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SunTrust To 'Outperform Peers Going Forward': FBR

NEW YORK ( TheStreet) -- SunTrust (STI - Get Report) of Atlanta is set to "garner a higher multiple and outperform peers going forward," according to FBR analyst Paul Miller.

SunTrust's shares closed at $29.05 Friday. The shares traded for 1.1 times their reported March 31 tangible book value of $26.33, and for 10.0 times the consensus 2014 earnings estimate of $2.90 a share, among analysts polled by Thomson Reuters. The consensus 2013 EPS estimate is $2.68.

Miller on Monday upgraded SunTrust to an "outperform" rating from a "market perform" rating and raised his price target for the shares to $37 from $30.00. The analyst said in a note to clients that the bank's "meaningful progress" in working through mortgage repurchase demands, resolution of credit problems and "strong fee income platform," should allow its share price to reflect a higher multiple to tangible book value.

Miller's price target for SunTrust equates to 1.3 times an estimated year-end 2013 tangible book value of $28.50.


SunTrust reported first-quarter net income available to common shareholders of $340 million, or 63 cents a share, compared to $350 million, or 65 cents a share, in the fourth quarter, and $245 million, or 46 cents a share, in the first quarter of 2012. Please see TheStreet's earnings coverage for a detailed review of the company's financial results.

A great deal of coverage for regional banks this earnings season has centered around the decline in mortgage revenue from elevated fourth-quarter levels, as refinancing volume has declined, and rising long-term market rates have led to a decline on lenders' gains on the sale of new mortgage loans, mainly to Fannie Mae (FNMA) and Freddie Mac (FMCC). SunTrust's mortgage production revenue in the first quarter was $159 million, declining from $241 million the previous quarter, but increasing from $63 million a year earlier.

The most positive developments for SunTrust were a continued decline in credit costs, and further signs that the company has put its risk of losses on legacy mortgage repurchase demands in the rear view mirror.

SunTrust's pretax income was directly boosted by a decline in the provision for credit losses to $212 million in the first quarter from $328 million in the fourth quarter and $317 million in the first quarter of 2012. The provision is the amount added to loan loss reserves each quarter, to cover anticipated losses.


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