ATLANTA -- Although trading at a robust premium, shares of Sun Trust Banks Inc. are still undervalued, analysts said.

The shares trade at just under two times book value, compared with an average of 167% of book value for SunTrust's southeastern peers.

But even at this lofty level, analysts say investors have failed to give full credit to "hidden jewels" in the Atlanta company's crown: unrealized securities gains, including about 24 million shares of Coca-Cola Co. common stock.

SunTrust is unlikely to sell the Coca-Cola stock.

Analysts also say that investors do not fully appreciate SunTrust's growing trust income and its management's caution in acquisitions.

Coca-Cola Riches

"The stock is undervalued and has been so for some time," said Richard I. Stillinger, analyst with Keefe, Bruyette & Woods Inc.

Mr. Stillinger and other analysts focus on SunTrust's Coca-Cola shares, worth $986.3 million at the end of the first quarter, according to SunTrust.

The bank said that if the gains on the Coke stock were realized in the first quarter, it would have added $7.77 to SunTrust's book value of $20.26 a share.

SunTrust began accumulating this treasure trove after underwriting Coke's first public offering in 1919.

Carried at Original Cost

It is no secret that SunTrust owns this stock. SunTrust assigns a market value to the shares every quarterly report, though the stock is carried on the books at the original cost of $110,000.

To be sure, SunTrust is unlikely to sell the stock. "That being the case, some investors are probably inclined to look at that Coke stock as a hidden value that's sort of nice but not likely to be realized in the near future," Mr. Stillinger said.

SunTrust's securities holdings extend beyond the Coke stock. Like other banks in the past few years, it has accumulated a large portfolio of bonds.

Held for 'Future Earnings'

But unlike the many banks that reaped one-time gains by selling the bonds in the first quarter, SunTrust retains the bonds and the $211 million in gains generated by the portfolio.

John W. Spiegel, chief financial officer at SunTrust, said company policy is to hold securities to their full term rather than cash them for short-term gain. "They represent future earnings," he said.

Susan R. Leadem, an analyst at Atlanta-based Robinson-Humphrey Co., calculates that if the gains on the bond portfolio had been booked in the first quarter, they would have added another $1.05 a share to SunTrust's book value.

The addition of the gains on the Coke stock and other securities would have increased SunTrust's book value to $29.08 and lowered the ratio of the share price to book value to 136%, according to Ms. Leadem.

She added, however, that other southeastern banks also have large unrealized securities gains. While the securities portfolio provides untapped strength for SunTrust, trust income is a more quantifiable asset for the company, consistently providing one-third of noninterest income.

SunTrust operates the Southeast's second-largest trust banking operation. In the first quarter, trust revenues were up 19% to $55.7 million from the year-ago quarter.

Lowball Bidder

SunTrust also draws raves from analysts for its unwillingness to overpay for acquisitions, reflected in its recent lowball bids for Southeast Banking Corp. of Miami and First Florida Banks Inc. of Tampa.

First Union Corp., Charlotte, N.C., won Southeast Banking, while First Florida recently accepted an acquisition offer from Barnett Banks Inc., Jacksonville, Fla.

SunTrust deserves a higher premium because of the absence of risk that it will pay too much to buy another bank, Ms. Leadem said.

"While they are, to some degree, criticized for not doing anything, the flip side of that is that when they do make an acquisition, it will be a smart deal and a well-priced deal," she said.

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