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U.S. Equity Research News
Chan Upgrades SunTrust Banks (STI) to OUTPERFORM from MARKET PERFORM
November 4, 2009
Lana Chan, senior research analyst in our Financial Institutions Group, has today upgraded SunTrust Banks (STI) to an OUTPERFORM rating from MARKET PERFORM.
From Chan's note: "STI shares are down 12% since October 15 vs. a 5% decline for S&P 500; we believe the current price represents an attractive entry point. Credit losses are expected to remain elevated for STI near term given its Southeast footprint and outsized exposure to residential housing-related lending; however, STI's capital ratios are solid and there were further positive signals on credit quality in the third quarter. NPAs actually declined slightly, early delinquencies fell for the third consecutive quarter to 1.52%, and loan losses YTD are running well below the run rate assumed under the government's stress test. If these trends continue, the pace of reserve build will continue to slow, and STI may be allowed to repay its TARP funds. We estimate that fully normalized earnings power for STI could be as much as $3.50 per share, assuming a conservative 1% ROA and no further common equity raises."
To receive a full copy of the report, please contact your BMO Capital Markets representative.
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