SunTrust Bank Blues
SunTrust Bank – banking blues. As financial reports come through and TARP funds examined you can begin to understand the SunTrust Bank blues. SunTrust Bank appears to have over extended their reach in mortgage areas, particularly in the south. This over reach affects their borrowing power with other banks and lenders.
Let me ask you a question. If you had a bank and your bank lost a lot of money on foreclosures, how would you compensate your bottom line? What does SunTrust Bank do? It appears they raise their fees on their good customers. Someone needs to show them how to win friends and influence people. You would think SunTrust would lower their fees, offer perks, do anything for the public to get their business and get out of the mess they created for themselves. Here is a closer look (from a financial source) at SunTrust Bank’s problems:
“The downgrade was triggered by continued deterioration in SunTrust’s asset quality. Until fourth-quarter 2008, asset quality problems had been largely contained to home equity and Alt-A loans with high loan-to-value ratios, but are now beginning to spread to SunTrust’s large portfolio of first mortgage loans on residential properties,” said Standard & Poor’s credit analyst Charles D. Rauch. In addition, the portfolio of loans to regional home builders is weakening. SunTrust has been particularly vulnerable during this credit cycle because of its large real estate exposure in Florida, one of the most overbuilt markets in the country.
The deterioration in credit quality caused the bank to report a large pretax operating loss of $656.5 million in fourth-quarter 2008. The quarter was marked by another spike in loan-loss provisions, as well as higher credit costs (mortgage application fraud and insurance denial claims). Net charge-offs, delinquencies, and nonperforming assets continued to climb from already high levels. We expect loan-loss provisions and other credit costs to remain elevated, causing more pressure on profitability in 2009.
Current ratings on SunTrust reflect its well-established banking franchise and extensive deposit-gathering branch network across the Southeast U.S. SunTrust’s issuance of $4.85 billion of preferred stock under the U.S. Treasury’s Troubled Asset Relief Program bolstered capital levels, increasing the Tier 1 risk-adjusted capital ratio to approximately 10.8% at year-end 2008. We expect SunTrust, which reduced its quarterly common dividend to $0.10 per share, to continue to build capital ratios through the credit downturn. During the fourth quarter, SunTrust raised core deposits and issued FDIC-guaranteed debt to bolster its liquidity profile. As of year-end 2008, the bank was a net supplier of overnight funds, a position we deem prudent in this volatile banking market.
The negative outlook incorporates our baseline scenario that SunTrust’s financial performance will remain weak in 2009. We expect asset quality problems to worsen throughout the year. If credit losses rise materially above our expectations or if core profitability is not poised for a recovery next year, we could lower the ratings.
In addition, complaints have piled up against SunTrust. Allegations of holding deposits for days before crediting them to accounts, overdraft fees charged to accounts because deposits weren’t cleared, mailing bank cards to the wrong address and many others. These issues are not the way to get your bank in good graces with your customers. One must ask, does SunTrust Bank want customers or just their money?