Truist takes a $1.4 billion securities hit as it agrees to sell LightStream loans to Carlyle

Truist Financial Corporation reported third-quarter diluted earnings of $0.56 a share on Friday after taking a $1.447 billion pretax loss on sales of available-for-sale securities, and said it had agreed to sell $7.7 billion of LightStream unsecured consumer loans to Carlyle Group.

Earnings after a $1.4 billion securities loss

Truist Financial Corporation said third-quarter net income was about $800 million, down from $1.45 billion a year earlier. Diluted earnings were $0.56 a share, compared with $1.04 a year earlier. Diluted EPS follows net income available to common shareholders, which was $680 million this quarter and $1.35 billion a year earlier. The drop was driven by a $1.447 billion pretax loss on sales of available-for-sale securities as the bank repositioned that portfolio after completing the sale of its Regional Acceptance Corporation loan business.

On an adjusted basis that excludes the securities loss, a $581 million pretax loan-loss reserve release tied to the Regional Acceptance sale, and $106 million of pretax costs and other impacts from that sale, Truist said diluted earnings were $1.16 a share, up 12% from a year earlier. Adjusted net income available to common shareholders was about $1.42 billion. Those adjusted figures are non-GAAP measures the company uses to show results without the one-time portfolio moves.

Net interest income was $3.66 billion, little changed from $3.63 billion a year earlier. The taxable-equivalent net interest margin was 3%. Total reported revenue fell to $3.75 billion from $5.19 billion a year earlier because noninterest income collapsed to $84 million once the securities losses were included. Outside those losses, Truist pointed to record quarterly wealth-management income of $407 million.

LightStream loans headed to Carlyle

On Oct. 14, Truist signed an agreement to sell $7.7 billion of unsecured consumer loans that make up substantially all of the assets of LightStream, its unsecured lending platform, to Carlyle Group Inc. The release describes a signed agreement, not a completed sale.

The Regional Acceptance sale and the securities repositioning were the main special items in the quarter. End-of-period loans held for investment fell $5.9 billion from June 30 to $323.9 billion; Truist said $5.5 billion of that decline came from Regional Acceptance. Deposits rose to $413.2 billion. The preliminary common equity Tier 1 capital ratio was 10.7%, down from 10.9% three months earlier.

Credit metrics moved with that sale. The net charge-off ratio was 0.77%, including 0.39 percentage points related to Regional Acceptance, and nonperforming loans fell to 0.4% of loans held for investment from 0.51% three months earlier.

Truist declared a common dividend of $0.52 a share and repurchased $1.2 billion of common stock during the quarter. It reported about $554 billion of assets at Sept. 30.

What management emphasized

"Since joining Truist, I’ve become even more confident in the strength of our franchise and the significant opportunities ahead," President and Chief Executive Mike Lyons said in the release. "We delivered a solid quarter while also taking decisive actions to better position Truist for the future. These actions strengthen our risk, liquidity, and funding profile and create greater capacity to invest in our best businesses. We’re simplifying the company and focusing our resources, capital, and expenses on the businesses and capabilities that will help us become the most important financial partner to our clients."

Executives were scheduled to discuss the results on a call at 8 a.m. ET on Friday.

Shares before the report

Truist shares closed at $46.57 on Thursday, up 2.2% from Wednesday, according to Google Finance data for the New York Stock Exchange. That close came before Friday's results. U.S. markets had not yet opened for Friday's regular session when this article was published.