UPDATE: Bank of America Upgrades SunTrust Banks

In a report published Thursday, Bank of America Merrill Lynch analyst Erika Najarian upgraded SunTrust Banks (NYSE: STI) to Neutral from Underperform, raising its price objective to $38.00. According to the report, the stock is expected to trade in line with group following 9pp in underperformance relative to its large-cap regional peers last year on the back of slowing mortgage refi activity. A positive stance on bank stocks heading into '14 is held by the analysts. For STI, consensus estimates have likely bottomed out with mortgage related revenue decline well understood by investors and largely reflected in street EPS estimates.“Further, STI has demonstrated conservative expense controls in the face of top-line pressure, and believe that positive 2014 guidance on both revenue and expense opportunities could serve as a potential catalyst for upward estimate revisions. Lastly, we expect increasing capital payout following the 2014 CCAR results (March), to be viewed positively by investors that are looking for stronger capital return here. We are raising our ‘14 EPS estimate to $2.95 (from $2.88) and ‘15 estimate to $3.20 (from $3.15) primarily on lower provisioning expenses due to improving credit trends. Our 4Q13 EPS estimate of $0.70 remains unchanged.”Some macro risks to the price objective include double-dip recession, the implementation of a strict liquidity coverage ratio and further regulation on overdraft income that restricts bank profitability. STI closed Wednesday at $37.27.