Truist Financial is ending its partnership with the fintech GreenSky shortly after announcing a deal to buy another company that also specializes in point-of-sale lending.
Atlanta-based GreenSky disclosed the partnership’s demise on Wednesday, one day after
“Demand for GreenSky program consumer loans from multiple funding sources remains high, cost of funds across funding sources remain low, and GreenSky continues to be poised for strong profitability,” the company said.
GreenSky offers technology that merchants such as home contractors can use to offer installment loans to consumers. Those loans are often funded by GreenSky’s financial institution partners.
Truist’s pending 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 consumer installment loans. The partnership between GreenSky and Truist will end on Nov. 9, according to the filing.
About 8% of GreenSky’s total transaction volumes this year have come from Truist loan originations, according to the securities filing. In 2019, SunTrust Banks, which merged with BB&T to form Truist, accounted for roughly 12% of GreenSky’s transaction volumes.
The securities filing highlighted GreenSky’s efforts since the start of last year to diversify its funding model, which historically has relied heavily on bank partnerships. GreenSky has been turning to the asset-backed securitization market and has entered into a $1.5 billion purchase agreement with a global insurance company, the filing stated.
GreenSky has also increased its funding commitments from other banks by more than $2.5 billion, helped by the addition of a new unnamed partner bank, according to the filing.
“Our liquidity and funding sources have never been more robust,” GreenSky Vice Chairman Gerald Benjamin said in an interview.
Multiple smaller banks that worked with Service Finance have already reached out to see if they can partner with GreenSky, according to Benjamin.
“We think Truist’s decision to terminate the relationship with GreenSky likely will result in greater capital availability and funding capability,” he said, “since all the former Service Finance lending counterparties are now looking to source home improvement loans elsewhere.”
In a research note, Piper Sandler analyst Christopher Donat wrote that he believes Truist has been among GreenSky’s biggest partners, if not the biggest. But demand for home improvement loans is currently elevated, according to Donat, who does not expect the end of the Truist partnership to lead to a “fundamental change” for GreenSky.
“While we view the loss of a large bank partner as a negative,” Donat wrote, ”we agree with management's view that the loss of Truist should not be material to earnings.”
Home improvement loans have shown little signs of slowing down after the coronavirus pandemic prompted a
Home Depot, a major GreenSky partner, told analysts in May that it continued to see “unprecedented levels” of momentum in the first three months of the year.
Merchants that work with GreenSky are seeing “very, very strong consumer demand,” and ongoing supply chain shortages should continue to be a tailwind for the remainder of this year and likely next year as well, according to Benjamin.
“We don’t anticipate the demand to turn down anytime soon,” Benjamin said.
GreenSky
