PNC Financial Services (PNC), SunTrust Banks, Inc. (STI): Two Financial Stocks to Buy, 1 to Avoid

The bank reported Tier 1 capital and Tier 1 common ratio of 11.20% and 10.10%, respectively, above the current regulatory requirement. Besides better expense management, SunTrust Banks, Inc. (NYSE:STI) needs to focus on improving its mortgage and loan growth, particularly when the U.S. housing markets are showing signs of a rebound. Going forward, its management expects a rise in mortgage banking and investment banking.

Industrial & commercial loan growth a driver

In 2011, PNC Financial Services (NYSE:PNC) purchased the retail operations of Royal Bank of Canada (USA) (NYSE:RY), which had a positive impact on PNC Financial Services (NYSE:PNC)’s net interest income. PNC Financial Services (NYSE:PNC) is expecting growth in industrial and commercial loans. The bank’s acquisition of Royal Bank of Canada (USA) (NYSE:RY) and dividend growth are positive stock price drivers.

Conclusion

Better expense management should be a driver for the aforementioned three banks, but macroeconomic conditions will affect their performance. By comparing these three banks, I believe Regions Financial Corporation (NYSE:RF) and PNC Financial would be better investment opportunities. SunTrust Banks, Inc. (NYSE:STI) needs to improve its deposits growth and mortgage banking segment to stay in the game. For PNC, increase in demand for loans from the industrial and commercial sectors will possibly propel its earnings higher.

Red Chip has no position in any stocks mentioned. The Motley Fool owns shares of PNC Financial Services. Red is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article 2 Financial Stocks to Buy, 1 to Avoid originally appeared on Fool.com is written by Red Chip.

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