Goldman Sachs Remains Positive On SunTrust Banks (STI)

Goldman Sachs Group analysts Richard Ramsden, Brian Foran, Daniel Harris and Jessica Binder Graham maintained their Buy rating for shares of SunTrust Banks Inc STI but removed it from their "Conviction List" and replaced it with Northern Trust Corporation NTRS. The analysts wrote that $3.50 of normalized earnings power put SunTrust Banks Inc at just under 8X normalized earnings, which implied a 1.1% ROA and a 10% ROE. The Goldman Sachs Group analysts wrote, "many investors are at under $3 of normalized earnings. We think the key difference is the assumed efficiency ratio as we assume a 57% efficiency ratio on the thesis that STI has become structurally more efficient, while many investors assume STI will go back to its historical 60-65% efficiency ratio. What this misses, in our view, is the 12% reduction in headcount this cycle at the company. See Exhibits 9-10."