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Analyst Raps SunTrust Disclosure

Outspoken bank stock analyst Dick Bove chided SunTrust for not telling investors in a more public way that it would return to profitability this quarter.



) -- Outspoken bank stock analyst Dick Bove chided

SunTrust Banks

(STI) - Get SunTrust Banks, Inc. Report

for not telling investors in a more official way that it would return to profitability this quarter, according to a research note he wrote to clients on Thursday.

"Speaking in New York earlier this week, the company announced that it had returned to profitability in the third quarter. The company should have released a preannouncement with this information rather than providing it in a conference," Bove's note says. "However, the good news is SunTrust's fortunes have improved markedly."

The Rochdale Securities analyst boosted SunTrust's earnings estimates for 2010-2012.

SunTrust's CFO Mark Chancy, in a presentation at the Barclays Global Financial Services Conference on Tuesday afternoon, made it a point of telling investors that the bank was expecting to turn a profit. "One thing we do want you to walk away from today's presentation with is we are expecting

positive earnings per share

for the quarter," he said.

While SunTrust offered up Chancy's presentation materials in a

Securities and Exchange Commission

filing a day earlier -- typical protocol for public companies making public presentations -- there was no specific mention within the materials of SunTrust returning to profitability this quarter.

A SunTrust spokesman did not respond to


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request for a response before press time.

Bove had a similar issue with


(C) - Get Citigroup Inc. Report

back in June of 2008. At the time, then-CFO Gary Crittenden disclosed to a select investor group that the troubled bank would face further

writedowns and credit losses

during the second quarter on a conference call hosted by veteran bank stock analyst

Mike Mayo

, who was working for

Deutsche Bank

(DB) - Get Deutsche Bank AG Report

at the time.

Bove, who at the time was working for Ladenburg Thalmann, took issue with Citi's method of disclosure. He implied that it might not comply with the SEC's Regulation FD, which requires companies to distribute any "material nonpublic information" as soon as it's available, and to all investors rather than a select group, to prevent insider trading.

"The fashion by which the company made this information available is questionable and unacceptable to this analyst," Bove wrote in a note to clients. "Material information was made available, but it is open to question if it was made available in a fair and honest fashion to all investors. Perhaps SEC FD is dead. Shame on Citigroup."

However, experts said that Webcasts and press releases can be substitutes for 8-K filings.

SunTrust's stock received a nice bounce after Chancy's comments, but the stock has retreated since then. SunTrust hasn't reported a quarterly profit since the third quarter of fiscal 2008 and analysts seem divided on whether to believe that the company will true operating profit.

As of Tuesday, Wall Street analysts projected the company to report a loss of 20 cents a share for the three months ending Sept. 30. As of Thursday afternoon, consensus estimates expect SunTrust to report a loss of 14 cents a share for the quarter and a loss of 84 cents for the full year, according to

Thomson Reuters


SunTrust shares were falling roughly 2.1% on Thursday, to $25.71 on volume of about 3.3 million shares. The stock is down 18% from its 52-week-high reached on May 13, but up nearly 30% when compared to the end of 2009.

--Written by Laurie Kulikowski in New York.

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Laurie Kulikowski


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