Critical Analysis: Banner (BANR) and SunTrust Banks (NYSE:STI)

Banner (NASDAQ: BANR) and SunTrust Banks (NYSE:STI) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their institutional ownership, profitability, earnings, valuation, risk, dividends and analyst recommendations.

Dividends

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Banner pays an annual dividend of $1.00 per share and has a dividend yield of 1.8%. SunTrust Banks pays an annual dividend of $1.60 per share and has a dividend yield of 2.4%. Banner pays out 54.3% of its earnings in the form of a dividend. SunTrust Banks pays out 35.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. SunTrust Banks has raised its dividend for 5 consecutive years. SunTrust Banks is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk & Volatility

Banner has a beta of 1, indicating that its stock price has a similar volatility profile to the S&P 500.Comparatively, SunTrust Banks has a beta of 1.33, indicating that its stock price is 33% more volatile than the S&P 500.

Institutional & Insider Ownership

92.1% of Banner shares are owned by institutional investors. Comparatively, 83.6% of SunTrust Banks shares are owned by institutional investors. 1.7% of Banner shares are owned by company insiders. Comparatively, 0.5% of SunTrust Banks shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Banner and SunTrust Banks’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Banner 12.02% 7.55% 0.98%
SunTrust Banks 23.35% 9.18% 1.00%

Earnings and Valuation

This table compares Banner and SunTrust Banks’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Banner $505.82 million 3.58 $60.77 million $1.84 30.16
SunTrust Banks $9.74 billion 3.27 $2.27 billion $4.48 15.19

SunTrust Banks has higher revenue and earnings than Banner. SunTrust Banks is trading at a lower price-to-earnings ratio than Banner, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Banner and SunTrust Banks, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Banner 0 4 1 0 2.20
SunTrust Banks 0 14 9 0 2.39

Banner presently has a consensus target price of $58.67, indicating a potential upside of 5.72%. SunTrust Banks has a consensus target price of $68.93, indicating a potential upside of 1.30%. Given Banner’s higher possible upside, equities analysts plainly believe Banner is more favorable than SunTrust Banks.

Summary

SunTrust Banks beats Banner on 12 of the 17 factors compared between the two stocks.

About Banner

Banner Corporation is a bank holding company. The Company is engaged in the business of planning, directing and coordinating the business activities of its subsidiaries, Banner Bank and Islanders Bank. Banner Bank is a Washington-chartered commercial bank. Banner Bank is a regional bank, which offers a range of commercial banking services and financial products to individuals, businesses and public sector entities in its primary market areas. Banner Bank is also an active participant in the secondary market, engaging in mortgage banking operations through the origination and sale of one- to four-family and multi-family residential loans. Islanders Bank is also a Washington-chartered commercial bank. Islanders Bank is a community bank, which offers similar banking services to individuals, businesses and public entities located primarily in the San Juan Islands. The Banks’ primary business is that of traditional banking institutions, accepting deposits and originating loans.

About SunTrust Banks

SunTrust Banks, Inc. is a provider of financial services. The Company’s principal subsidiary is SunTrust Bank (the Bank). The Company’s business segments include Consumer Banking and Private Wealth Management, Wholesale Banking, Mortgage Banking and Corporate Other. As of December 31, 2016, the Consumer Banking and Private Wealth Management segment consisted of three primary businesses: Consumer Banking, Consumer Lending and Private Wealth Management. The Wholesale Banking segment includes the operations of the Corporate and investment banking (CIB), Commercial and Business Banking, Commercial Real Estate, and Treasury and Payment Solutions businesses. The Mortgage Banking segment offers residential mortgage products nationally through its retail and correspondent channels, the Internet (www.suntrust.com) and by telephone. The Bank provides clients with a selection of full-, self- and assisted-service channels, including branch, call center, Teller Connect machines, mobile and tablet.

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