On Mar 18, 2013, we reiterated our long-term recommendation on
SunTrust Banks, Inc
) at Neutral based on its successful expense reduction strategies
and restructuring initiatives as well as better-than-expected
fourth-quarter earnings. However, increased mortgage repurchase
demand and deposit pricing pressure along with stringent
regulatory restrictions remain the causes of concern.
SunTrust's fourth-quarter 2012 earnings came in at 65 cents,
surpassing the Zacks Consensus Estimate of 61 cents.
Better-than-expected results were primarily driven by growth in
top line and reduced operating expenses. Further, stable asset
quality, capital ratios as well as improvement in loan and
deposit balances were the tailwinds.
Following its fourth-quarter results, the Zacks Consensus
Estimate for 2013 slipped 0.7% to $2.72 per share over the last
60 days. The Zacks Consensus Estimate for 2014 also fell 1.65% to
$2.98 per share over the same time frame. Hence, SunTrust
currently has a Zacks Rank #3 (Hold).
With the approval of SunTrust's capital plan by the Federal
Reserve, the company authorized a new share repurchase program
under which it plans to buyback $200 million shares between
second-quarter 2013 and first-quarter 2014. Further, SunTrust
plans to hike its dividend by 100% to 10 cents per share.
Moreover, SunTrust's restructuring initiatives to fortify its
balance sheet, improve credit quality and enhance revenue
generating capacity through several small acquisitions have been
the driving forces for its growth.
On the other hand, SunTrust's exposure to risky assets, limited
margin growth and continued regulatory pressures remain looming
concerns. Moreover, a sluggish economic recovery along with a
persistent low-interest rate environment and overall industry
challenges might prove to be impediments for SunTrust to
considerably improve its financials going forward.
Other Major Banks to Consider
While we prefer SunTrust, other major banks worth a look include
State Street Corporation
Fifth Third Bancorp
), all of which carry a Zacks Rank #2 (Buy).
BANKUNITED INC (BKU): Free Stock Analysis
FIFTH THIRD BK (FITB): Free Stock Analysis
SUNTRUST BKS (STI): Free Stock Analysis
STATE ST CORP (STT): Free Stock Analysis
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