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

However, as is the case with the majority of major banks, Huntington is seeing net interest margin pressure. Its net interest margin was slightly less than 3.4%, down from 3.5% during 4Q and 3.4% in the same quarter last year.

Much like the other major regional banks, Fifth Third is seeing an improved balance sheet. First-quarter nonperforming loans were down to only 0.7% of loans versus 1.2% for the prior year’s quarter. And 1Q net charge-offs fell to $133 million, from $220 million for the same quarter last year. Loan growth is expected to grow by 3.2% in 2013, up from 2.2% in 2012.

Part of the worries with Fifth Third Bancorp (NASDAQ:FITB) is that reserve releases have helped fuel earnings growth over the past few years. As these reserve releases slow, so should earnings growth. Analysts expect Fifth Third to grow EPS at an annualized 4.5% over the next five years, compared to SunTrust’s 10%.

Bottom line

All of the regional banks listed above appear to have made marked improvements in their balance sheets. I think SunTrust Banks, Inc. (NYSE:STI) is operating as one the most underrated regional banks in the industry. The bank is appealing from a valuation standpoint, being the the cheapest from a price-to-book ratio:

I think SunTrust Banks, Inc. (NYSE:STI) is best positioned in key markets, including Florida and Georgia, and could be poised to move higher. Not to mention the fact that the bank pays a 1.3% dividend yield, with room to boost its payment.

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

Published on June 24, 2013 at 8:59 am by The Motley Fool in News

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