This Big Bank Stock Trades at a Discount to Book Value -- Is It a Buy?
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TFC
This Big Bank Stock Trades at a Discount to Book Value -- Is It a Buy?
April 07, 2026 — 06:35 am EDT
Written by
Courtney Carlsen for
The Motley Fool->
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Key Points
- Recent regulatory changes proposed by U.S. federal banking regulators are less stringent than previous proposals.
- Newly proposed requirements could reduce the amount of capital banks must set aside.
- Lower capital requirements could help banks increase lending capacity and boost share repurchases and dividends to investors.
- 10 stocks we like better than Truist Financial ›
Stocks have gotten off to a difficult start here in 2026, and in March, the Dow Jones Industrial Average entered correction territory for the first time since last year's "Liberation Day" tariff announcement shook markets.
Getting lost in the shuffle are recent regulatory changes that benefit bank stocks, and one bank on my radar is Truist Financial (NYSE: TFC). The bank stock trades at a slight discount to book value and is an intriguing opportunity for investors looking to play the upside in regional banks amid changing capital requirements. Here's why.
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Changing capital requirements are a tailwind for Truist Financial
In March, U.S. federal banking regulators, including the Federal Reserve, FDIC, and OCC, released newly proposed Basel III Endgame rules that would represent a significant change from the previously proposed capital requirements put forward in July 2023. The previous proposal would've raised capital requirements by nearly 20% for large banks.
Instead, the updated proposal should significantly benefit banks by decreasing the Common Equity Tier 1 (CET1) requirements by 4.8% for Category I and II banks and 5.2% for Category III and IV banks. The proposal includes many favorable changes that help alleviate banks' stringent capital requirements, including eliminating the requirement to deduct mortgage-servicing assets (MSAs) and lowering the risk weight for corporate exposure from 100% to 95%.
As a Category III bank, Truist Financial is slated to be a big winner from these newly released guidelines. The bank stands to benefit from the removal of the "threshold-based deduction" for MSAs. This previous rule required banks to deduct any Mortgage Servicing Assets (MSAs) exceeding 10% of their common equity capital.
Instead of being deducted from capital, these will now receive a 250% risk weight, which is much more favorable for banks with large mortgage operations. Previously, Truist had been careful not to let its MSA grow so large that it hit the 10% deduction threshold.
New rules give Truist more capital for growth, share buybacks, and dividends
Truist has been managing its balance sheet following the 2023 regional banking stress, and now it has more flexibility, as freed-up capital will increase lending capacity for residential and commercial loans, and support share repurchases and dividends.
The bank has authorized the repurchase of up to $10 billion in shares and plans to buy back $4 billion in 2026, a big jump from last year's $2.5 billion in share repurchases. It also pays a dividend yield of 4.4%, making it an appealing stock for investors seeking income.
Changes to regulatory proposals bode well for Truist Financial and should give the banks more flexibility. For investors seeking diversification from bank stocks with upside from regulatory relief, Truist, trading at a 1.3% discount to book value, looks like an appealing buy today.
Should you buy stock in Truist Financial right now?
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