Morgan Stanley Comments On SunTrust Following TARP Exit, Raises PT To $33

Morgan Stanley increases its PT $2 to $33 as SunTrust STI exited TARP with lower capital raise than expected. TARP repayment and strong Basel 3 CT1 of 9.1% sets the stage for capital deployment in 2H11. Morgan Stanley expects a dividend hike from 1c to 8c in 3q11 to 20% payout ratio. It forecast buybacks to start in 4Q11. Buybacks are Morgan Stanley's placeholder for acquisitions which it does not explicitly forecast. STI expect to redeploy the capital to support organic growth, return to normalized dividend policy, repurchase stock and opportunistic strategic acquisitions. STI announced that it received approval to repay TARP. In conjunction with repayment, STI announced a $1 bil equity raise (21% of TARP) and a $1 bil debt issuance. Management guidance on 1Q11 earnings remained unchanged. STI closed Friday at $29.59