SunTrust Banks Inc.
After reaching a new 52 week low on Monday, SunTrust jumped 10%
along with all financials on Tuesday but returned to its selling pattern on
Wednesday falling 5%.
for Friedman, Billings, Ramsey & Co spooked investors on Monday reporting
that SunTrust will have to cut its dividend and raise additional capital. The
risk to the bank is the residential construction loans that it holds which are
not doing well and will create default situations soon.
Over 6% of
the banks loan portfolio is residential construction loans in Florida
and the Atlanta
area where the company is headquartered. As recent as June 20th the company
claimed to not need additional funding or a cut in its dividend. But the stock
price continues to decline and their loan portfolio continues to be questioned.
You can go
short SunTrust now that the bank rally has subsided and end the trade before
their earnings are released on July 22nd. If the company does cut
its dividend or has to write down its loan portfolio prior to their earnings,
you could get a nice opportunity to end your short position with a healthy gain.