an increase of $944 million from the preceding three months. Mortgage banking income was $113 million, down from $118 million a year earlier. Those figures point to a distinction between the size of the bank’s retained mortgage assets and the fee income it generates from mortgage banking activities.
Average commercial real estate loans were approximately $25.49 billion, a 2.2% quarterly increase. These exposures matter to housing and property-finance professionals evaluating banks’ appetite for real estate credit, but they should not be conflated with the unsecured loans Truist intends to sell to Carlyle.
For lenders and brokers, the quarter does not establish a change in Truist’s mortgage pricing or underwriting policy. The reported figures instead show how a large lender is managing capital and earnings while continuing to carry a sizable residential mortgage book.
Truist reported total assets of $554 billion as of September 30. The next milestones are the anticipated LightStream closing and subsequent disclosures about the use of sale proceeds and the performance of the repositioned securities portfolio. Truist’s official results announcement directs investors to the underlying earnings release, presentation and financial schedules.
