TEXT-Fitch: SunTrust Banks ratings unaffected by announced actions
Sept 7 - The ratings for SunTrust Banks, Inc. (STI) are not impacted by the recent announcement regarding the sale of the company's Coca-Cola (KO) shares or the charges related to mortgage repurchases, loans being moved to held-for-sale, or the community development investment, according to Fitch Ratings. STI's Long-term Issuer Default Rating (IDR) is 'BBB+' with a Stable Outlook. Together, these four actions will contribute a modest 10bps improvement to Tier 1 common under Basel I as of June 30, 2012. STI reported several charges that were offset by the gain related to the sale of its KO shares. STI disclosed that based on further discussions with Fannie Mae and Freddie Mac, the company will be reporting a $375 million mortgage repurchase provision in 3Q'12. STI anticipates this will address all future repurchase costs stemming from the 2005 to 2008 vintages. This is a potential positive for the company as mortgage repurchase provisions have been a drag on STI's earnings, which continue to track below peer averages. If the company is not successful in selling the newly transferred held-for-sale loans at their current marks, it could create more earnings pressure and volatility for STI, which would viewed negatively by Fitch. With regard to the sale of Coca-Cola holdings, it is reduces the volatility associated with other comprehensive income and lessens the impact related the higher risk-weighted assets for equity holdings under Basel III. Accordingly, although STI will no longer receive the approximate $40 million in annual dividend income, there is no more volatility in capital ratios related to KO, which is viewed positively by Fitch. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research: --'U.S. Banks: Mortgage Representations and Warranties (Banks Increase Reserves; Uncertainty Remains)' (Aug. 20, 2012). Applicable Criteria and Related Research: U.S. Banks: Mortgage Representations and Warranties (Banks Increase Reserves; Uncertainty Remains)
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