SunTrust: Financial Winner

Corrected to show that SunTrust raised the dividend on common shares to 10 cents from 5 cents, and that the Federal Reserve approved common share repurchases of up to $200 million through the first quarter of 2014.

NEW YORK ( TheStreet) -- SunTrust ( STI) was the winner among major U.S. banking names on Friday, with shares over 2% to close at $28.04.

The broad indices ended lower after official monthly employment numbers confirmed the pattern set by the ADP report earlier in the week.

The Department of Labor Statistics early on Friday reported that nonfarm payrolls in the U.S. grew by a seasonally adjusted 88,000 jobs during March, declining sharply from an upwardly revised 268,000 in February. The number of jobs added during January was also revised upward, to 148,000.

The U.S. unemployment rate declined to 7.6% during March from 7.7% in February, however, this was because the workforce shrank by 496,000 during the month.

Economists polled by Thomson Reuters expected nonfarm payrolls to grow by 200,000, with the unemployment rate staying at 7.7%.

The Federal Reserve later reported that consumer credit in the U.S. during February grew at a seasonally adjusted annual pace of 7.8%, increasing from 5.5% in January. The increased pace for overall consumer credit growth mainly reflected a 10.9% growth rate for nonrevolving consumer loans, including automobile loans, increasing from a growth rate of 6.9% in January. Meanwhile, revolving credit balances during February increased at a slow annual rate of 0.8% in February, slowing from 2.3% in January.

Investors poured money into U.S. Treasury securities, sending the closing yield on 10-year U.S. government paper to 1.694%, which was a significant decline of 6.8 basis points from the previous close. This is the lowest closing market yield for 10-year Treasury bonds since Dec. 11, when the yield was 1.66%. The closing market yield for the 10-year bond peaked this year at 2.07% on March 13, as investors anticipated the eventual curbing of the Federal Reserve's monthly purchases of $85 billion in long-term securities, in an effort to hold long-term rates down.

The KBW Bank Index ( I:BKX) was down slightly to close at 55.14, with 14 of the 24 index components showing declines.


SunTrust's shares are down 1% this year, following a 62% return during 2012. The shares trade for 1.1 times their reported Dec. 31 tangible book value of $25.98, and for 9.6 times the consensus 2014 earnings estimate of $2.91, among analysts polled by Thomson Reuters. The consensus 2013 EPS estimate is $2.67.

Following the completion of the Federal Reserve's annual stress tests, the company on March 14 announced it would increase its quarterly dividend to 10 cents a share from 5 cents, and that it had received regulatory approval for up to $200 million in share buybacks through the first quarter of 2014.

SunTrust will announce its first-quarter results on April 19, with analysts on average expecting earnings of 62 cents a share, declining from 65 cents in the fourth quarter, but increasing from 46 cents in the first quarter of 2012.

KBW analyst Christopher Mutascio rates SunTrust "market perform," with a $30 price target, estimating the company will report first-quarter earnings of 60 cents. The analyst in a report on March 1 estimated that the company's first-quarter mortgage revenue would decline to $271 million from $286 million in the fourth quarter.

Credit Suisse analyst Craig Siegenthaler on Tuesday downgraded SunTrust to a neutral rating from an "outperform" rating, following a meeting with the bank's senior management. The analyst said in a report there was a risk of declining earnings this year and in 2014, "due to (1) lower than expected expense mgmt. in '13/'14, and (2) the impact of swap portfolio runoff on net interest income ."

Siegenthaler lowered his 2013 EPS estimate for SunTrust to $2.47 from $2.56 and lowered his 2014 EPS estimate by a penny, to $2.84. The analyst's price target for SunTrust's shares is $28.00.

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

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

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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 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.