ATLANTA - SunTrust Banks Inc., where James B. "Jimmy" Williams is chairman and CEO, had its best year ever in 1994, with return on assets reaching 1.33% for the first nine months and return on equity 17.64%.

Even as bank stocks get hammered in today's environment of rising interest rates, SunTrust's fortress balance sheet and stellar credit quality allow it to keep its 162% market-to-book valuation, one of the best in the industry.

"I just feel so good about this place right now," Mr. Williams said with characteristic enthusiasm during a recent interview with the American Banker.

But Mr. Williams is not going to be lulled into complacency. Trust revenues at SunTrust, which has $42 billion in assets, flattened out in 1994 for the first time in many years. Clearly concerned, Mr. Williams vows to get that traditional engine of profitability back up to speed.

He also confirms he would at least consider another "merger of equals" of the type that created SunTrust in 1985, when Trust Co. Bank of Atlanta hitched up with Sun Banks Inc., Orlando.

Does that suggest a union with Wachovia Corp., the "dream merger" much touted by Wall Street? Mr. Williams won't discuss specific combinations.

Another subject on which he declines to speak is his plan for succession. Mr. Williams, now 61, is scheduled to retire in four years. Most outsiders assume that SunTrust president L. Phillip Humann, 49, is the heir apparent. But Mr. Williams says it's too early to speculate.

One thing is for sure: As long as the gentlemanly but relentlessly focused Mr. Williams is in command, SunTrust is going to stay the course as one of America's most conservatively run banks. As he puts it, "We're just not going to have a disaster."

Q.: What's your outlook on 1995?

WILLIAMS: We're seeing lending practices that we're not going to take part in. And that finally leads to bad loans.

I think the thing we worry about the most is our fee income growth. It's just not growing like we want it to, and I think we can do something about it by putting our shoulder to the wheel and having our folks work a little harder.

We're pretty new at not doing well in fee income. I think what has happened is, we did so well for so long that we thought it was easier than it was.

Q.: Is the main problem in your corporate trust area?

WILLIAMS: I'd say that's right. On the personal trust side, we're still doing mighty well. I'd say we're the dominant bank in each of our three states in personal trust.

Q.: But your corporate money managers are having problems?

WILLIAMS: Well, certain styles get in and out of fashion, and that just causes money to move about. Some years we're the beneficiary of it, and some years we're not. We don't see any of that money, that I know about, moving to the other banks. It moves to other investment houses.

Q.: Is Tony Gray, chairman and chief investment officer of SunBank Capital Management, the cause of the problem?

WILLIAMS: Tony is still pretty good at what he does. His style is just out of fashion right now. He's a growth investor; our value investing guys are doing well. But Tony will be all right.

We've got great confidence in that part of our business. It is making us a lot of money, and we think it's going to continue to make us a lot of money.

One thing you probably don't see is that our inflow of money is pretty good, compared to other banks.

Q.: Several banks will take big securities losses in the fourth quarter because of rising interest rates. Could that happen at SunTrust?

WILLIAMS: We don't have to do that. We'd like to make more on our bond account, but we keep it short, and we will make more on it pretty soon. We'll just let our maturities roll off and invest at higher rates.

We try to balance ourselves to where we don't have to take a hit. People that own our stock, we think, don't want us to do that sort of thing. And we don't want to do that sort of thing. It's not our game.

Investors always ask me: When's the next disaster coming in banking? Because there's always been one. And we try to say to them: We're just not going to have a disaster.

We try to run this thing so that if the economy gets worse, we'll get worse - but it's not a disaster. If the economy gets better, we get better.

By trying to keep ourselves solid and strong, it seems like opportunities always come along. At some point, the moon and the stars line up right and you do a deal. And we just want to be in position, when that happens, to be able to take advantage of that opportunity.

Q.: What sort of deal would you look at?

WILLIAMS: Whatever the thing is, it's got to be priced right. The way we do our arithmetic, the only deals we can find are where the other guy's shareholders come out and our shareholders don't. We're going to make sure our shareholders come out on the top end rather than the other fellow's shareholders.

The kind of deal we'd have to make, I think, would be a situation where the other shareholders said, "I've got a good thing and you've got a good thing. Together, we'll have a better thing. We won't get a premium over what we're selling for now. But together, our stock will go up, and we'll make a lot of money."

We don't find that mentality out there. Our problem is, we talk to managements, not to stockholders.

If we can't find anything that we think is of high quality, that's priced right, we've got one deal in mind - and that's us. We have this stock buyback program, announced in the fourth quarter of 1993, because we couldn't find anything of quality.

Q.: It's become common now for banks to buy other financial service companies as well as other banks. Have you looked at those?

WILLIAMS: Yeah, we sure have. In fact, if we could expand our trust and investment business, that would have as much appeal to us as expanding the banking business. We make a lot of our money in those areas. But we haven't found a deal we could tolerate.

In fact, it would amaze you the number of deals that we look at. But we can't find anything that's not disturbingly dilutive.

Q.: Did you look at Dreyfus Corp. or Lieber & Co., the two mutual fund companies recently bought by other banks?

WILLIAMS: We didn't look at those.

Q.: Similar ones?

WILLIAMS: Not that big. We wouldn't want to burden ourselves with that much goodwill. Dreyfus would be like us looking at the Bank of England or something.

Q.: One "dream merger" often touted by analysts would be a union of SunTrust and Wachovia Corp. Any interest in that?

WILLIAMS: Well, I won't talk about that one specifically. But that would be in the category of "merger of equals." And that's what we did with Sun Banks Inc. in 1985. And we would be receptive to that sort of thing.

We'd also be receptive to doing an outright acquisition - but again, at the right price.

Q.: Don't you have to give up some control in a merger of equals?

WILLIAMS: But you'd have good people helping you. We have good people helping us now.

Look at us and Sun Banks. Sun was twice our size at Trust Co. But we made twice as much money. We started out wanting more, and they started out wanting more. So we split the board. And it's been absolutely a pleasure. The old Trust Co. crowd hasn't had anything but help and support from the old Sun Banks crowd.

I hope that in two years or so, we're selling at 15 times earnings and everybody else is selling at nine times earnings. Then we'll talk about some deals. Our multiple is now a little higher, but it's not high enough.

Q.: Doesn't your stock buyback program prevent you from doing a large pooling-of-interests acquisition for a certain period?

WILLIAMS: We're not going to be tainted out of doing a deal very long. That's the way we look at it.

What we did before we entered into the buyback was to look at our opportunities. So we're not at risk immediately, because there's no immediate opportunity.

Now, let's say the deal was so good that we just couldn't stand it. We could go issue those shares back out and do the deal.

Q.: I understand you've hired some consultants recently. What are they helping you with?

WILLIAMS: Yeah, we spend too much money on consultants. We've had consultants about everywhere. In fact, if we quit paying consultants, we'd have a banner year. We use McKinsey & Co. a lot. We've got good results from them.

It's really pointed toward fee income. We're good at expense control, so we're trying to look at some new revenue ideas, like maybe expanding the mutual funds business. But we're exploring it. It's not a big thing. It won't change us much.

Q.: When will this be completed?

WILLIAMS: It's a short, five-month project, and it's about to wind down.

Q.: SunTrust has never been a big national player in credit cards. Why not?

WILLIAMS: We might have been. We've charged a lot for our card, and it's hard to get volume. Others are offering cheaper cards. And we've shied away from the mass mailings, because we've tried to keep our cardholders in our market. So when your competition is targeting the national market with a cheaper card, it's just hard to grow.

I wish our outstandings were higher. But I wouldn't want to get them there those two ways, through price and mass mailings.

We've held our outstandings about level to down some. I guess we're increasing a little bit now. We've still got $650 million of outstandings in the credit card, and it's a good profit item for us.

Q.: Do you worry you might have missed an opportunity?

WILLIAMS: You just don't know. We will, if five years from now these other folks haven't had any losses. We think we did the right thing. We just don't know.

Again, look at the banks that are big in it - look at their earnings and look at our earnings. Our approach is just consistent with our approach, which seems to have proven itself.

It's easy when times are this good. I mean, everything works.

Q.: You've been CEO since 1990. Are you satisfied with how you've done?

WILLIAMS: I sometimes think about us that we just can't be as good as we think we are. But I just don't see the problem right now. We're in the right part of the country.

Now, we've got these doggone interest rates. We've got to worry about keeping our spreads while there's some reckless lending going on out there, we think. So there's something out there to worry about.

But I just feel so good about this place right now. I'd say I see it as being the soundest I've ever seen it. We had some bad years out there in Tennessee, and we're recovering from that. But even if you net out recoveries, our chargeoffs are back like they were in the old Trust Co. days.

Q.: Didn't you miss some deals, like Miami-based Southeast Banking Corp., by a hair?

WILLIAMS: We don't miss them by a hair. We miss them by a lot. Maybe we would have bid $100 million more for Southeast Banking Corp. - and missed it by just $100 million.

I guess my regret is that we haven't had the multiple differential in the market to allow us to be more active. But we put that shareholder first, and we're going to keep doing that.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.