Moody's Investor Service, the rating services arm of Moody's Corporation MCO , affirmed the ratings of SunTrust Banks, Inc.STI , and its subsidiary SunTrust Bank. The outlook for the company also remains stable.
SunTrust's senior and subordinate debt rating is Baa1. Its subsidiary's deposit rating is A1/Prime-1 and Baseline Credit Assessment is a3. Further, its counterparty risk assessments are A2/Prime-1.
Looking at SunTrust's price performance, the stock gained 41.4% over the last one year, outperforming the 30.2% gain for the Zacks categorized Major Regional Banks industry.
The company has been witnessing improvement in its credit quality with nonperforming loans and net charge-offs witnessing a declining trend, over the last few years. This, along with strong liquidity, has led to the rating affirmation. These should help the price performance continue in the near term as well.
SunTrust has a large and low-cost deposit base. In fact, it is expected that an improvement in loan demand will provide the company buoyancy to maintain its profitability, supported by overall improvement in the economy.
Notably, Moody's expects this deposit base to generate extra earnings in a higher-rate environment. However, SunTrust uses swaps to manage its interest rate risk and hence, the relative benefit of rising rates is not likely.
Compared to its peers, SunTrust's capital profile looks weak. Also, the company does not intend to increase its capital ratios anytime soon.
However, in order to get a positive rating, the company needs to improve its capital ratios and profitability.
Currently, SunTrust carries a Zacks Rank #2 (Buy).
Comerica has witnessed an upward earnings estimate revision of 0.3% for 2016, over the past 60 days. Its share price has risen 80.8%, over the last one year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Citigroup carries a Zacks Rank #2. It has witnessed an upward earnings estimate revision of 1.7% for 2016, over the past 60 days. Its share price is up 28.5% over the last one year.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.