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SunTrust Banks (NYSE:STI) Downgraded by Fitch Ratings


Friday, March 26th, 2010

SunTrust Banks (NYSE:STI) has some of its ratings downgraded by Fitch Ratings based on commercial real estate loans, mortgages and home equity loans they still hold.

Citing the mortgage, home equity and commercial real estate portfolios held by SunTrust Banks, Fitch said their "persistently weak credit and performance metrics does not compare well to its peers and is not commensurate with an 'A-' rated company."

With many commercial real estate loans expected to default in the second half of 2010, Fitch expects that to be an increasing problem and challenge for SunTrust in 2010.

The parent company and its subsidiary had its long-term issuer default ratings cut from "A-" to "BBB+" by Fitch. The two also were cut on their short-term IDR rating from "F1" to "F2." Another important downgrade was concerning their senior debt rating, which dropped from "A-" to "BBB+." Other ratings at SunTrust were also downgraded.

Along with their credit issues, the high cost of credit for them will make it hard for them to be a profitable company in 2010, and that could extend through 2011, said Fitch.

This is a big blow to SunTrust, but Fitch said all the rating will be at investment grade and the outlook remains stable. That means Fitch believes SunTrust has enough reserves and financial resources to take on increasing losses in the short- or mid-term.

Fitch cited the expansive branch operations of the company as the key element shoring up their financial position. Even so, SunTrust may have to raise more capital through issuing more stock in order to pay off the preferred stock in connection to the U.S. Treasury bailing them out.



Article by Gary B

The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com



Tags: commercial real estate loans , fitch ratings , suntrust bank

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