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Suntrust Bank Q4-09 Review and Opinion
Fourth quarter operating results opinions are available for Morgan
Stanley and Suntrust for BoomBustBlog subscribers(
STI 4Q09_Review and MS 4Q09 results). I have extracted key tidbits from the Sun Trust document below.
Of particular note is the difference between some readers perception of
the Sun Trust results and mine. If you take a close look at the results,
you will see credit performance and asset quality is still
deteriorating. The perception of a reprieve or moderation is potentially
misleading due to the fact that Suntrust (like most other large banks)
is actively shrinking their loan portfolio and transferring bad assets
from one category to another.
To the credit of the CEO, he actually appears to tell it like it is and
does not appear to be on a marketing binge to sugarcoat reality. This is
an impressive, and increasingly rare trait among the C-suite crowd!
Some highlights from the Sun Trust Review:
- Nonperforming
loans declined marginally to $5,403 mn (4.75% of total loans) at the
end
of 4Q09
from $5,444 mn (4.67% of total loans) at the end of 3Q09 but relativelyremain
high when compared with $3,940 mn (3.10% of total loans) at the end of
4Q08. This
marginal decline in non-performing loans can largely be attributed to
the
transfer from non-accrual to foreclosed and other real estate owned
category.
- With
tangible equity
declining further owing to losses recorded during the quarter, the
Texas ratio
inched higher to 59.8% in 4Q09 against 58.0% in 3Q08. Further,the Bank's interest earning assets are contracting
as the
loan
portfolio shrunk 2.4% (q-o-q) as the Bank continues to reduce exposure
to
residential and commercial real estate.
- Non-interest
income declined 4.2% (q-o-q) to $742 mn from $775 mn in 3Q09 largely
owing to lower
mortgage production income due to higher estimated losses
related to the
potential repurchase of mortgage loans (a recurring theme in nearly all
of the
TARP recipient bank's Q4 results, including JP Morgan and Wells Fargo -
see
WFC4Q09_Review- subscriber edition
or the less intense, free version as well as the JPM4Q09 review
- public edition).
Next up, a look at the "new" Goldman Sachs valuation and trading revenue scenarios, more on
the China short thesis debate, the Central and Eastern European short
thesis and the macro/fundamental prospects of the simultaneous
withdrawal of stimulus in both China and the US: Fed
Declares Recovery for First Time, Prepares Ground for End to Stimulus.
As I prepare this, the European financial markets are in the process of
melting down. I have performed a decent amount of due diligence on my
European shorts and will be putting them out shortly to subscirbers.
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+1.
Some other comments on SunTrust. Their troubled asset ration was 41.2 as of Sept 09. It's been growing steadily, and is approaching the range of where the FDIC has usually been taking over a Bank. IMHO, it could go at any time.
Profit/Loss Sept 08: $1,254,775,000
Profit/Loss Sept 09: $-1,307,328,000
That's a $2 Billion swing in one year. Ouch. I wouldn't keep any money there, nor any long positions.
Thanks, Reggie.
Additionally, and nobody wants to talk about this as it is the elephant in the room, let's not forget about FASB 157 and a bank's ability to mark assets any old way they want to.
The GS move to go CONviction list with this one is one of the silliest I've ever seen outside the dot com boom, bust.
Thanks for this Reggie.
Reggie, I would be interested in your views on repurchase expenses. I anticipate they will be rising substantially throughout the year. HAMP delayed the recognition of losses on a lot of these loans, but now that borrowers are falling out of HAMP, the GSEs are looking at these defaults and saying "no way are we paying on this". I expect repurchase activity to triple by the end of this year, your thoughts?
I haven't quantified it, but I agree it is going to go up by a lot. The writing was on the wall in 2007 when the monolines started getting in trouble. One relatively easy way to wiggle out of the CDS was to claim fraud, misrepresentation or willful negligence in underwriting - all three of which were most rampant, and probably still is.
The recent rise then has been probably due to the squid front running this with their buddies in the huddle, they probably offloaded this am at $ 26 a nice 15% return for their week!
yep!
OMG Reggie, your work speaks for itself. You are so great, so wonderful.
You raise me up, so I can stand on mountains;
You raise me up, to walk on stormy seas;
I am strong, when I am on your shoulders;
You raise me up: To more than I can be.
You are the man who will change the banks. You give us hope for the change.
-Kissy
You've got a lot of extra time on your hand???
Oh Reggie your articles on Zero need a separate forum. They are so great. They cannot be mixed with the other contributor trash.
I think you may be the one true clairvoyant. (you knew I was going to say that didn't you?)
Time is not relative to those who don't account for it.
The Suntrust CEO has been very frank in my view and every time i've read his comments, he is by no means pumping (yet the stock keeps going up).
at least we know why the dramatic rise happened the last few days: the squid placed STI on its CONviction buy list this a.m.
Don't forget the frontrunning of those who knew about this $30B in TARP money being given (not loaned) to non-TBTF banks...
I think you can see the 'Conviction Buy' add used to create their dumping point this morning.