SunTrust 2014 Annual Report Download - page 9
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2. Enhance Returns by Optimizing Balance Sheet and Business Mix
Over the past several years we have been focused on diversifying our balance sheet and reducing our
concentration of residential real estate loans. This component of the strategy is largely complete, as
residential-related loans have declined from 50% of our portfolio in 2007 to 29% at the end of 2014.
We grew our commercial and consumer loan exposure over the same time frame, and in 2014 average
performing commercial and consumer loans grew 14% and 8%, respectively.
Going forward, the balance sheet optimization strategy will focus on enhancing returns more so than
materially changing the business mix. Our balance sheet is an important resource, and we need to ensure
that we use it effectively. We evaluate our returns on capital in the context of the entire client relationship,
which includes deposits and fee income in addition to lending, and when we are unable to meet our
internal hurdles, we explore balance sheet management alternatives. Accordingly, we sold over $4 billion
of lower-return loans in 2014.
Our progress on this strategic initiative has resulted in a much more diversified company, with better growth
opportunities and improved access to new markets and clients. Additionally, the enhanced diversity of our
balance sheet should aid in reducing the volatility of our financial performance in the future.
3. Improve Efficiency
Streamlining the way we do business not only allows us to increase
profitability, but also improves the effectiveness of how we serve our
clients and our communities.
Since setting our long-term tangible efficiency ratio
target of sub-60%, we have made significant
progress – improving this ratio on an
adjusted basis from 72% in 2011 to
63% in 2014. To date, the entire
improvement has been driven
by rigorous expense discipline,
evidenced by the 16% reduction
in our adjusted expense base
since 2011. In 2014, our expense
reduction efforts were focused on
right-sizing our mortgage business,
optimizing our delivery model and
streamlining our operations.
In Mortgage Banking, we exceeded
our initial $200 million savings goal by
acting decisively against the backdrop of
a lower origination environment. Additionally,
we continued to proactively reduce our
nonperforming loans and delinquent servicing
portfolio balances. We also streamlined our go-to-market
model by consolidating our retail and consumer direct channels
and discontinuing our broker channel.
2014 Annual Report
7