Moody’s Ratings downgraded Truist Financial’s long-term ratings to Baa1 from A3, saying the sale of the Charlotte-based company’s insurance unit makes it less diversified and more reliant on potentially volatile net interest income.
The rating remains investment grade for Truist, the nation’s seventh-largest banking company with about $530 billion in assets on Dec. 31. Charlotte-based Truist sold its remaining stake in Truist Insurance earlier this year, generating a $10 billion after-tax gain from selling the business, Moody’s said in a release.
“The downgrade of Truist’s ratings reflects Moody’s view that following the sale of TIH, Truist will be less diversified, will have greater reliance on net interest income increasing earnings volatility and that long-term profitability will be lower,” Moody’s said.
The insurance business made up 14% of Truist’s net revenue in 2023, while its total non-interest income was 38% of net revenue, which Moody’s said was comparable with the largest U.S. banks. Without the insurance contribution, non-interest revenue would make up 27% of net revenue, a similar ratio for many smaller, lower-rated U.S. regional banks, the rating agency said.