When rumors circulated that Truist Financial (TFC) would sell its crown jewel, its insurance business, it flashed a red flag. The unit would fetch nearly $10 billion if sold to private equity firm Stone Point.
Stone Point bought 20% of the insurance unit in early 2023. After Silicon Valley Bank failed, regulators increased their pressure on regional banks to shore up their balance sheet. Truist’s past acquisitions added troubling debt levels to its balance sheet.
Truist customers must pay their insurance premiums regardless of market conditions. By contrast, people skipped paying their mortgages during the great financial crisis. Thus the sale is a troubling development for Truist investors.
PNC Financial posted Q3 revenue of $5.23 billion. This is down by 5.8% Y/Y. Net interest income also fell by 3%, to $3.4 billion. In addition, the provision for credit losses was $129 million. This is down from $146M in Q2.
PNC’s best-case scenario is the stock price trading sideways. The firm needs to navigate past the period of sharp interest rate hikes. Shareholders are rewarded with a dividend of $6.10 a share, which yields around 5.16%.
The firm has unrealized losses of $5.4 billion. This is up from $4.8 billion last year.
Expect both companies to underperform in the stock market.
