SunTrust Banks, Inc. (STI), State Street Corporation (STT): Two Banks To Buy, One To Hold

Among other highlights in the latest results is the 5.4% year-over-year growth in the bank’s net interest income, as its net interest margin expanded eight bps over the same time period. This is despite an industry-wide net interest rate compression. Further, the bank posted fee-based income of $425 million, which remained relatively flat over the prior year, but down 3.2%, sequentially. This was partially supported by relatively flat non-interest expenses. During the first quarter, the bank’s credit quality improved, while mortgage originations surged. The net charge-offs-to-average-loans ratio fell from 0.82% a year ago to 0.38%, while originations surged 2.5% over the same time period.

Conclusion

While the near-term fundamentals remain challenging, I continue to favor State Street Corporation (NYSE:STT) and KeyCorp (NYSE:KEY). I believe these banks are best positioned to outmaneuver the prevailing, challenging macroeconomic environment. KeyCorp has demonstrated this very well during the first quarter of the current year by expanding its net interest margin and growing its market share in the U.S. mortgage originations arena. On the other hand, State Street Corporation (NYSE:STT) presents excellent long-term positioning, coupled with a healthy capital base. I have a neutral rating for SunTrust Banks, Inc. (NYSE:STI), as it wasn’t even able to increase its mortgage originations.

The article 2 Banks To Buy, 1 To Hold originally appeared on Fool.com and is written by Adnan Khan.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.