While investors are flocking to SunTrust Banks Inc.'s bonds, the company's capital ratio took a largely unnoticed hit in the third quarter.

A decline in the value of SunTrust's investment in Coca-Cola Co's. stock has shaved roughly $900 million from the bank's capital, market experts estimated.

SunTrust has been an investor in Coca-Cola since 1919, when the beverage was marketed as a "new brain tonic and intellectual soda fountain beverage." The Atlanta banking company took Coca-Cola public that year.

But Coca-Cola shares have fallen 23.2% from a high of $87.9375 on July 14. That steep decline has translated into a hard hit for SunTrust's total capital ratio, a key measure of its financial strength.

Though SunTrust's equity-to-assets ratio fell to 8.6% in the third quarter from 9.6% on June 30, the bank remains well-capitalized.

Effective Sept. 1, banking companies were allowed to count up to 45% of pretax net unrealized gains on available-for-sale securities as Tier 2 capital.

The shortfall shows up on the balance sheet where unrealized gains in the third quarter dropped to $4.2 billion from $2.9 billion in the second quarter. On an aftertax basis, analysts estimated that the decline comes to approximately $900 million.

"That change," said one analyst, "does not flow into the income statement."

However, "people are saying that SunTrust had an excellent third quarter, but $900 million is nothing to make light of," said one bond expert. "If this had been a securities firm, there would have been headlines everywhere and analysts would have been threatening downgrades."

But that hasn't happened. Investors have rushed into both SunTrust's bonds and equities as the market has taken a beating. On Thursday, Friedman Billings Ramsey Inc. reiterated its "buy" rating on SunTrust.

Bond analysts acknowledged that investors should monitor the slide in Coca-Cola's stock and its impact on SunTrust's total capital ratio, but said that overall SunTrust is a strong company.

Investors are drawn to SunTrust's "excellent asset quality which has been a hallmark of the company," said bank bond analyst Mary Quinn of BankAmerica's Montgomery Securities. They "are also looking for banks that do not have exposures to foreign markets or hedge funds. SunTrust clearly has avoided those pitfalls."

Ms. Quinn added that she was "surprised by at the extent of the margin erosion and stalling of revenue growth" in the third quarter. But "there is no question that it is a well-capitalized institution," she said.

Bank bond analyst John Otis at Bear, Stearns & Co. agreed that investors view SunTrust "as a safe haven" at a time when there is international turmoil.

It is a safe haven, but not necessarily the safest, said Mr. Otis.

"There are some other companies that offer a little better yield without the issue of a big merger or declining equity ratios," he said.

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