SunTrust Banks, Inc. (NYSE:STI) is expected to achieve solid loan growth over the near-term despite its latest settlement with multiple government agencies in connection with its previous mortgage practices, according to analysts at Sterne Agee.
Favorable outlook remains for SunTrust
Sterne Agee analysts Terry McEvoy, Erik Zwick and Austin Nicholas commented that the negative headlines about SunTrust Banks, Inc (NYSE:STI) related to the settlement of its past mortgage practices cannot be overlooked. According to them, the issue does not reflect nor change their favorable fundamental outlook for the company.
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The analysts wrote, “We are looking for a solid loan growth over the near-term with potential above-peer NIM expansion in ’16.” McEvoy, Zwick and Nicholas reiterated their Buy rating for the shares of SunTrust Banks, Inc (NYSE:STI) with a $48 price target.
SunTrust should be held accountable
The analysts emphasized that SunTrust Banks, Inc (NYSE:STI) should be accountable for its past mortgage practices. They emphasized that the costly delays in settling the mortgage problem is “no laughing matter.”
In addition, McEvoy, Zwick and Nicholas noted that some of the comments of the media and politicians regarding SunTrust Banks, Inc (NYSE:STI) went too far. According to them, “We struggle to picture a floorboard actually “buckling” with the weight of unopened mail at a SunTrust office.”
SunTrust settled claims related to HAMP
SunTrust Banks, Inc (NYSE:STI) announced last week that its unit SunTrust Mortgage reached an agreement with the United States Attorney’s Office for the Western District of Virginia to settle the claims related to its administration of the Federal Home Affordable Modification Program (HAMP).
SunTrust Mortgage agreed to provide $179 million (up to a maximum of $274 million) in consumer remediation, $20 million to fund housing counseling for homeowners and $10 million in restitution for the Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC).
SunTrust Banks, Inc (NYSE:STI) said it would record $204 million pre-tax charge in the second quarter of 2014 due to the settlement. The company also announced the completion of the sale of its asset management subsidiary, RidgeWorth Capital.