Morningstar | Loan Growth Continues To Be a Strength for SunTrust in the Second Quarter. See Updated Analyst Note from 18 Jul 2019
No-moat rated SunTrust reported OK second-quarter results, adjusted earnings per share of $1.51, up roughly 1% year over year. The primary adjustment to results was charges related to the pending merger with BB&T. The return on tangible equity came in at 15.7%, as noninterest income was down roughly 1% year over year (adjusted), adjusted expenses were up roughly 2%, and growth in net interest income of 3% led to roughly flat operating income (ex-provisioning). Provisioning came in higher year over year, although all credit metrics really remain range bound and this was more the result of portfolio growth and some expected seasoning. The bank is also building up capital in preparation for its pending merger, which will weigh on returns in the short term. The real key for SunTrust remains the gains to be had from its merger with BB&T. We are now incorporating three rate cuts into our forecast, and as a result we are lowering our fair value estimate for SunTrust to $68 per share from $72.Loan growth continues to be a strong point for SunTrust, with average loans up 9% year over year. Growth with C&I and CRE was robust for SunTrust, and management believes its strong growth with CRE should continue. The consumer portfolio also performed well, with the direct and indirect portfolios also displaying strong growth. Average deposits were up roughly 1% year over year. The deposit base continues to shift into higher cost deposits, and we expect this, combined with rate cuts, should cause net interest income to be down for the remainder of the year. Although we think the bank can still pull off positive full-year growth for NII given the strong balance sheet growth.
Noninterest income still struggled to grow compared with the previous year’s quarter. On the positive side, mortgage-related fee income did recover, although management expects lower mortgage income in the third quarter. Meanwhile, investment banking income, service charges, trust and investment fees, and card fees were all down year over year, and all are down year to date. With potential revenue synergies from the merger, we hope the combined franchise may be able to better optimize its combined fee bases.
SunTrust Banks is a financial services holding company. Through its subsidiary, SunTrust Bank (the Bank), the company provides a line of financial services for consumers, businesses, corporations, institutions, and not-for-profit entities, both through branches (located primarily in Florida, Georgia, Virginia, North Carolina, Tennessee, Maryland, South Carolina, and the District of Columbia) and through other digital and national delivery channels. The Bank provides deposit, credit, mortgage banking, and trust and investment services to its clients through a selection of channels, including branch, call center, Teller Connect? machines, automated teller machines, online, mobile, and tablet.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.