SunTrust Banks, Inc. announces the framework of its plan to address the conclusions of the federal government’s recently released Supervisory Capital Assessment Program (SCAP).
While it was determined that SunTrust is currently well-capitalized, and projected to remain so under the Treasury’s more adverse-than-expected (“More Adverse”) economic scenario, in order to meet newly adopted regulatory requirements, the Company plans to adjust the composition of its overall Tier 1 capital resources to increase the common equity portion by USD2.2 billion (“Common Buffer”).
In accordance with the process outlined by the Federal Government, SunTrust will submit a formal capital plan (“Capital Plan”) by 8 June 2009, and it expects to complete the actions contemplated by the Capital Plan by 9 November 2009. While not finalized or formally approved, the main components of the Capital Plan are as follows:
Common Stock Offering: SunTrust will sell up to USD1.25 billion of common stock from time to time through an “at-the-market” offering. Morgan Stanley is acting as the Company’s sales agent for the offering.
Internal Actions: SunTrust has several opportunities to generate additional common equity, including through the sale of selected securities and other asset dispositions. At this time, these actions are expected to generate approximately USD300 million of Tier 1 common equity. The Company is analyzing additional actions that may increase the amount of internally generated capital.
Other Steps: In addition, SunTrust has over USD3.3 billion of preferred and hybrid securities outstanding, and it may pursue private and/or public transactions to exchange certain of these Tier 1 securities for common stock.
In addition to its Capital Plan, SunTrust said it intends to reduce its quarterly dividend to USD0.01 from USD0.10 per share, effective as of September 2009.
“We are fortunate to have many ways to address the Common Buffer required under the government’s More Adverse scenario,” says James M. Wells III, chairman and chief executive officer, SunTrust. “We will be prudent and proactive in evaluating and executing aspects of the plan prior to 9 November deadline. We also believe that these actions will enhance our ability to be in a position to repay TARP at the appropriate time and to actively pursue the opportunities that will come with a resumption of economic growth.”
L.D.