Citigroup Inc. initiated coverage of SunTrust Banks Inc. of Atlanta with a "sell" rating Monday, telling clients the $177 billion-asset company has "little cushion" to maintain its dividend should credit conditions worsen.
Greg Ketron, a Citi analyst who until a year ago headed SunTrust's investor relations, wrote that its earnings are unlikely to justify its dividend levels until late 2009. SunTrust chairman and CEO James Wells 3rd recently conceded its dividend was "high" next to earnings.
Mr. Ketron said SunTrust considers cutting the dividend "last on its list of capital levers" behind selling preferred stock, managing expenses tighter, and selling noncore business units. His note provided no further details and he did not return a call for comment.
He raised his rating on BB&T Corp. of Winston-Salem, N.C., to "buy," from "hold," saying the company's credit quality is outpacing other Southeast regionals.