Analysts divided on SunTrust Banks' capital position
BANGALORE (Reuters) - Analysts were divided on the capital position of SunTrust Banks Inc (STI.N), after the U.S. southeast regional bank on Tuesday said it will bolster capital by unloading a big Coca-Cola Co (KO.N) stake.
While analysts at Robert W. Baird & Co and Morgan Keegan said the bank was adequately capitalized, Sanford C. Bernstein and Friedman Billings Ramsey said the company would eventually need to cut dividend to defend its capital position.
Baird analyst David George upgraded the bank to "outperform" from "neutral," and said the company's capital levels should be adequate to address near-term credit challenges.
He, however, said SunTrust's losses and provision levels will likely remain elevated during the next several quarters.
"We do not believe that STI is out of the woods from a credit perspective," he said.
Morgan Keegan's Robert Patten upgraded the bank to "outperform," saying "we believe that SunTrust should earn its way through the credit challenges, and dividend appears safe."
SunTrust is unloading its 43.6 million share stake, worth more than $2 billion, in Coca-Cola.
CAPITAL CONCERNS
Friedman analyst Scott Valentin reiterated his "underperform" rating on the stock and said he does not view the bank as overcapitalized.
There is "a high probability of a dividend cut," particularly if credit deterioration increased meaningfully, he said.
"Unless the company decides to divest assets, or it issues additional hybrid capital securities, we do not believe current capital levels are sufficient for the next two and half years," he said.
Valentin cut his price target on the stock by $5 to $32.
Bernstein said SunTrust will eventually decide to cut dividend to defend its capital position.
The brokerage lowered its price target on the stock by $1 to $42 and maintained its "market perform" rating.
Shares of the bank were up 13 percent at $44.82 in morning trade on the New York Stock Exchange.
(Editing by Vinu Pilakkott)
