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Fitch Details Rating Rationale on STI's Outlook Revision Following Large Regional Bank Review
October 8, 2013 / 6:16 PM / 4 years ago

Fitch Details Rating Rationale on STI's Outlook Revision Following Large Regional Bank Review

(The following statement was released by the rating agency) CHICAGO, October 08 (Fitch) Following its large regional bank peer review, Fitch Ratings has revised the Outlook to Positive from Stable on SunTrust Banks, Inc. (STI) Issuer Default Ratings (IDRs). Please refer to the release titled 'Fitch Takes Rating Actions on Its Large Regional Bank Group Following Peer Review' dated Oct. 08, 2013 for a discussion of rating actions taken on the large regional banks. A complete list of rating actions on STI follows at the end of this release. KEY RATING DRIVERS - IDR & VR STI's ratings were affirmed at 'BBB+' reflecting the company's solid liquidity profile, sound capital position, and improving asset quality. The company's Outlook was revised to Positive from Stable reflecting an improving overall risk profile. STI's risk profile benefits from a reduction in residential mortgage and home equity lending, and a material decline in problem assets. Further, its risk profile incorporates a balanced business mix, and a good degree of noninterest income. In light of the low interest rate environment and subdued economic growth, Fitch remains concerned relative to the industry stretching for yield. Fitch notes that STI's securities portfolio continues to have very little credit risk, and its loan growth suggests a measured approach to extending credit in the current environment, characterized as having very competitive pricing. Lastly, STI's interest rate risk positioning is relatively neutral, not suggesting any directional bets in its risk management. Somewhat offsetting this, STI's earnings performance remains below large regional bank peer averages, though it does reflect an improving trend over the past several years. The improvement in reported earnings has largely come from lower provision expenses. Fitch views favorably STI's recent settlement with Freddie Mac, however, noting that most of STI's legacy repurchase risk resides with Fannie Mae. RATING SENSITIVITIES - IDR & VR Sustained and improved profitability metrics that are in line with large bank regional peers, combined with the maintenance of appropriate capital levels and the continuation of moderating asset quality, could result in positive rating momentum for STI. Fitch anticipates that resolution of the Positive Rating Outlook may extend beyond 12 months. Conversely, deteriorating asset quality trends, combined with a lack of improvement in profitability metrics could pressure STI's current ratings, though a downgrade is viewed as unlikely. Fitch has affirmed the following ratings and Revised the Outlook to Positive from Stable: SunTrust Banks, Inc. Long-term IDR at 'BBB+'; Short-term IDR at 'F2'; Viability Rating at 'bbb+'; Preferred stock at 'BB-'; Senior debt at 'BBB+'; Subordinated debt at 'BBB'; Short-term debt at 'F2'; Support at 5; Support Floor at 'NF'. SunTrust Bank Long-term IDR at 'BBB+'; Short-term IDR at 'F2'; Viability Rating at 'bbb+'; Long-term deposits at 'A-'; Market-linked securities at 'A-emr'; Senior notes at 'BBB+'; Short-term deposits at 'F2'; Subordinated debt at 'BBB'; Short-term debt at 'F2'; Support at '5'; Support Floor at 'NF'. SunTrust Capital I SunTrust Capital III National Commerce Capital Trust I Preferred stock at 'BB'. SunTrust Preferred Capital I Preferred stock at 'BB-'. Contact: Primary Analyst Julie Solar Senior Director +1-312-368-5472 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 Secondary Analyst Doriana Gamboa +1-212-908-0865 Senior Director Committee Chairperson Christopher Wolfe Managing Director +1-212-908-0771 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research: --'Fitch Takes Rating Actions on Its Large Regional Bank Group Following Peer Review' (Oct. 8, 2013). --'Global Financial Institutions Rating Criteria' (Aug. 15, 2012); --'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012); --'Assessing and Rating Bank Subordinated and Hybrid Securities' (Dec. 05, 2012) --'Bank Support: Likely Rating Paths' (Sept. 11, 2013); --'The Evolving Dynamics of Support for Banks' (Sept. 11, 2013); --'Risk Radar' (Sept. 5, 2013); --'U.S. Banking Quarterly Review: 2Q13 (Record Net Income in No-Growth Environment)' (August 16, 2013) --'U.S. Banks: Liquidity and Deposit Funding (Diminishing QE Effectiveness and its Impact on Systemic Liquidity and Funding)' (Aug. 8, 2013); --'U.S. Bank Mergers and Acquisitions' -- When Will The Catalysts Kick In? (July 11, 2013) --'U.S. Banks: Interest Rate Risks (What Happens When Rates Rise)' (June 18, 2013) --'U.S. Banks -- Home Equity Reset Risk Hitting the Reset Button in 2014' (April 29, 2013) --'U.S. Banks: Rationalizing the Branch Network (Witness the Incredible Shrinking Branch Network)' (Sept. 17, 2012). ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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