Welcome to the SunTrust’s Fourth Quarter 2015 Earnings Conference Call. [Operator Instructions] This call is being recorded. If you have any objections, you may disconnect at this point. Now, I will turn the call over to Ankur Vyas, Director of Investor Relations. Thank you. You may now begin.

Good morning and welcome to SunTrust’s fourth quarter 2015 earnings conference call. Thank you for joining us. In addition to today’s press release, we have also provided a presentation that covers the topics we plan to address during our call. The press release, presentation and detailed financial schedules can be accessed at investors.suntrust.com. With me today among other members of our executive management team are Bill Rogers, our Chairman and Chief Executive Officer and Aleem Gillani, our Chief Financial Officer. Before we get started, I need to remind you that our comments today may include forward-looking statements. These statements are subject to risks and uncertainty and actual results could differ materially. We list the factors that might cause actual results to differ materially in our SEC filings, which are available on our website. During the call, we will discuss non-GAAP financial measures when talking about the company’s performance. You can find the reconciliation of these measures to GAAP financial measures in our press release and on our website, investors.suntrust.com. Finally, SunTrust is not responsible for and does not edit nor guarantee the accuracy of our earnings teleconference transcripts provided by third-parties. The only authorized live and archived webcasts are located on our website. With that, I will now turn the call over to Bill.

Thanks, Ankur and good morning everybody. I will begin with a brief overview of the quarter and then turn over to Aleem for additional details, including our results at the business segment level. I will conclude with the review of our performance in 2015 as a whole in addition to providing some forward-looking perspectives. We delivered solid results this quarter, which is a direct result of the focus we have maintained on executing our primary strategies of optimizing our business mix and balance sheet, investing in growth opportunities, improving efficiency and increasing capital return to shareholders. For the fourth quarter, we reported $0.91 of earnings per share, which included $0.03 of discrete tax benefits. When adjusting for non-core items, earnings per share were stable compared with the prior quarter and prior year. Continued improvement in net interest income this quarter was offset by a decline in non-interest income as a result of challenging market conditions in addition to normal quarterly variability. Capital markets related income was in line with the prior quarter as the slowdown in fixed income markets was offset by higher equity origination fees and trading income, the latter, which was a result of increased client-driven interest rate hedging activities. Overall, we are successfully deepening client relationships within our wholesale banking platform and benefiting from our diverse business mix and breadth of capabilities. We achieved our goal of attaining the sub 63% efficiency ratio and ended the year with an adjusted tangible efficiency ratio of 62.7%, 24 basis points better than 2014. Looking ahead, we remain focused on achieving our long-term goal of the being sub-60% and we will continue to diligently manage expenses while also investing in strategic revenue-generating initiatives throughout the company. We continue to see the benefits of our active balance sheet management and optimization…

Thanks, Bill. Good morning, everybody. Thank you for joining us this morning. Before I jump into the details, I would like to call your attention to a new table we are presenting on Slide 4, which highlights key metrics over the past five quarters and will help you analyze our financial performance in an efficient manner. As it is year end, we have added this slide to the main presentation and going forward, you will find this in the appendix. Moving to Slide 5, you can see the net interest margin improved by 4 basis points driven by higher security deals as a result of slower prepayment speeds, further low cost deposit growth and lower long-term debt as we received a full quarter benefit of the $1.7 billion debt reduction in the third quarter. Net interest income increased $34 million sequentially driven by solid 2% loan and deposit growth and the 4 basis point improvement in NIM. As a result of our activity balance sheet management efforts, overall net interest income has been grinding higher since the first quarter, which we had anticipated would be the trough. For the full year, net interest income declined at 2% entirely due to a decline in commercial loan swap income as a result of lower fixed rates. In 2016, commercial loan swap income will decline modestly relative to 2015 largely due to an anticipated increase in LIBOR, which would be more than offset by higher net interest income from the core asset sensitivity of the balance sheet. Looking ahead, we expect first quarter net interest margin to improve further 3 to 5 basis points relative to the fourth quarter. From there, NIM will likely be relatively stable for the remainder of 2016 assuming we only get one additional increase in the federal funds…

Great. Thanks Aleem. So coming into last year, we have several key objectives; continue to improve efficiency, further optimize the balance sheet in order to enhance returns, invest in growth opportunities and increase capital return. Overall, I am pleased with our performance in 2015 as we met each of these objectives. We grew earnings per share by a solid 11%, we met our efficiency ratio goal, we increased ROA by 5 basis points and advanced the revenue growth trajectory of many businesses, all in the context of managing the headwinds associated with the prolonged low interest rate environment. We also grew tangible book value per share by 6% and returned over 60% of our earnings back to our shareholders, continuing our path of improving capital returns. Our performance is a reflection of the diversity of our business model, where each segment made strong contributions to enhance the financial performance of our company. Within consumer and private wealth, organic production growth and higher return portfolios and continued momentum on the deposit front has allowed us to further optimize the balance sheet. Our investments in digital have allowed us to better identify and meet more client needs while also extracting efficiencies from certain areas. In wholesale, our differentiated business model allowed us to absorb the impact of the more challenging market conditions in the second half of the year and drive strong high single-digit growth in revenue and net income. In particular, I am pleased with the more integrated One Team approach we delivered to our clients and that’s evidenced by a 36% increase in capital markets revenue from the commercial real estate and private wealth businesses. This increase in client and product diversity will be an important contributor to the long-term growth of wholesale banking. And within mortgage, we benefited from…

Dexter, we are now ready to begin the Q&A portion of the call. As we do so, I would like to ask the participants to please limit yourself to one primary question and one follow-up so that we can accommodate as many of you as possible today.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Matt O’Connor of Deutsche Bank. Your line is now open. Matt O’Connor: I was wondering if you can give us some thoughts on your framework in terms of when all said and done, how you think the energy book plays out in terms of either default rates or total NPL levels, what the loss content might be and any framework on that kind of would be helpful?

Well, Matt, let me take a crack at that. I think when you think about our energy book overall, it’s helpful to think about the context. So you know our energy exposure overall is only 2.2% of our total loan book, first of all. Secondly, within that E&P and oil field services are 40%, so only about 1% of our total loan portfolio is in those two sectors which should probably be the sectors most negatively impacted by lower oil prices. Within that, now you think about, we have got about 4.5% of reserves against the entire energy book. So for those two segments, reserve levels are closer to 12%. So that starts to feel pretty good. And then thirdly, of course we have got total of $1.8 billion of ALLL in total, which is available to cover all of our loans. So as I think about what might happen here in 2016, ‘17, ‘18, we will see some increase in NPLs. We will see some increase in provisioning against our energy portfolio. But in the context of the rest of the book, where our resi mortgage exposure continues to get better and better and as charge-off levels and required reserves continue to come down, I think that our 2016 charge-off levels and provision levels for energy actually are looking very manageable. Matt O’Connor: And then, just on the loss content, once the loan is moved to non-performer, can you remind us, do you take a charge-off on that and then what’s potentially the eventual loss content, obviously not all non-performers are the same, but it takes a while for that to be clear, I think from the outside?

It does. I mean, it will take a while to see how all of this plays out. We build – we are building up our reserves for energy clients, up client-by-client. You actually made a great point in not all non-performers have the same loss content. You saw the increase in non-performing loans that we had this quarter. I ought to let you know that the vast majority of those non-performing loans are actually performing, they are still performing today. What we are trying to do here is be prudent and get ahead of the curve on non-performing loans the same way you saw us do in Q4 ‘14 when we tried to get ahead of the curve and start to provision early for energy. We are trying to do the same thing here in non-performing loans. Matt O’Connor: Okay. Thank you.

Thank you very much. Our next question comes from the line of John McDonald of Bernstein. Your line is now open.

Yes. Hi, just following-up on credit again, the outlook for net charge-offs less than 40 basis points is a bit away from the 24 basis points you did this quarter, recognizing that’s a very low charge-off rate that you are at today, are you expecting it to kind of march up steadily? And is it the driver of your outlook for higher charge-offs really just energy or you have got some other normalization going on?

No, it’s mostly just energy as sort of where I think the inflection is, John. We have been seeing now for several years that our charge-off levels are unsustainably low. Well, it looks like energy might be the catalyst to actually turn that around. So, I do expect that we will see more provisioning coming in the wholesale book in 2016, but I also expect the rise in provisioning will be mitigated by the releases that I expect to get out of our consumer and mortgage books in that as a result of resi mortgage improving.

Yes. And outside of energy that increase was more of a macro combat. I mean to your question, we don’t see any particular portfolio segment, geography however you might want to categorize it that we see a particular problem and it’s more of a macro kind of non-energy compound.

Okay. So, you still could have some net reserve release in the beginning part of the year, Aleem. It sounds like the gap is going to close between provision and charge-offs, but you could still have a little bit of a gap?

Maybe, I am not sure yet, John. But if I think about the full year, I would think that our full year provision and charge-offs ought to be pretty close.

Okay, thank you.

Thank you very much. Our next question comes from the line of Betsy Graseck of Morgan Stanley. Your line is now open.

Hi, thanks. Two questions. Just one more on the energy reserve and one on loan growth, on the energy reserve, you indicated the 4.5% and the 12%. Can you give us a sense as to how you think about oil price when you are making that reserve? Is that done on a forward basis, on a spot basis? And can you give us some sensitivities to, if oil goes down another $5 or another $10, what happens to the reserve there?

Well, the reserve is built as of December 31, Betsy. So at the time we used the oil price on that day, which was $37. That’s the way the reserve was built. If oil stays down under $30 for a while, yes, we will expect that we will continue to see additional provisioning required. But as I said earlier, I think we will be able to mitigate some of that with the benefits we get out of the mortgage book overall. Our price decks as you know are pretty sort of consistent across the industry and we will be rebuilding our new price deck for the spring re-determination period very soon.

Okay, no sense of just what kind of order of magnitude change we should expect or like should I just take whatever the reserve is that you have done today than have another half or given an expectation for if oil stays at $30?

I don’t have a great sense of that for you yet, but it will be well into eight figures, maybe even get into nine figures in total provisioning over a multiyear period, which in the context of the total PPNR for the company and releases will be coming out of mortgage, I think they are very manageable.

Okay. And just the follow-up was on loan growth and C&I had a nice inflection this quarter, maybe you can speak to the drivers there, was that just less asset sales or more of originations, context would be great?

Yes, it’s interesting, because we have sort of talked about loan growth being an outcome versus something that we are managing. And if I look at production over the last few quarters, it’s actually been very consistent and at a consistent high level. In the fourth quarter, in particular, we benefit a little more from some lower pay-downs, so pay-downs were a little less in the fourth quarter than the third quarter. We had a slight increase in the utilization rate. I don’t want to mark anything there, but there was a slight increase in the utilization rate. So, it really is just a – it’s a reflection of all the things we have been doing within the case of the fourth quarter, just a little less headwind than we have had in the previous quarters.

Okay, thanks.

Thank you very much. Our next question comes from the line of Ken Usdin of Jefferies. Your line is now open.

Hi, good morning guys.

Good morning, Ken.

Good morning. I just want to level set on the starting points for the expense side, I got your point about the step up the annuals, the quarterly step up and then the marketing in the first half and taking your points about driving to operating leverage. It seems like we had a great end to the year and we have that normal step-up. So – and I know we ask this question a lot, but can you just help us frame kind of the starting point and then I presume we kind of still have that ramp down throughout the year. Is that the right way to think about it?

Well, that would be a nice way to think about it, but of course, it depends on the revenue environment. If the revenue environment improves in ‘16 relative to ‘15 as we are currently anticipating, I think that will be the driver of expenses increasing ‘16 relative to ‘15. If I try to think about, Ken, an average number and of course, it’s going – this is going to be volatile quarter-to-quarter. But if I try to think about an average number for the year, I would probably be thinking about something that would be closer to something like $1.35 billion on average, some quarters higher, some quarters lower and improving slightly, improving efficiency ratio as that revenue appears. If the revenue environment does not improve, then we will have to adjust expenses accordingly. And in that case, I would start thinking about a number lower than that, maybe closer to the $1.3 billion.

Yes, understood. And then just a follow-up on that is you guys have done a great job over the past couple of years rightsizing shrinking branch count, etcetera, how much flexibility would you have in that tougher environment? We don’t want to anticipate happening, but like is there a lot of opportunity set still inside if that were to be the case?

Well, this is Bill. I mean, I think the opportunity still exist, because we are still on the path to sub-60. So, we have plans underway for expense management in virtually every category. So, it’s not like they are not on the shelf already, our ability to execute against them would really mean. In fact, we are taking a little more risk speeding them up in terms of terms [ph]. So, we have those plans in mind.

Ken, you may have seen the press announcement we had in the last few days about changes in our real estate footprint in Raleigh and in Richmond, we are moving to new space. We will take our total number of locations in those two cities from 11 to 5 between ‘16 and ‘17. We will reduce our square footage in those areas by 50% and we will create a better environment for our teammates. Just as a sort of a point of info, we have been – you said, we have been working on branch count and office space reduction over the last several years. We have actually taken out 2.5 million square feet over the last 4 years out of our physical footprint and we continue to be on that path. Between now and 2018, we will stay on that becoming more efficient with our use of space.

So to answer your question, I mean, we think we have got the flexibility on the expense versus revenue achieved in the efficiency ratio target long-term. It doesn’t exactly work perfectly quarter-to-quarter. I mean, that’s the point that I would want to make. But we can look ahead and adjust the levers accordingly.

Understood. Thanks for the color.

Thank you. Our next question comes from the line of Ryan Nash of Goldman Sachs. Your line is now open.

Hey, good morning guys.

Good morning, Ryan.

Maybe I could just follow-up on Ken’s question, if we were to have expenses coming in at $1.35 billion you are going to imply something like mid single-digit growth. And Aleem, given your comments around positive operating leverage, that implies revenue growth should be north of 5%. I was just wondering maybe can you talk us through the components of revenue growth? How should we think about NII growth? What does it mean for the net interest margin over the last couple of quarters? And on the fee side, how do we think about the split between wholesale and consumer fees? Clearly, consumer will likely be under pressure as you make some changes. Markets have come down. So, may be that will hurt the wealth business, but just trying to contextualize how to think about the different moving pieces on revenue growth?

Thanks Ryan for the question. So, if you think about NII overall, for the last several years, it’s been essentially flat, maybe even coming down a small amount and that’s been the effect of declining NIMs essentially being offset by production and growth. Now that NIMs are no longer declining and we are looking for NIM to be essentially stable for 2016, that underlines our organic loan production and growth on both assets and liabilities is going to start to show through. And as that shows through, I think we will see NII start to climb in ’16, sort of as it started to do in ‘15 after the first quarter. So I think that will be where you see the growth in revenue. On the fee income side, you are right, we are not really expecting growth in consumer service charges, that’s not going to be a growth area for us, but the growth that we have seen overall in wholesale will continue, I think will continue to appear. The One Team approach that we have got, our ability to meet more of our clients’ needs across more products and be a bigger, more of a strategic advisor to more clients, I think continues to show up. So I think that will be helpful. And I think mortgage will also become a more sort of consistent contributor to the bottom line. So that’s where revenue will appear.

Got it. And then maybe if I could just follow-up on one other question, given where your reserve is on energy and the E&P and oil field services book of 12% and which I think is well above a lot of your peers, I guess how should we think about the comment that you made that we should expect continued reserve builds from here. And more specifically, if oil prices stayed at these levels, what would be realistic loss content over a 2-year period, I heard what you said to Betsy, but I am just trying to understand like why would losses in your book be at that type of level relative to peers you were talking about levels that are half of what you are commenting on?

Well, you know us, we are inherently a conservative company and we would try to think conservatively. So I don’t know where peers are or what they have got in their book. We are trying to be careful and make sure that we stay ahead of this overall. I think our reserve levels are very prudent for where we are right now with oil at this stage in the cycle. But remember, we set these reserves when oil was $37. And if oil moves into the $20s, we will have to take account of that and I would think that the farther oil moves down, the loss content starts to become asymmetric for the industry.

Got it. Thanks for taking my questions.

Thanks.

Thank you very much. Our next question comes from the line of Mike Mayo of CLSA. Your line is now open.

Hi. Well, can’t wait for the Super Bowl to see your ad.

Great.

But it comes in the context of 4 years of expense declines and now expense is going higher as you just discussed. So it’s the same question I asked last year and you got your target. But if we don’t get rate increases, do you think you can still grow revenues faster than expenses and you gave some specific examples about those locations. But if you could say, what are the few main reasons why you think you can improve efficiency if that is the case without rate hikes?

Yes. I think Mike, as we went into last year we were a very clear about saying we were going to improve efficiency irrespective of rates. So we sort of said take that off the table. Now it looks like we are only projecting two rate hikes and one at end of the year. So I think we are still taking a pretty conservative approach to the impact of rate hikes. And we are continuing to make the statement that we are going to stay focused on improving our efficiency ratio. Now in fairness, it grinds down slower. So there is no doubt about that. I mean we got sort of a big junk and it grinds down slower. But we are not backing off, we are not wavering or anything I guess the commitment to continue to improve on the efficiency side.

Mike, in terms of some of the things that we continued to work on expenses, to be clear, we are not saying that we are taking our foot off the gas pedal on managing expenses. And we are still looking at overall operations costs. We are looking at call centers, lending centers. We are still looking at technology infrastructure and how we can continue to improve our efficiency there. I mentioned that we introduced a new mortgage origination platform late in 2015 and I anticipate that, that will help our overall efficiency and effectiveness within the mortgage segment. I mentioned we continue to work on optimizing our real estate footprint and we will continue to do that now through ‘18 and ‘19, I expect. And look, across the whole company, we are staying disciplined on how we manage roles, responsibilities. We have a very clear pay for performance philosophy. I think that shows up for – across our teammate profile. And of course we continue to consolidate our suppliers. So we are working on managing our third party supplier profile. So none of this is meant to say that, hey we are declaring victory on expenses, what we are saying is that as we move forward the big rocks on expenses, I think we have achieved and we are going to be more balanced to going forward in terms of revenue growth and expense management.

Okay. Thank you.

Thank you very much. Our next question comes from the line of Marty Mosby of Vining Sparks. Your line is now open.

Thanks. Aleem, I want to ask you on your guidance on net interest margin being I think a little inconsistent, so I just want to make sure we connect the dots right, you came into the year in first quarter of ‘15, you had a 2.83 margin, which improved to 2.98 by the time you get to the end of the year, which would average 2.90, you are saying you are going to improve 3 basis points to 5 basis points in the first quarter. And so when you are looking at that kind of trend, your net interest margin would have to significantly be above in 2016 versus 2015 unless expense going downward from the first quarter through the end of 2016?

That’s right Marty, that’s exactly what I was trying to say. I am sorry, if I was unclear. I do expect...

Just a little more flat year-to-year, which you really got a – already a lot of improvement in there and I was also wondering about you said if you had another rate hike in the middle of the year, if you wouldn’t see the margin improve over the first quarter, when you are already getting some benefit from rising interest rates, there would be seems like another catalyst or margins to go up again on that next, just one more rate hike in the middle of the year?

I do think that will help. So to be clear on my margin expectations, Marty I think the first quarter margin will go up from the fourth quarter. And I think that’s sort of 3 basis points to 5 basis points or so. And then from there for the rest of the year, I am expecting it to be generally stable to the first quarter number, to the increased higher margin level, assuming we get that one rate hike in the middle of the year. The offset to that, so that’s – the rate hike is going to be helpful and we are asset sensitive. And we are asset sensitive actually at every key rate duration point across the curve. So that will be helpful. The offset to that is competitive pressures are still strong. Spreads continue to be tight, if anything grinding maybe at a bit tighter, but sort of trying to stabilizing a little bit relative to the decline we saw in spreads over the last year. And we still have old mortgages and old securities that will continue to roll off the books that will have to reinvest that new lower rates. So there are mitigants to the rate rise, which I think will put a cap on margin. But I do think year-over-year, margin will be higher and Q1 to Q4 margin will be higher.

And then as a follow-up on the asset quality side, you are talking about being conservative in a sense that you got performing loans that somehow you are pushing into non-performing, I didn’t really have any foreshadowing of this in the delinquencies, can you give us some feel for the migration of how $200 million ended up in non-performing this particular quarter and your thought process around that deterioration? Thank you.

Yes. Thanks for the question, Marty. We are just trying to be a little bit careful here. The majority of the loans we put into non-performing are actually still performing today. They are performing loans, but these are loans when we look at those particular clients, we think that there is a risk that they will become non-performing some time in the next couple of years if oil stays where it is. Remember how quickly this move has been on oil, right. And so it’s only 15 months ago, we were at $100 a barrel. So, the move has been very, very rapid and we are just trying to make sure that we try and stay ahead of this, so that we don’t end up surprising you and ourselves later.

Thanks.

Dexter, we have time for one more question.

Thank you very much. Our last question comes from John Pancari of Evercore ISI. Your line is now open.

Good morning.

Good morning, John.

Going back to energy, sorry, the – regarding the increase in the NPAs, can you just tell us what types of credits they were or the E&P or service that went on to NPA? Also were they shared national credits and do you have the average size of the credits that moved on or the number?

Yes, it was just a handful of credits, John. I don’t know if they were shared national credits, but it was a relatively small number and they were all either upstream or services.

Okay. And again, the increase in the charge-offs this quarter that was related to the energy book as well?

Yes, some of it was. There was one charge-off in energy that related to one credit.

Okay. And then the non-energy or the non-oilfield service and non-E&P types of loans that you are including in that energy-related classification, what is that? Is that utilities and coal?

That’s mostly midstream and downstream. So, when you look at midstream and downstream that makes up the remainder of what we call the energy book. And when you think about what lower oil prices do for midstream, it’s sort of a nonevent and for downstream, it’s actually beneficial. And so for our downstream clients, the decrease in energy prices will help them.

Okay, alright. And then lastly also within the energy topic, do you have your total criticized ratio within your energy portfolio? And then also how much of your energy book is investment grade versus non-investment grade?

Well, John, let me answer those backwards. The investment grade versus non-investment grade, I don’t have that exact number in front of me, but as you would expect, we have a relatively higher proportion than others of investment grade, so think about the context maybe of a third to a half of our book would actually be investment grade. And as you would also expect when you think about a conservative underwriter like SunTrust, the criticized portion would be relatively low and for us that’s on the order of 20%.

Okay. And then lastly, the first lien versus second lien, do you have that?

The vast majority of our loans are first lien. The vast, vast majority of our loans are first lien.

Okay. Alright, great. Thank you.

Operator, this concludes our call. Thank you to everyone for joining us today. If you have any further questions, please feel free to contact us in the Investor Relations department.

And that concludes today’s conference. Thank you all for participating. You may now disconnect.