What happened
Shares of Truist Financial (TFC 0.53%) were moving higher Tuesday on reports that the bank could sell its insurance brokerage for roughly $10 billion.
As a result, the stock was up 6.2% as of 2:25 p.m. ET.
Image source: Getty Images.
So what
According to news site Semafor, Truist is in talks to sell the remaining 80% of its insurance brokerage, Truist Insurance Holdings, to private equity firm Stone Point for about $10 billion. Earlier this year, Stone Point bought 20% of the business, which is the world's seventh-largest insurance broker, in a deal that valued it at $14.5 billion.
In the wake of March's regional banking crisis, regulators are tightening up their oversight of financial institutions, which seems to have spurred Truist to make this move.
It's understandable why investors would react positively to a deal. Truist's insurance segment contributes just 7% of the company's net income, but the $10 billion price tag values the insurance business at more than a quarter of Truist's market cap, making it look like a windfall in a sale.
Now what
Truist shares have languished this year as the regional banking crisis, rising interest rates, and threats of a recession have all weighed on the stock. Additionally, the recent Fed stress test ranked the bank near the bottom of the pack, though it was still strong enough to survive a crash scenario.
The stock plunged in March and has fallen further since then; it's now down 32% year to date. However, the regional bank stock looks attractive, trading at a price-to-earnings ratio of less than 7, and offering a dividend yield of 7.7%.
The insurance business sale, if it goes through, will further improve the company's capital ratio and protect it from downside risks. If you're looking for income stocks, Truist looks like a great choice right now, trading at a discount and with a well-funded dividend.
