Synovus sells $373M in auto loans as balance sheet reduction continues

The private equity firm KKR has bought $373 million in prime auto loans from Synovus Financial, which has been shedding assets in recent months.

The Columbus, Georgia-based bank is one of numerous lenders that have been offloading loans in an effort to reduce risk in their portfolios, scale back from certain businesses or accumulate cash.

KKR, which announced the auto loan portfolio purchase on Tuesday, did not reveal the deal's terms. Synovus did not respond to a request for comment.

Last month, Synovus announced a deal to sell $1.3 billion in medical office loans — a transaction the bank said would help it pay off higher-cost funding it used earlier this year.

CEO Kevin Blair said in the company's second-quarter earnings release that the $60.7 billion-asset bank was "proactively optimizing the balance sheet" to "position the company for sustainable, long-term growth."

The auto loan sale appears to make up most, if not all, of Synovus' consumer auto loans. Synovus Bank had reported some $389 million in auto loans as of June 30, according to a regulatory filing.

Synovus previously disclosed that it started eyeing a sale of its auto portfolio late last year, though company executives noted in April that turmoil in the banking industry had increased uncertainty in the market. The bank's auto loans are "performing very well" and are attractive, Synovus Chief Financial Officer Jamie Gregory said in April.

Other banks have also scaled back their presence in auto lending recently. Cincinnati-based Fifth Third Bancorp said last month it planned to reduce its indirect auto loans, where it works with dealers to make loans to customers. Citizens Financial Group in Providence, Rhode Island, said it would exit indirect auto lending entirely.

Banks have also been selling car loans in recent months. Auto loans have had one of their best years of trading in the last decade, John Toohig, head of whole loan trading at Raymond James, said in a recent interview. 

Among the benefits of buying auto loans is that they have shorter durations than, say, 30-year, fixed rate mortgages.

"Everybody wants to stay short on the curve right now," Toohig said.

Commercial banking

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KKR, whose private credit funds and accounts bought the loans, said the purchase lines up with its strategy of growing its asset-based finance business.

The private equity firm sees "an immense opportunity for scaled private capital investment" in asset-based finance, "especially as traditional lenders increasingly focus on optimizing their balance sheets and increasing liquidity," Avi Korn and Chris Melia, managing directors at KKR, said in a news release announcing the deal with Synovus.

The private equity firm continues to "see opportunities to provide capital to the banking community" and to partner with banks on transactions, said Dan Pietrzak, KKR's global head of private credit.