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A commercial banking organizations and a diversified financial services holding company whose businesses provide a range of financial services to consumer and corporate customers.
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NetscribeBanking (96.18) Submitted: 12/19/06 9:34 AM : Start Price: $77.72 STI Score: 22.03
SunTrust Bank, headquartered in Atlanta, is one of the nation's largest banking organizations, serving a broad range of consumer, commercial, corporate and institutional clients. As of September 30, 2006, SunTrust had total assets of $183.1 billion and total deposits of $124.4 billion. The recent announcement that James Wells would replace Phillip Humann as CEO comes as a surprise to many. The decision may be the result of the pressure arising out of poor performance of the bank compared to its peers. Moreover, Jim Wells, who is 60 years old and just five years away from the mandatory retirement age, doesn’t seem to be a long-term solution. However, the announcement has made it clear that the bank is not for sale as speculated.The net interest margin decreased 21 basis points to 2.93% over the same during the previous quarter. This is attributed to decline in low cost deposits and overall shift in the deposit mix to higher cost certificates of deposit. After much struggle and reorganization, the bank has reached the set target tier I capital ratio of 7.5% for Basel compliance with the required core capital. Even after National Commerce acquisition, it is scouting for more instead of focusing on the existing franchise and increasing the operating performance. The operations of the bank are largely concentrated on the southeastern states, which are prone to flooding and hurricanes. Over the past 18 months, the bank has divested its factoring, stock transfer, trustee businesses and other non-profitable ventures. Apart from this, it has also done a security and loan portfolio restructuring selling $3 billion in mortgage and student loans.
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NetscribeBanking (96.18) Submitted: 4/16/07 6:33 AM
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SunTrust posted modest growth rates for the year 2007 despite challenging revenue environment. Net interest margin and efficiency ratio has been deteriorating over the years and currently stand at 3% and 59.39% respectively. Balance Sheet of the Sun Trust has been more of liability sensitive and hurt a lot by the rising interest rates. Other significant events in the year were the change of guard in the top management and implementation of proper risk management systemsManagement is very keen on its efficiency initiative that seems to be right on track and would generate savings to the tune of $400 million by 2009. The year 2007 would witness $135 million savings from real estate rationalization, supplier management and reduction in headcount. Though the bank has resolved its NPA issue with the Southeastern service company it still has a huge exposure in mortgage portfolio, which would be negatively impacted by the tougher housing market environment. Credit quality looks impressive and would have an increase in loan loss provision due to the loan granted in the Florida regions and the growth in consumer lending. Capitalization is not much of a problem and it receives good dividends from its historical investments in Coca Cola stock. Sun Trust serves the Carolina, Florida, Central and Mid Atlantic region and has all the problems faced by a generic regional banking firm with inverted yield curve, unfavorable deposit mix and softening demand for consumer credit. Overall the fundamental look good for the long term and has even managed to find a place in Warren Buffets Berkshire Hathaway. However the stock is still trading at a premium and current macro economic factors makes the near future uncertain for the bank.
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kneegro (< 20) Submitted: 12/12/07 10:42 PM
Was delighted to read that SunTrust's problems related to its Southeastern location and the frequency of 'hurricanes and flooding' in this region. I was more concerned about its top rank position as a servicer of Alt-A loans. The Southeastern connection was a plus I thought because Charlotte, N.C., Richmond and Atlanta were different than say Phoenix, LA and Las Vegas as far as residential Real Estate was concerned. Its position in Florida concerned me as did its loan offices in both Northern and Southern California. Read its quarterly reports but I'm not good at deciphering these and don't know how much of its mortgage holdings are located where. It makes a difference you know. I think SunTrust, because it operates in those dreadful hurricane and flood prone cities might be a better bet IF its exposure to the California and Florida mortgage markets are not excessive. Certainly it is less vulnerable, I hope, than say Bank of America, Wells Fargo etc. Anyway I'm going long on STI because hurricanes are not on my priority list of banking concerns, at least until next summer.
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