SunTrust 2005 Annual Report Download - page 60

SUNTRUST  ANNUAL REPORT58
Forward-looking statements involve inherent risks and uncertain-
ties. Management cautions the readers that a number of important factors
could cause actual results to differ materially from those contained in any
forward-looking statement. Such factors include, but are not limited to, the
following:
• competitive pressures among local, regional, national, and international
banks, thrifts, credit unions and other nonbank financial institutions may
increase significantly;
• changes in the interest rate environment may reduce margins and impact
funding sources;
• general economic or business conditions in the geographic regions and
industries in which SunTrust operates as well as the risk of domestic or
international military or terrorist activities or conflicts, may lead to a
deterioration in credit quality or a reduced demand for credit;
• legislative or regulatory changes, including changes in accounting stan-
dards, may adversely affect the business in which SunTrust is engaged;
• various monetary and fiscal policies and regulations, including those
determined by the Federal Reserve Board, the Federal Deposit Insurance
Corporation and state regulators;
• changes may occur in the securities markets that affect SunTrust’s access
to capital, the value of the Company’s holdings or revenues; and
• competitors of SunTrust may have greater financial resources and develop
products that enable such competitors to compete more successfully
than SunTrust.
Other factors that may cause actual results to differ from the forward-
looking statements include the following:
• the timely development of competitive new products and services by the
Company and the acceptance of such products and services by clients;
• changes in consumer spending and saving habits;
• the effects of competitors’ pricing policies;
• the Company’s success in managing the costs associated with the expan-
sion of existing distribution channels and developing new ones, and in
realizing increased revenues from such distribution channels, including
cross-selling initiatives and electronic commerce-based efforts; and
• the effect of corporate restructurings, mergers, acquisitions and/or dis-
positions and their integration into the Company, the actual restructuring
and other charges related thereto and management’s ability to manage
these and other risks, including achieving the expected revenue growth
and/or expense savings from such corporate restructurings, mergers,
acquisitions, and/or dispositions.
Management of SunTrust believes these forward-looking statements
are reasonable; however, undue reliance should not be placed on such
forward-looking statements, which are based on current expectations.
SunTrust cautions that the foregoing list of important factors is not inclu-
sive. Forward-looking statements are not guarantees of performance. They
involve risks, uncertainties and assumptions. The future results and share-
holder values of SunTrust may differ materially from historical results and
from those expressed in the forward-looking statements contained in this
annual report. Many of the factors that will determine these results and
values are beyond SunTrust’s ability to control or predict. For more infor-
mation on the foregoing risks and uncertainties and additional factors that
could affect the Company’s results please see the “Risk Factors” section in
this report.
RISK FACTORS
BUSINESS RISKS
As a financial services company, adverse changes in general business or
economic conditions could have a material adverse effect on our finan-
cial condition and results of operations.
A sustained weakness or weakening in business and economic condi-
tions generally or specifically in the principal markets in which we do busi-
ness could have one or more of the following adverse impacts on business:
• A decrease in the demand for loans and other products and services
offered by us;
• A decrease in the value of our loans held for sale;
• An increase or decrease in the usage of unfunded commitments; or
• An increase in the number of clients and counterparties who become
delinquent, file for protection under bankruptcy laws or default on their
loans or other obligations to us. An increase in the number of delinquen-
cies, bankruptcies or defaults could result in a higher level of nonper-
forming assets, net charge-offs, provision for loan losses, and valuation
adjustments on loans held for sale.
Our management discusses other business and economic conditions
in more detail elsewhere in this Annual Report.
Changes in market interest rates or capital markets could adversely
affect our revenue and expense, the value of assets and obligations,
costs of capital or liquidity.
Given our business mix, and the fact that most of the assets and lia-
bilities are financial in nature, we tend to be particularly sensitive to market
interest rate movement and the performance of the financial markets. In
addition to the impact on the general economy, changes in interest rates or
in valuations in the debt or equity markets could directly impact us in one or
more of the following ways:
• The value of certain on-balance sheet and off-balance sheet financial
instruments or the value of equity investments that we hold, in particu-
lar, holdings in common stock of The Coca-Cola Company, which as of
December ,  were valued at approximately . billion;
• The yield on earning assets and rates paid on interest bearing liabilities
may change in disproportionate ways.
• The value of assets for which we provide processing services; or
• To the extent we access capital markets to raise funds to support the busi-
ness, such changes could affect the cost of such funds or the ability to
raise such funds.
The fiscal and monetary policies of the federal government and its
agencies could have a material adverse effect on our earnings.
The Federal Reserve regulates the supply of money and credit in the
United States. Its policies determine in large part the cost of funds for lend-
ing and investing and the return earned on those loans and investments,
both of which affect the net interest margin. They also can materially
decrease the value of financial instruments we hold, such as debt securi-
ties and MSRs. Its policies also can adversely affect borrowers, potentially
increasing the risk that they may fail to repay their loans. Changes in Federal
Reserve Board policies are beyond our control and difficult to predict; con-
sequently, the impact of these changes on our activities and results of oper-
ations is difficult to predict.
MANAGEMENT’S DISCUSSION AND ANALYSIS continued