Morgan Stanley Sees Guidance on SunTrust Banks as Conservative

In a report published Thursday, Morgan Stanley analyst Betsy L. Graseck reiterated an Equal-Weight rating and $40.00 price target on

. In the report, Morgan Stanley noted, “STI guided to swap income of $102mn in 2015, lower than our prior estimate of $279. STI's guidance implies a 72% y/y decline in swap income in 2015 vs. our prior estimate for a 24% decline. This decline is largely due to swaps rolling off late 2014 / early 2015. STI's guidance is conservative, in that this guidance assumes short-term rates rise early in 2015, vs. our expectations for a rise in late 2015. As a result, we bake in marginally higher 2015 swap income of $120mn (vs. STI's $102mn guidance). We also bake in some additional expense management as STI continues to tackle expenses to reach its long-term sub-60% tangible efficiency ratio target. Overall, we take 2015 EPS down from $3.42 to $3.24 as a result of this announcement.” SunTrust Banks closed on Wednesday at $37.13.