Time For SunTrust Banks, Inc. (STI) To Get Serious

One of the only ways that SunTrust is outperforming its competition is, with their non-performing loan percentage. SunTrust’s non-performing loan percentage was 1.27% in the current quarter. Only BB&T performed better with a non-performing loan percentage of 1.2%. Relatively speaking, M&T and PNC did worse with percentages of 1.52% and 1.75% respectively.

Snap Out Of It
The bottom line is, SunTrust management needs to spread the word to each of their offices that it’s time to turn this ship around. The bank needs to aggressively pursue new relationships, and not be afraid to go toe to toe with their competition. The company’s mortgage team already gets it, with mortgage production income going from a loss of $62 million last year to a profit of $242 million this year. Now it’s time for the branches to get on board.

The company needs growth in checking accounts, which only account for about half of SunTrust’s deposits. With over $9 billion in long-term debt, the company could vastly improve their net interest margin by growing deposits and paying down debt. They also need to focus on growing their consumer loan portfolio, as this was a big part of the weakness in lending growth.

When it comes to valuation, SunTrust is a turnaround play. Analysts expect over 15% EPS growth and shares trade for about 10.8 times projected earnings. BB&T and PNC have lower P/E ratios at 10.37 and 9.7 respectively. BB&T and PNC also pay much better yields at 3% and 2.5% versus 0.7% at SunTrust. M&T has the highest relatively valuation at over 12 times projected earnings, and has the second lowest projected growth rate at 8.1%. If SunTrust is going to get anywhere near analyst expectations for earnings growth, it is time to move forward now. The company needs to stop managing like they are in crisis mode, and start growing again. Until SunTrust can show better organic growth, I would stay away from the stock.

The article Time For This Bank To Get Serious originally appeared on Fool.com and is written by Chad Henage.

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