Truist, ready to buy consumer lender, cuts ties with GreenSky
Truist Financial is ending its partnership with fintech GreenSky shortly after announcing an agreement to buy another company also specializing in point-of-sale loans.
Atlanta-based GreenSky revealed the partnership’s demise on Wednesday, a day after Truist said he would pay $ 2 billion to acquire Florida-based consumer lender. GreenSky has said in a securities filing that he did not expect Truist’s decision to have a significant impact on his earnings.
“The demand for GreenSky program consumer loans from multiple funding sources remains high, the cost of funds between funding sources remains low and GreenSky continues to be poised for high profitability,” the company said.
GreenSky offers technology that traders such as building contractors can use to provide installment loans to consumers. These loans are often funded by GreenSky partner financial institutions.
Truist’s ongoing acquisition of Service Finance Co., which also focuses on home improvement loans, would give the Charlotte, North Carolina-based bank a direct way to offer more installment loans to the consumption. The partnership between GreenSky and Truist will end on November 9, according to the filing.
About 8% of GreenSky’s total trading volumes this year come from Truist loan origination, according to the securities depository. In 2019, SunTrust Banks, which merged with BB&T to form Truist, accounted for approximately 12% of GreenSky’s trading volumes.
The securities deposit highlighted GreenSky’s efforts since the start of last year to diversify its funding model, which has historically relied heavily on banking partnerships. GreenSky has turned to the asset-backed securitization market and entered into a $ 1.5 billion purchase agreement with a global insurance company, according to the filing.
GreenSky also increased its funding commitments to other banks by more than $ 2.5 billion, aided by the addition of a new anonymous partner bank, according to the filing.
“Our sources of liquidity and funding have never been stronger,” GreenSky vice president Gerald Benjamin said in an interview.
According to Benjamin, several small banks that have worked with Service Finance have already asked if they can partner with GreenSky.
“We believe that Truist’s decision to end the relationship with GreenSky will likely result in greater availability of capital and greater funding capacity,” he said, “since all of Service’s former loan counterparts Finance are now seeking home improvement loans elsewhere. “
In a research note, Piper Sandler analyst Christopher Donat wrote that he believes Truist has been one of GreenSky’s biggest partners, if not the biggest. But demand for home improvement loans is currently high, according to Donat, who doesn’t expect the end of the Truist partnership to lead to “fundamental change” for GreenSky.
“While we view the loss of a large banking partner as a negative,” Donat wrote, “we agree with management’s view that the loss of Truist should not be material to them. profits “.
Home improvement loans showed little sign of slowing down after the coronavirus pandemic caused a ascend in home repair and renovation projects. Brian Doubles, CEO of credit card company Synchrony Financial, told analysts last month that “consumers’ desire to invest in their living spaces is stronger than ever” amid the ongoing transition to more remote work.
Home Depot, a major partner of GreenSky, told analysts in May that it continued to see “unprecedented levels” of momentum in the first three months of the year.
Merchants who work with GreenSky are seeing “very, very strong consumer demand”, and ongoing shortages in the supply chain are expected to continue to be a positive wind for the rest of this year and possibly next year as well. , according to Benjamin.
“We don’t expect demand to drop anytime soon,” Benjamin said.
Green sky lost another banking partnership in 2019 after Regions Financial decided not to renew its contract. Like Truist, the regions this year announced plans to acquire a home improvement lender. The Birmingham, Alabama-based bank’s $ 960 million deal to buy Salt Lake City-based EnerBank USA is expected to close in the fourth quarter.