SunTrust 2011 Annual Report Download - page 37
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from our subsidiaries could have a material adverse effect on our liquidity and on our ability to pay dividends on common stock.
Additionally, if our subsidiaries' earnings are not sufficient to make dividend payments to us while maintaining adequate capital
levels, we may not be able to make dividend payments to our common stockholders.
Disruptions in our ability to access global capital markets may adversely affect our capital resources and liquidity.
In managing our consolidated balance sheet, we depend on access to global capital markets to provide us with sufficient capital
resources and liquidity to meet our commitments and business needs, and to accommodate the transaction and cash management
needs of our clients. Other sources of contingent funding available to us includes inter-bank borrowings, repurchase agreements,
FHLB capacity, and borrowings from the Federal Reserve discount window. Any occurrence that may limit our access to the
capital markets, such as a decline in the confidence of debt investors, our depositors or counterparties participating in the capital
markets, or a downgrade of our debt rating, may adversely affect our capital costs and our ability to raise capital and, in turn, our
liquidity.
Any reduction in our credit rating could increase the cost of our funding from the capital markets.
Our issuer ratings are rated investment grade by the major rating agencies. While those ratings were downgraded during 2009 and
2010, there were no changes to our primary credit ratings during 2011. On March 3, 2011, Fitch affirmed our senior long- and
short-term credit ratings at BBB+ and F2, respectively, and upgraded its outlook on our ratings from “Stable” to “Positive”. On
December 6, 2011, S&P affirmed our credit ratings and maintained its outlook on those ratings at “Stable”. Our credit ratings also
remain on “Stable” outlook with Moody's and DBRS. Additional downgrades are possible although not anticipated given the
“Stable” or "Positive" outlook from all four major rating agencies.
The rating agencies regularly evaluate us and their ratings are based on a number of factors, including our financial strength as
well as factors not entirely within our control, including conditions affecting the financial services industry generally. In light of
the difficulties in the financial services industry and the housing and financial markets, there can be no assurance that we will
maintain our current ratings. Our failure to maintain those ratings could adversely affect the cost and other terms upon which we
are able to obtain funding and increase our cost of capital. Credit ratings are one of numerous factors that influence our funding
costs. Among our various retail and wholesale funding sources, credit ratings have a more direct impact only on the cost of
wholesale funding as our primary source of retail funding is bank deposits, most of which are insured by the FDIC. During the
most recent financial market crisis and economic recession, our senior debt credit spread to the matched maturity 5-year swap rate
widened before we received any credit ratings downgrades in 2009 and began to tighten before we received our most recent credit
rating downgrade in November 2010. After the loss of our A-1 short-term credit rating in April 2009 and capital raise in May and
June 2009, more recent credit rating downgrades had little or no detrimental impact to our debt credit spreads. We expect that a
one notch downgrade would have a relatively small impact on our debt credit spreads.
We have in the past and may in the future pursue acquisitions, which could affect costs and from which we may not be
able to realize anticipated benefits.
We have historically pursued an acquisition strategy, and may continue to seek additional acquisition opportunities. We may not
be able to successfully identify suitable candidates, negotiate appropriate acquisition terms, complete proposed acquisitions,
successfully integrate acquired businesses into the existing operations, or expand into new markets. Once integrated, acquired
operations may not achieve levels of revenues, profitability, or productivity comparable with those achieved by our existing
operations, or otherwise perform as expected.
Acquisitions involve numerous risks, including difficulties in the integration of the operations, technologies, services and products
of the acquired companies, and the diversion of management's attention from other business concerns. We may not properly
ascertain all such risks prior to an acquisition or prior to such a risk impacting us while integrating an acquired company. As a
result, difficulties encountered with acquisitions could have a material adverse effect on our business, financial condition, and
results of operations.
Furthermore, we must generally receive federal regulatory approval before we can acquire a bank or bank holding company. In
determining whether to approve a proposed bank acquisition, federal bank regulators will consider, among other factors, the effect
of the acquisition on competition, financial condition, future prospects, including current and projected capital levels, the
competence, experience, and integrity of management, compliance with laws and regulations, the convenience and needs of the
communities to be served, including the acquiring institution's record of compliance under the CRA, and the effectiveness of the
acquiring institution in combating money laundering activities. In addition, we cannot be certain when or if, or on what terms and
conditions, any required regulatory approvals will be granted. Consequently, we might be required to sell portions of the acquired
institution as a condition to receiving regulatory approval or we may not obtain regulatory approval for a proposed acquisition on
acceptable terms or at all, in which case we would not be able to complete the acquisition despite the time and expenses invested
in pursuing it.