SunTrust Banks Inc., a perennial bystander in southeastern banking consolidation, may be preparing to join the fray.
The Atlanta company is taking steps to boost the number of shares it can issue, a move that analysts said could set the stage for acquisitions.
SunTrust originally wanted the ability to issue up to one billion shares but scaled back the request to 500 million after taking heat from institutional shareholders who saw too much potential dilution.
The plan, disclosed this week in a filing with the Securities and Exchange Commission, is subject to approval by shareholders. The move came as banks in the Southeast are merging at a rapid clip and SunTrust, with $58 billion of assets, may be feeling pressure to grow or sell out, analysts said.
"Acquisitions are going on all around SunTrust and include the possibility they may be acquired," said John J. Mason at regional brokerage Interstate/Johnson Lane, Atlanta. Rather than concede, the banking company "may want to do something itself," Mr. Mason said.
SunTrust is keeping its plans close to the vest. It said in its regulatory filing that the shares could be used for acquisitions, a stock split, or a stock dividend. "Nothing is imminent," a spokesman for the bank said.
But some industry watchers are betting on expansion. "The first thing that comes to mind is acquisitions," said Michael Mayo, banking analyst at Credit Suisse First Boston.
Indeed, the heat was turned up last week when Montgomery, Ala.-based Regions Financial Corp. announced plans to expand from Alabama and Florida into Arkansas and Tennessee by purchasing First Commercial Corp., Little Rock, Ark.
A move by SunTrust would be in keeping with the higher profile the company is expected to take after March 21, when president L. William Humann takes over as chairman and chief executive officer.
"You have to consider what strategies or changes will be made as the result of the new chief executive," Mr. Mayo said.
Mr. Humann, 52, is succeeding James B. Williams, whose four decades at SunTrust were marked by solid but extremely conservative expansion. SunTrust's last bank purchase was in 1986, while NationsBank Corp., First Union Corp., and others in the Southeast have steadily used purchases as platforms for rapid growth.
SunTrust now operates 699 branches mainly in Florida, Georgia, and Tennessee.
Analysts said the company could pursue an often rumored merger of equals with Wachovia Corp., a regional rival based in Winston-Salem, N.C., or look northward and pursue deals with Crestar Financial, Richmond, Va., or Summit Bancorp, Princeton, N.J.
R. Harold Schroeder of Keefe, Bruyette & Woods Inc. declined to name a potential merger partner but said: "If you go by the argument that bigger is better, it would be an issue that SunTrust has to look into."
SunTrust's SEC filing-a preliminary proxy required in advance of the bank's annual meeting-disclosed that the company's board on Feb. 10 authorized a request to issue up to one billion shares.
In subsequent discussions with large shareholders and SunTrust's proxy agent, "we felt 500 million would be easier to approve," the spokesman said.
So far, SunTrust has issued 210 million of the 350 million it is already authorized to offer.
Early next month it plans to file a final proxy that contains an amended request for 500 million shares in total, the spokesman said. Shareholders will consider the proposal at SunTrust's annual meeting on April 21.
The possibility of using the additional shares for a stock split is plausible, said Mr. Schroeder of Keefe, Bruyette & Woods. But in addition, he said, "why not, given the time and expense involved," stockpile shares for a possible acquisition.
