SunTrust Banks: Financial Analysis

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SunTrust Banks Financial Analysis
Florida Atlantic University
ACG 6315

Introduction 3
Description of the Company 3-4
Economic and Industry Analysis 4-5
Competition 5-6
Financial Ratio Analysis 6-9
Capital Adequacy 6-7
Asset Quality 7
Liquidity 8
Sensitivity to Market Risk 9
Assumptions 9
Results of Analysis 9
Conclusion 10
References 11
Appendix 12

The banking industry has undergone major upheaval in recent years, largely due to the lingering recessionary environment and increased regulatory environment. Many banks have failed in the face of such tough environmental conditions. These conditions emphasize the importance of gaining an accurate picture of a bank’s financial health through detailed financial analysis.

This financial analysis report analyzes SunTrust Bank’s profitability, solvency and financial stability using financial ratios that point to the basic health of its activities. The report also analyzes the overall health of the industry while examining SunTrust’s relative position to its competitors in the market. Finally, the report provides a future perspective of the Bank and its growth prospects.

Description of the Company
The earliest form of SunTrust Banks began in 1811 as the Farmer's Bank of Alexandria, Virginia which led to the Trust Company of Georgia in 1891. The Bank was one of the original underwriters for Coca-Cola’s IPO in 1919, becoming one of their largest shareholders for many years. The IPO became a huge asset for SunTrust when the Coca-Cola stock was later revalued in 1993 from its historic value of $110,000 to almost $1.1 billion. The Bank, as it is today, is a result of the merger in 1985 of the Trust Company of Georgia and SunBanks, Inc., of Florida. The merger resulted in the adoption of the current SunTrust name in 1995 (Hoover’s, 2012).

SunTrust Banks, Inc. (NYSE: STI) is one of the largest regional banks in the U.S. with over $178 billion in assets and ranked eighth amongst the top 10 banks in terms of number of branches, deposits and assets (SunTrust Profile, 2012). The company is headquartered in Atlanta, Georgia with a footprint focused on the southeastern and Mid-Atlantic states. SunTrust Banks has l,658 branches and over 28,000 employees in Alabama, Arkansas, Florida, Georgia, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, West Virginia, and the District of Columbia. The Bank and its subsidiaries provide a broad range of services within six lines of business: retail banking; diversified commercial banking, corporate and investment banking; mortgage banking; and wealth and investment management (SunTrust Profile).

Economic and Industry Analysis
Economic conditions remain shaky but have improved since the lows of the financial crisis in mid 2007 through 2008. Banks have been vilified by the media and public as the culprit of the financial crisis, causing greater scrutiny and tighter regulations. Increased regulation has adversely affected some of the banking industry’s traditional fee income, most notably in service charges (e.g. overdraft fees) on deposit accounts. In addition to the decrease in fee revenue, there have been increased costs associated with the regulations. Banks scurried to recoup their lost revenues by adding fees to normally non fee products. Several banks, including SunTrust, tried charging fees to their clients for debit card transactions. A huge consumer backlash on the new fees quickly followed. The banks were left with no other choice then rescind the fees or risk losing customers.

Despite the dragging effect of the financial crisis on banks, the outlook for the banking industry has improved in several areas recently. More banks are improving their earnings. As reported by the FDIC, banks earned $26.3 billion in the fourth quarter of 2011, an increase of $4.9 billion...
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