Critical Analysis: PacWest Bancorp (PACW) & SunTrust Banks (STI)

PacWest Bancorp (NASDAQ: PACW) and SunTrust Banks (NYSE:STI) are both finance companies, but which is the better business? We will contrast the two companies based on the strength of their institutional ownership, profitability, valuation, analyst recommendations, dividends, earnings and risk.

Earnings & Valuation

This table compares PacWest Bancorp and SunTrust Banks’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
PacWest Bancorp $1.18 billion 5.25 $357.81 million $2.92 16.96
SunTrust Banks $9.74 billion 3.18 $2.27 billion $4.04 16.48

SunTrust Banks has higher revenue and earnings than PacWest Bancorp. SunTrust Banks is trading at a lower price-to-earnings ratio than PacWest Bancorp, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares PacWest Bancorp and SunTrust Banks’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PacWest Bancorp 32.53% 8.34% 1.69%
SunTrust Banks 24.92% 10.05% 1.09%

Dividends

PacWest Bancorp pays an annual dividend of $2.40 per share and has a dividend yield of 4.8%. SunTrust Banks pays an annual dividend of $1.60 per share and has a dividend yield of 2.4%. PacWest Bancorp pays out 82.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. SunTrust Banks pays out 39.6% of its earnings in the form of a dividend. SunTrust Banks has increased its dividend for 5 consecutive years.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for PacWest Bancorp and SunTrust Banks, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PacWest Bancorp 0 4 5 2 2.82
SunTrust Banks 0 14 13 0 2.48

PacWest Bancorp presently has a consensus price target of $55.70, suggesting a potential upside of 12.50%. SunTrust Banks has a consensus price target of $70.27, suggesting a potential upside of 5.55%. Given PacWest Bancorp’s stronger consensus rating and higher possible upside, equities analysts clearly believe PacWest Bancorp is more favorable than SunTrust Banks.

Insider and Institutional Ownership

86.4% of PacWest Bancorp shares are owned by institutional investors. Comparatively, 83.6% of SunTrust Banks shares are owned by institutional investors. 1.0% of PacWest Bancorp shares are owned by insiders. Comparatively, 0.5% of SunTrust Banks shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Volatility & Risk

PacWest Bancorp has a beta of 1.52, indicating that its share price is 52% more volatile than the S&P 500. Comparatively, SunTrust Banks has a beta of 1.31, indicating that its share price is 31% more volatile than the S&P 500.

Summary

PacWest Bancorp beats SunTrust Banks on 11 of the 18 factors compared between the two stocks.

About PacWest Bancorp

PacWest Bancorp operates as the holding company for Pacific Western Bank, a state chartered bank that provides commercial banking products and services. The company accepts demand, money market, and time deposits. It also provides real estate loans to professional developers and real estate investors for the acquisition, refinancing, and construction of commercial real estate properties; small business administration loans; asset-based loans for working capital needs; venture capital loans to support the start-up operations of entrepreneurial companies; and equipment-secured loans and leases. In addition, the company offers consumer loans comprising personal loans, auto loans, home equity lines of credit, revolving lines of credit, and other loans. Further, it provides international banking and multi-state deposit services; money market sweep products; investment advisory and asset management services; treasury and cash management services; telephone banking, and online and mobile banking services; and foreign exchange and ATM services. The company offers its products and services to small and mid-sized companies, entrepreneurial businesses and their venture capital, private equity investors, professionals, and other individuals. As of February 1, 2018, it had 76 full-service branches located throughout the state of California; and one branch in Durham, North Carolina. The company was formerly known as First Community Bancorp and changed its name to PacWest Bancorp in April 2008. PacWest Bancorp was founded in 1999 and is headquartered in Beverly Hills, California.

About SunTrust Banks

SunTrust Banks, Inc. operates as the holding company for SunTrust Bank that provides various financial services for consumers, businesses, corporations, and institutions in the United States. It operates through two segments, Consumer and Wholesale. The Consumer segment provides deposits and payments; home equity and personal credit lines; auto, student, and other lending products; credit cards; discount/online and full-service brokerage products; professional investment advisory products and services; and trust services, as well as family office solutions. This segment also offers residential mortgage products in the secondary market. The Wholesale segment provides capital markets solutions, including advisory, capital raising, and financial risk management, as well as lease financing solutions; cash management services and auto dealer financing solutions; and construction, mini-perm, and permanent real estate financing, as well as tailored financing and equity investment solutions. This segment also offers treasury and payment solutions, such as operating various electronic and paper payment types, which comprise card, wire transfer, automated clearing house, check, and cash; and provides services clients to manage their accounts online. The company offers its products and services through a network of traditional and in-store branches, automated teller machines, Internet, mobile, and telephone banking channels. As of December 31, 2017, it operated 1,268 full-service banking offices located in Florida, Georgia, Virginia, North Carolina, Tennessee, Maryland, South Carolina, and the District of Columbia. SunTrust Banks, Inc. was founded in 1891 and is headquartered in Atlanta, Georgia.

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