SunTrust: Financial Loser

NEW YORK ( TheStreet) -- SunTrust ( STI) was the loser among the largest U.S. banking names on Wednesday, with shares sliding 3.5% to close at $23.63.

The broad indexes all declined following HSBC's report that its flash purchasing managers index showed a decline in Chinese manufacturing during March. The index declined to 48.1 for March from February's revised 49.6, while new factory orders declined to a four-month low.

In Europe, the Markit euro-zone purchasing managers' composite output index declined to a three-month low of 48.7 during March, from 49.3 in February.

Back home, the U.S. Labor Department reported that initial jobless claims for the week ended March 17 fell 5,000 to 348,000, coming in at their lowest level since Feb. 2008, but that wasn't enough to keep U.S. stocks out of the red.

The KBW Bank Index ( I:BKX) declined 2% to close at 49.10, with all 24 index components showing decline for the session.

SunTrust's shares have now returned 34% year-to-date, following a 40% decline during 2011.

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After the Federal Reserve rejected the Atlanta lender's plan to return capital to investors this year through a dividend increase and share buybacks, SunTrust said in a statement on March 13 that it would "not be increasing its return of capital to shareholders at this time," and that it would maintain its current quarterly dividend of five cents a share, and "redeem certain trust preferred securities at such time as their governing documents permit, including when these securities are no longer expected to qualify as Tier 1 capital."

Guggenheim Securities analyst Marty Mosby on Wednesday downgraded SunTrust to a neutral rating from a "Buy" rating, while leaving his price target for the shares unchanged at $26, which is the analyst's estimate of the company's fourth-quarter 2012 tangible book value per share.

Mosby said that "without these increases in capital distribution, the stock price does not receive the needed support to push it higher tangible book value."

SunTrust trades for 0.9 times the company's reported tangible book value of $25.33 and for nine times the consensus 2013 EPS estimate of $2.69 a share, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $1.75.

Interested in more on SunTrust? See TheStreet Ratings' report card for this stock.

Shares of KeyCorp ( KEY) declined 3% to close at $8.35.

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The shares have now returned 9% year-to-date, following last year's 12% decline.

KeyCorp's shares now trade for 0.9 times the company's reported Dec. 30 tangible book value of $9.22, and for 10 times the consensus 2013 EPS estimate of 81 cents. The consensus 2012 EPS estimate is 77 cents.

The company last Wednesday announced that the Federal Reserve had approved its plan to increase its quarterly dividend to five cents from three cents, and announced that its board of directors would "consider the potential dividend increase at its regular May meeting."KeyCorp also announced that it had authorized "a common stock repurchase program of up to $344 million."

Following the company's announcements on its capital plan, JPMorgan analyst Steven Alexopoulos reiterated his "Overweight" rating for KeyCorp, with a $9.50 price target, saying he was "pleased that the capital return story at KEY turned out modestly better than expected," particularly given that with the stock trading below tangible book value, the best risk adjusted use of excess capital in our view is for the company to repurchase its own shares."

Interested in more on KeyCorp? See TheStreet Ratings' report card for this stock.

Shares of Citigroup ( C) declined 2.5% to close at $36.87.

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The shares have now returned 40% year-to-date, following a 44% decline during 2011.

Citi now trades for 0.7 times the company's reported Dec. 30 tangible book value of $49.81, and for eight times the consensus 2013 EPS estimate of $4.78. The consensus 2012 EPS estimate is $3.97.

As most bank stock investors know by now, Citigroup had its plan to increase its return of capital to investors through an increased dividend and share buybacks rejected by the Federal Reserve last Tuesday, although investors could see a reduced return of capital this year, as "Citi will submit a revised Capital Plan to the Federal Reserve later this year, as required by the applicable regulations."

JPM Securities analyst David Trone on Thursday reiterated his "Market Perform" rating on Citigroup, saying that although the shares are attractively priced to book value, "despite having no material remaining exposure to the mortgage mess but having a nice international franchise, particularly in fast growing markets," the "bad news is the large legacy asset portfolio may have been a factor in the company's stress test results coming out harsher than management expected."

Dispite the neutral rating, Trone said that Citi "our favorite among the universal banks."

Interested in more on Citigroup? See TheStreet Ratings' report card for this stock.

Shares of Bank of America ( BAC) declined over 2% to close at $9.60.

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The shares have now returned 73% year-to-date, following last year's 58% drop.

Bank of America now trades for 0.7 times the company's reported Dec. 30 tangible book value of $12.95, and for eight times the consensus 2013 EPS estimate of $1.19. The consensus 2012 EPS estimate is 69 cents.

BernsteinResearch analyst John McDonald on Thursday maintained his "Market Perform" rating for Bank of America, but increased his price target for the shares to $11.00 from $9.00, while increasing his 2012 earnings estimate by a nickel to 70 cents, and leaving his 2013 EPS estimate unchanged at $1.15.

The analyst raised his price targets and EPS estimates for several of the largest U.S. banks "to account for better trends in capital markets, credit quality, and mortgage - as well as some tweaks around expenses," including litigation and mortgage putback demands. .

Interested in more on Bank of America? See TheStreet Ratings' report card for this stock.

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-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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