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SunTrust Banks, Inc. (STI): The Sun Is Shining on This Regional

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SunTrust Banks, Inc. (NYSE:STI) is one of the largest regional banks and it appears that the dark cloud of the financial crisis could be moving away, which should allow this bank to shine going forward. The bank has managed to under-perform the broader banking market by nearly 15 percentage points over the past 12 months, but its compelling valuation means the stock could move higher going forward.



Who is SunTrust?

SunTrust Banks, Inc. (NYSE:STI) serves 11 states, with a focus on Florida, Georgia, Virginia and Tennessee. As of 2012, SunTrust had over 1,600 branches and some $130 billion in deposits, with 33% of deposits in Florida and 29% in Georgia. What’s more is that in Florida, SunTrust Banks, Inc. (NYSE:STI) hold a 9% market share, ranking third, and in Georgia it ranks first with 18% of the market share.

SunTrust Banks, Inc.Rebounding balance sheet

SunTrust Banks, Inc. (NYSE:STI) has also been restructuring in an effort to strengthen its balance sheet. Non-performing loans were only 1.2% of total loans at the end of 1Q, down from approximately 2.2% a year ago. Net charge-offs are expected to be down to $900 million in 2013, from the $1.7 billion in 2012. This comes after SunTrust Banks, Inc. (NYSE:STI) made key steps to reduce non-performing assets.
Revenue was also up some $2 billion in 2012, with core fee income up 6.2% on stronger mortgage banking gains. The big news for SunTrust is that its Federal Reserve capital review from earlier this year went very well; the bank was allowed to raise its dividend and repurchase $200 million in shares. SunTrust is now paying out some 10% of earnings, giving the bank room to up its 1.3% dividend yield over the interim.
The south

BB&T Corporation (NYSE:BBT) is one of the most renowned regional banks operating primarily in the southern part of the U.S., and having held up really well throughout the financial crisis. Revenue was up 12% in 2012, on the back of 23% non-interest income growth.

BB&T Corporation (NYSE:BBT) offers a diverse revenue stream, with services that include insurance brokerage services, life insurance and wealth management. First-quarter results were positive, with nonperforming loans at 1.1% of total loans, down from the 1.8% for the same period last year. Net charge-offs also fell from $367 million to $289 million year-over-year. The thing about BB&T is that its valuation appears a bit rich (more on this later).

Specifically for BB&T, the bank should be able to capitalize on key acquisitions and planned branch growth in Texas. The other key is completion of its BankAtlantic deal in Florida. BB&T Corporation (NYSE:BBT) gains BankAtlantic’s 78 branches with about $2.1 billion in loans and $3.3 billion in deposits, doubling its deposits in Florida and putting the bank as sixth in deposit market share in the state.

Midwest

A couple of top Midwestern banks are Huntington Bancshares Incorporated (NASDAQ:HBAN) and Fifth Third Bancorp (NASDAQ:FITB), which should perform well on the back of their strong presence in the bustling areas for oil and gas development, the Utica Shale and the Marcellus Shale plays. For example, Ohio, a key area for both Huntington Bancshares Incorporated (NASDAQ:HBAN) and Fifth Third, has an unemployment rate that’s well below the national average. Huntington has some 700 banks in Ohio, Michigan, Pennsylvania, Indiana, West Virginia, Kentucky, and Florida. Fifth Third Bancorp (NASDAQ:FITB) operates 1,340 branches in 12 states, with a focus on Ohio, Michigan and Illinois.

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