UPDATE 4-Truist to Focus on Banking With $15.5 Bln Insurance Brokerage Business Sale

(Reuters) - Truist Financial agreed to sell the remaining stake in its insurance brokerage business to an investor group on Tuesday, in a deal valued at $15.5 billion, as it focuses on its core banking business, at a time when regulators are proposing new capital rules for the sector.

The broader banking industry is facing looming regulatory hurdles including the Basel III Endgame proposal, which will likely increase their capital requirements, leading to many major lenders considering sales for secondary businesses.

"The sale of Truist Insurance Holdings (TIH) accelerates our ability to meet increasing standards for capital and liquidity in the industry," said CFO Mike Maguire in a call with investors.

The deal, an all-cash transaction, to buy TIH was led by private equity firms Stone Point and CD&R, and includes investments from Mubadala Investment Company and other co-investors.

Truist said the sale is expected to significantly improve its relative capital position and increase its CET1 capital ratio, a measure of a bank's core liquid capital, by 230 basis points. It is also expected to raise its tangible book value per share by $7.12, or 33%.

"From a Truist perspective, the sale of TIH significantly improves our relative capital profile and create substantial capacity for growth at a time when our industry is constraining growth due to future capital considerations," CEO Bill Rogers said.

Rogers added the sale also raises Truist's ability to resume share repurchases but said the timing and size will depend on future capital planning, market conditions, clarity around final capital rules and other factors.

Truist also intends to evaluate a variety of capital deployment options, including a potential balance sheet repositioning, to replace the insurance brokerage business earnings after the deal closes.

U.S. banks had until recently seen large gains from the U.S. Federal Reserve's interest rate hikes, aimed at controlling inflation, as they earned more on loans. Those gains have now eased as high interest rates weigh on loan growth, while the banks pay more for deposits.

Truist, the seventh largest bank in the U.S. with more than $535 billion in assets, reported a loss in the fourth quarter, hurt by a raft of one-time charges tied to regulatory and restructuring activities, and a fall in net interest income.

The lender said the sale is a part of its broader effort to simplify operations and lower expenses. It had previously announced headcount reductions and named new executives to simplify reporting lines.

Shares in the bank were down by a marginal 0.4% in premarket trading.

By Manya Saini in Bengaluru
Editing by Krishna Chandra Eluri


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