Bank stocks have been the biggest gainers since Trump’s electoral victory on hopes of higher interest rates and lighter regulations under the new administration. Many investors wonder if the rally can continue going forward.
Looking at the longer-term picture, banks were beaten down for the past eight years as ultra-low interest rates and onerous regulations resulted in a difficult operating environment. Now as economic growth is picking up and interest rates have started rising, banks have further to run and their stocks are still worth a look.
Headquartered in Atlanta, GA, SunTrust Banks (STI - Free Report) is a diversified financial services holding company, which operates through its principal banking subsidiary SunTrust Bank. They have following segments: Consumer Banking and Private Wealth Management segment (constituting 53% of total revenue in 2015), Wholesale Banking segment (37%), Mortgage Banking segment (12%) and Corporate Other (3%).
Solid Fourth Quarter Results
The bank reported on January 20. Net income for the quarter came in at $448 million, or $0.90 per share, beating the Zacks Consensus Estimate of $0.88. Total revenue for the quarter grew 7% year-over-year to $2.19 billion and was above the Zacks Consensus Estimate of $2.17 billion.
Net interest margin was 3.00% in the current quarter, up 2 basis points year-over-year thanks to higher earning asset yields and continued positive mix shift in the loan portfolio. Total non-performing assets were up 25% from prior-year quarter, mainly due to rise in energy-related loans and home equity products. Credit quality is however expected to improve with gradually stabilizing energy sector.
Their capital ratios were well above regulatory requirements.
Rising Estimates
After better than expected results, analysts have raised estimates for the company. Zacks Consensus Estimates for the current and the next year have surged to $3.82 per share and $4.27 per share from $3.72 and $4.11 respectively, before the results.
The following chart shows earnings and price momentum:
SunTrust Banks, Inc. Price, Consensus and EPS Surprise
Returning Cash to Shareholders
During the quarter, SunTrust bought back shares worth $240 million. They plan to repurchase approximately $480 million of common stock during the first half of 2017.
The Bottom Line
“Major Regional Banks” currently have a Zacks Industry Rank of 2 out of 265 (top 1%), while the Finance sector is ranked 1 out of 16 Zacks sectors. The positive outlook is a result of rising interest rates, brightening economic picture and hopes for a friendlier regulatory environment.
Zacks' Top 10 Stocks for 2017
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Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Bank stocks have been the biggest gainers since Trump’s electoral victory on hopes of higher interest rates and lighter regulations under the new administration. Many investors wonder if the rally can continue going forward.
Looking at the longer-term picture, banks were beaten down for the past eight years as ultra-low interest rates and onerous regulations resulted in a difficult operating environment. Now as economic growth is picking up and interest rates have started rising, banks have further to run and their stocks are still worth a look.
Headquartered in Atlanta, GA, SunTrust Banks (STI - Free Report) is a diversified financial services holding company, which operates through its principal banking subsidiary SunTrust Bank. They have following segments: Consumer Banking and Private Wealth Management segment (constituting 53% of total revenue in 2015), Wholesale Banking segment (37%), Mortgage Banking segment (12%) and Corporate Other (3%).
Solid Fourth Quarter Results
The bank reported on January 20. Net income for the quarter came in at $448 million, or $0.90 per share, beating the Zacks Consensus Estimate of $0.88. Total revenue for the quarter grew 7% year-over-year to $2.19 billion and was above the Zacks Consensus Estimate of $2.17 billion.
Net interest margin was 3.00% in the current quarter, up 2 basis points year-over-year thanks to higher earning asset yields and continued positive mix shift in the loan portfolio. Total non-performing assets were up 25% from prior-year quarter, mainly due to rise in energy-related loans and home equity products. Credit quality is however expected to improve with gradually stabilizing energy sector.
Their capital ratios were well above regulatory requirements.
Rising Estimates
After better than expected results, analysts have raised estimates for the company. Zacks Consensus Estimates for the current and the next year have surged to $3.82 per share and $4.27 per share from $3.72 and $4.11 respectively, before the results.
The following chart shows earnings and price momentum:
SunTrust Banks, Inc. Price, Consensus and EPS Surprise
Returning Cash to Shareholders
During the quarter, SunTrust bought back shares worth $240 million. They plan to repurchase approximately $480 million of common stock during the first half of 2017.
The Bottom Line
“Major Regional Banks” currently have a Zacks Industry Rank of 2 out of 265 (top 1%), while the Finance sector is ranked 1 out of 16 Zacks sectors. The positive outlook is a result of rising interest rates, brightening economic picture and hopes for a friendlier regulatory environment.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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