New York, August 17, 2009 -- Moody's Investors Service confirmed the Baa2 ratings on trust preferred
stock issued by subsidiaries of SunTrust Banks, Inc. (SunTrust)
as well as the Ba2 rating on SunTrust's preferred stock and the Baa3 rating
on SunTrust Real Estate Investment Corporation's REIT preferred stock.
All of the impacted ratings had been on review for possible downgrade
since May 14. Moody's noted that none of SunTrust's other ratings
were affected by today's rating action. Following the review,
Moody's outlook on SunTrust and its subsidiaries remains negative.
The rating confirmations reflected Moody's view that the potential
for a missed dividend or interest payment on SunTrust's hybrid securities
has been dramatically reduced because of SunTrust's success in raising
sufficient capital to satisfy the requirement mandated by the U.S.
government following its earlier 'stress test' under the Supervisory Capital
Assessment Program (SCAP). The majority of the $2.3
billion capital increase, or about $1.8 billion,
came from a common stock offering, with the remainder coming from
asset sales, recapture of deferred tax assets and gains associated
with tender offers for some of SunTrust's hybrid securities. Specifically,
SunTrust acquired $750 million of hybrid securities for an aggregate
price of $525 million. Therefore, the tenders raised
roughly $225 million in Tier 1 common capital.
When SunTrust's hybrid ratings were placed on review, Moody's was
uncertain about SunTrust's ability to raise a large amount of capital.
That led to the concern about a potential missed dividend or interest
payment on SunTrust's hybrid securities in order to increase the success
of any exchange or tender offers. In addition, Moody's considered
the likelihood that additional government capital, on top of the
existing TARP preferred, would be required. That too could
have resulted in pressure to eliminate payments on hybrid securities.
Since those concerns do not presently exist, in Moody's view,
SunTrust's hybrid ratings were confirmed.
Despite the rating confirmations, Moody's said that SunTrust's profitability
and credit quality challenges, which are intertwined, remain
notable. SunTrust has reported three consecutive quarterly losses
and, relative to a year ago, its nonperforming assets,
including loans 90+ days past due, have more than doubled while
the loan loss allowance has only increased by 58%. Although
a meaningful portion of SunTrust's nonperforming and impaired loans have
already been marked down or have specific reserves, their growth
suggests that provisioning needs will remain elevated in the near-term.
These challenges continue to warrant an overall negative rating outlook,
in Moody's view.
Moody's last rating action on SunTrust was on May 14th, 2009 when
its hybrid securities were placed on review for possible downgrade.
The principal methodologies used in rating this issuer were "Bank Financial
Strength Ratings: Global Methodology" (February 2007) and "Incorporation
of Joint-Default Analysis into Moody's Bank Ratings: A Refined
Methodology" (March 2007), which can be found at www.moodys.com
in the Credit Policy & Methodologies directory, in the Ratings
Methodologies subdirectory. Other methodologies and factors that
may have been considered in the process of rating this issuer can also
be found in the Credit Policy & Methodologies directory.
Outlook Actions:
..Issuer: National Commerce Capital Trust I
....Outlook, Changed To Negative From
Rating Under Review
..Issuer: SunTrust Banks, Inc.
....Outlook, Changed To Negative From
Rating Under Review
..Issuer: SunTrust Capital I
....Outlook, Changed To Negative From
Rating Under Review
..Issuer: SunTrust Capital III
....Outlook, Changed To Negative From
Rating Under Review
..Issuer: SunTrust Capital IX
....Outlook, Changed To Negative From
Rating Under Review
..Issuer: SunTrust Capital VI
....Outlook, Changed To Negative From
Rating Under Review
..Issuer: SunTrust Capital VIII
....Outlook, Changed To Negative From
Rating Under Review
..Issuer: SunTrust Capital X
....Outlook, Changed To Negative From
Rating Under Review
..Issuer: SunTrust Capital XI
....Outlook, Changed To Negative From
Rating Under Review
..Issuer: SunTrust Capital XII
....Outlook, Changed To Negative From
Rating Under Review
..Issuer: SunTrust Capital XIII
....Outlook, Changed To Negative From
Rating Under Review
..Issuer: SunTrust Capital XIV
....Outlook, Changed To Negative From
Rating Under Review
..Issuer: SunTrust Capital XV
....Outlook, Changed To Negative From
Rating Under Review
..Issuer: SunTrust Preferred Capital I
....Outlook, Changed To Negative From
Rating Under Review
..Issuer: SunTrust Real Estate Investment Corporation
....Outlook, Changed To Negative From
Rating Under Review
Confirmations:
..Issuer: National Commerce Capital Trust I
....Preferred Stock Preferred Stock,
Confirmed at Baa2
..Issuer: SunTrust Banks, Inc.
....Multiple Seniority Shelf, Confirmed
at (P)Ba2, (P)Baa2
....Preferred Stock Preferred Stock,
Confirmed at Ba2
..Issuer: SunTrust Capital I
....Preferred Stock Preferred Stock,
Confirmed at Baa2
....Preferred Stock Shelf, Confirmed
at (P)Baa2
..Issuer: SunTrust Capital III
....Preferred Stock Shelf, Confirmed
at (P)Baa2
..Issuer: SunTrust Capital IX
....Preferred Stock Preferred Stock,
Confirmed at Baa2
....Preferred Stock Shelf, Confirmed
at (P)Baa2
..Issuer: SunTrust Capital VI
....Preferred Stock Shelf, Confirmed
at (P)Baa2
..Issuer: SunTrust Capital VIII
....Preferred Stock Preferred Stock,
Confirmed at Baa2
..Issuer: SunTrust Capital X
....Preferred Stock Shelf, Confirmed
at (P)Baa2
..Issuer: SunTrust Capital XI
....Preferred Stock Shelf, Confirmed
at (P)Baa2
..Issuer: SunTrust Capital XII
....Preferred Stock Shelf, Confirmed
at (P)Baa2
..Issuer: SunTrust Capital XIII
....Preferred Stock Shelf, Confirmed
at (P)Baa2
..Issuer: SunTrust Capital XIV
....Preferred Stock Shelf, Confirmed
at (P)Baa2
..Issuer: SunTrust Capital XV
....Preferred Stock Shelf, Confirmed
at (P)Baa2
..Issuer: SunTrust Preferred Capital I
....Preferred Stock Preferred Stock,
Confirmed at Ba2
..Issuer: SunTrust Real Estate Investment Corporation
....Preferred Stock Preferred Stock,
Confirmed at Baa3
SunTrust Banks, Inc., headquartered in Atlanta,
Georgia, reported assets of $177 billion at June 30,
2009.
New York
Robert Young
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Allen H. Tischler
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's confirms ratings on SunTrust's hybrid securities