Welcome to the SunTrust First Quarter 2016 Earnings Conference Call. At this time, all participants are in listen-only mode. [Operator Instructions] This call is being recorded, if you have any objections, please disconnect at this time. Now, I will turn the call over to Ankur Vyas, Director of Investor Relations. Thank you. You may begin.

Thanks, Jay. Good morning and welcome to SunTrust’s First quarter 2016 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 also available on our Web site. During the call, we will discuss non-GAAP financial measures when talking about the Company’s performance. You may find the reconciliations of these measures to GAAP financial measures in our press release and on our Web site, 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 webcast are located on our Web site. With that, I will turn the call over to Bill.

Thanks, Ankur and good morning everyone. I will begin with a brief overview of the quarter and then turn it over to Aleem for additional details including our results at the business segment level. I’ll conclude with some perspectives on how this quarter’s performance fits into our long-term strategy and investment thesis. This quarter we saw the benefits of our consistent strategic focus and improving execution, a combination of which resulted in revenue growth that exceeded expense growth. As we communicated during the last earnings call, delivering positive operating leverage in 2016 was going to be necessary to overcome our expectation of our credit cost and to achieve our financial objectives. Our performance in the first quarter was a good start towards meeting those objectives for the year. Specifically, we reported $0.84 per share slightly lower than the fourth quarter given typical seasonal patterns in our business and more importantly up a solid 8% compared to a year ago. Total revenue was up 3% sequentially and 5% year-over-year. The sequential improvement was driven by an increase in net interest income and non-interest income where we benefitted from good performance across both, mortgage and capital markets, a lot of which was notable given market conditions in January and February. Out net interest margin improved 6 basis points sequentially and is up 21 basis points over the past year, reflecting our continued efforts to optimize the balance sheet, including improving our loan mix, growing deposits and reducing long-term debt all while carefully managing duration. Despite a modest increase in our expense base, the tangible efficiency ratio for the quarter improved to 62.3%, a full 220 basis points better than last year and represents the focus we have maintained on disciplined expense management, which has also created additional capacity to invest in our…

Thanks, Bill. Good morning, everybody. Thank you for joining us this morning. Moving to Slide 4, you can see that our net interest margin improved 6 basis points. Primarily driven by higher loan yields as a result of the recent increase in short-term rates, and partially offset by slightly higher funding costs. Net interest income increased 3% sequentially driven by the 6 basis point improvement in NIM and solid 2% loan growth. On a year-over-year basis, net interest margin increased 21 basis points due to the same factors as the sequential drivers, but also due to our continuous balance sheet management and optimization efforts. These efforts have resulted in a favorable shift in our loan portfolio mix, a significant reduction in higher cost long-term debt driven by low cost deposit growth, and lower premium amortization expense in our securities portfolio. Looking ahead to the remainder of 2016 and assuming there are no additional increases in the Fed funds rate. We expect net interest margin to decline by an average of a couple of basis points per quarter. If there are increases in the Fed funds rate, we would expect our net interest margin to benefit, given our modestly asset sensitive position with the amount of benefit dependant on the shape of the yield curve in addition to the broader competitive environment. We have been and we’ll continue to carefully manage the duration of our overall balance sheet in light of the current low interest rate environment. While also ensuring our balance sheet is structured to benefit from potential increases in short-term rates. Moving to Slide 5, non-interest income increased $16 million from the prior quarter, primarily driven by higher mortgage-related income resulting from a recent increase in refinancing activity. Capital markets related income was up modestly, a performance that was…

Great, thanks Aleem. And to conclude I’m going to point to Slide 15 which highlights how this quarter’s performance aligns with our overall investment thesis and the strategies we have had in place for several years now. First, the diversity of our business model helped us deliver 5% revenue growth despite challenging market conditions. Second, our profitability continues to improve as a result of our strategic focus on improving efficiency and optimizing the balance sheet to enhance returns. These two strategies which we’ve been working on since 2011 are key contributors to the 220 basis point reduction in the adjusted tangible efficiency ratio and the 21 basis point improvement in NIM. This focus on expense management has also provided us the capacity to make consistent investments in the Company. As an example, we continue to see the benefits for the investments we’ve been making in CIB over the last 10 years and are also encouraged by the results we’re seeing from our commercial and CRE businesses. Similarly, consumer lending has been another key area of investment over the last few years and is demonstrating good momentum. Also, our digital investments continue to pay-off in consumer banking with steady increases in mobile usage and self-service deposits. And in mortgage, we continue to make targeted investments for growth across both origination and servicing. Lastly our strong capital position has afforded us the opportunity to grow capital returns and reduce share count. Our goal is to continue this trend. So big picture, our revenue trajectory is improving, expenses remain well-controlled, credit quality outside of energy remains favorable, and our capital position is strong. So I’m pleased with the continued progress and I remain highly optimistic about our Company’s future. And with that, let me turn it back over to Ankur to begin the Q&A portion.

Great, Jake, we’re now ready to begin the Q&A portion of the call. As we do so, I’d like to ask participants to please limit yourselves 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 Ken Usdin of Jefferies. Your line is open.

Aleem, if I could just a question on the net interest margin and the NII performance, which is really good. You mentioned in the comments, you had some help from premium amortization you had a little help from swaps and we know you have taken out that swap slide. But can you just talk to us about, if you can help us understand those helpers and then the bias for the down NIM would that just be some normalization of those factors or is that the rollover rates that you’re seeing underneath?

Well, first of all on swaps and amortization. Yes, I’d characterize those as small helpers, if I think about 2016 relative to 2015, we’re expecting, because we were able to restructure a part of our portfolio in 2015. We are expecting slightly lower levels of premium amortization in ’16 relative to ’15. But we’re talking about sort of single-digit millions per quarter, these aren’t big numbers. Likewise, if I think about the swap book ’16 relative to ’15, most of the changes in our swap book have actually already taken place. So one of the reasons, we took that slide out from here Ken is that, we don’t expect to see much change in swaps year-over-year from here, most of the changes have already occurred. And so we’re really ought to be thinking about NIM and NII in total rather than sort of zooming in on one part of our interest rate risk management, that’s the reason we took it out. And I don’t think that those are sort of large numbers in the context of our overall rate risk and rate management perspective. To your point on NIM from here, the main -- we’ve got sort of several drivers, why we’re expecting a small grind down in NIM from here. The new production yield is still probably slightly lower than current portfolio yields. So as the portfolio turns over that will be a slight negative. Remember that the LCR requirement for banks our size goes up at the end of this year. And so as we build out our securities portfolio to meet the higher requirement at the end of this year, that will be a slight drag on NIM although it will be actually a little bit of a help to NII. And so those are a couple of reasons why you’ll see probably slightly lower NIM and NIM will grind down a little bit over the course of the year. But in context, so if you think about the last several years. NIM was coming down at a pretty rapid pace and we got good loan growth, we got good deposit growth, we were able to hold NII about flat over the last several years even in the face of all of that declining NIM. So now that the pace of NIM decline is moderating, as a result of that first Fed hike I am expected that we’ll see some NII improvements over the course of the year.

And one question for Bill, on the loan side, you mentioned -- we see the big improvement in C&I just some -- over the last two quarters now. Can you just elaborate on your points about the underlying customer and are you seeing an underlying strengthening in just the C&I demand specifically?

Yes. I think it actually has been pretty consistent. If you sort of look at loans overall and my comments was probably more general. Our production over the last eight quarters has been pretty consistent, production was a little higher this quarter and the ebbs and flows of that relates to paydowns, pay-offs, loan sales, utilization and this quarter we -- those were ditched, and we had a little higher production, we had fewer paydowns we obviously didn’t have any loan sales and utilization was a little bit up. So I don’t think it’s a specific trend I think it’s sort of a continuation of a consistent trend over the last few quarters.

Our next question comes from Gerard Cassidy of RBC. Your line is open.

Following up on your comments on commercial business.

Hi Gerard can you speak up a little we are having trouble hearing you?

Bill speaking of the commercial lending area, what are you guys seeing in underwriting standards both in commercial real estate and commercial loans and are you seeing any stabilization in the spreads for either of those products?

Yes I’d say if I sort of go down the spectrum, if you start with the higher end of the broadly syndicated market yes we’re absolutely seeing stabilization there and that’s obviously market impacted and liquidity impacted. If you go down smaller into the commercial market, I think first it’s still pretty competitive and we’re seeing that not seeing the same level of stabilization then if you go to CRE, I think that’s probably the most impacted by reduction in the liquidity so we are seeing from a pricing standpoint some return on CRE. I think we’re also seeing some revert to the mean on structure in terms of CRE. So I think the answer is yes all of everything I’ve said is on the margin now.

And then coming back you Aleem I really appreciated your view on the return of capital and the compounding effect that has had for shareholder returns. In the vein, return on equity for the industry and for yourselves obviously has been impacted by the high capital levels everyone has to carry now as well as the lower interest rate environment in suggesting that some people’s return on equity is below cost of capital. How do you guys see getting your ROE over 10% and in the next 12 to 24 months, is it truly tied to just rates going higher or there is other things that you’re looking at? Thank you.

Well I think the first component of getting our ROE up as an industry overall is getting our ROA up and there are several levers you’ve seen the industry pull to do that, right. Net interest income as I said earlier to Ken I expect we’re actually going to see a little growth in net interest income irrespective of rates and to the extent that we do get some rate hikes that growth will accelerate. The industry’s ability to grow non-interest income as it has been pressured in the past but I think you’re seeing us and other players also look for other businesses and other ways to meet more client needs to grow that and of course efficiency. Just improving productivity, improving our overall efficiency that all of those things are helping grow ROA to the extent that we are then able to take that growth in ROA and translate that to accelerating growth in ROE managing capital as best as we can. Obviously that is not all in our hands but you’ve seen payout ratios grow pretty substantially over the last several years. In our case, last year we were in the sort of mid 60% pay-out ratio still lower than we would like but our ability to grow pay-out ratio when returning capital will be one of those levers of many that I think where we will be able to grow ROE overtime.

Thank you. Our next question comes from Matt O’Connor of Deutsche Bank. Your line is open. Matt O’Connor: Can you talk about the approach to managing expenses for the rest of the year, obviously you have us the reiteration of hoping to improve the efficiency ratio versus last year. But if I remember correctly that you have one target of expenses for your base case driving yield and then you had another kind of fall back option if revenue was tracking below expectations. So, how are you thinking about managing the Company on the expense side given your revenue outlook today?

And you know Matt we talk about this a lot. I mean we stayed focused on managing to an efficiency ratio versus an expense level as a dollar level. So I think we’re ahead of the game where we normally are in the first quarter relative to the efficiency ratio. We had a little higher revenue that you saw the expense that goes along with that. And the goal right now will be not to give that away. It’s not to give the gains that we’ve made in the efficiency ratio away. We’ve made a commitment to continue to improve, we’ve been doing that now for some 4 years plus. So the focus is going to be on not giving away the improvement that we made in the efficiency ratio and improve relative to ’15. Now all that being said, we have lots and lots of expense initiatives that we’re constantly putting forth as a strategy and the different levels and intensity of how we pull those varies relative to what we see in terms of expectations and they are also allowing us to continue to make investments in our Company, so as we continue on our expense mission, we also have an investment opportunity in terms of total revenue and future of the Company. Matt O’Connor: And then just separately Aleem any color on how many securities or how many liquidity you have to build to meet the next round of LCR requirements?

It’s not all that substantial Matt the increase in requirements goes from 90% to 100% we’re obviously in excess of the 90% as it is. So the amount of the increase to get from where we are to a little over 200% grew it’s not all that large.

Next we have Michael Rose of Raymond James. Your line is open.

Just wanted to touch on loan growth a little bit you guys have grown at a high single-digit annualized past couple quarters, obviously really good momentum. How should we think about the pipelines from here? And obviously your growth was still a lot stronger than GDP, so how should we think about loan growth for the rest of the year and kind of what are the offsets in the energy run off? Thanks.

Yes I know as I said earlier but we don’t really manage to our loan growth number. I mean to me loan growth is an outcome what I look at is what you’ve asked about is I look at pipelines and production and pipelines and productions have been very consistent over the last several quarters. As I said earlier, production was a little higher this quarter and if we didn’t have some of the offsets and pay downs. So I think you’re going to have some give and take so we sort of go down the portfolio to your point I think CRE will be lower production but that won’t necessarily reflect itself an outstanding because we’ve had good production in the past so a lot of that is construction related, people are completing their projects, there is less liquidity in the system so that’s liable to stay outstanding for a little bit longer than it had in the past. So, there will be some interesting offsets to CREs specifically. As we go to C&I, pipelines continue to be good, our strategies are effective. We’ll be very focused on return so we’ll be aggressive where we think we can get a lot of return and we won’t be as aggressive where we don’t think we can get the appropriate return. Consumer, I think that will continue to grow as you’ve seen the initiatives that we’ve had in place and the investments that we’ve made in consumers. So as a production basis that will continue to grow sort of in the double-digit side. But again a little bit offset by the runoff in home equity. So, there are give and takes of all this which is again why I am sort of careful not to say loan growth as a number is the thing we want to give guidance around but pipelines are healthy and the strategies that we have in place are working.

Maybe if I follow-up just looking at the Slide 18 on the energy portfolio, thanks for providing it this quarter. Just if you guys can just help me reconcile the criticized in the E&P book versus the oilfield services, because I think clearly me and most investors see kind of a oilfield service as the bigger risk category. I mean is there is a tail risk there and maybe how would you kind of quantify that or classify it over the next few quarters? Thanks.

Well I think that’s where investors have seen a little bit more of the risk. In our case, if I think about our oilfield service. Well E&P and oilfield services combined as you know that’s only 38% of our total book so that’s not significant. And within oilfield services the majority of our oilfield services exposure is either investment grade or what we would characterize as investment grades from our internal rating systems or is supported by assets, as asset backed lending. So the majority of our book actually in oilfield services on a risk basis may be a little bit lower risk than we used to see it.

Next question is from John McDonald with Bernstein. Your line is open.

The capital market fees as you mentioned outperformed the big investment banks this quarter. And you touched a little bit on the business model being a differentiator. Aleem just kind of wondering did you feel the cyclical headwinds of reduced capital markets activity on deal lines and issuance and just a little bit more color on how you powered through that?

We absolutely did. As you know the market in January and February was decidedly weak and decidedly volatile and we certainly felt that in the first two months of the quarter but as the market stabilized in March our teammates absolutely came through and you know this has been a 10 year strategy for us investment into our CIB business and bringing our one team approach across all aspects of commercial CRE and corporate banking has really helped. I think that we have grown market share over the last 10 years, certainly over the last year also and that growth and share really showed up this quarter.

I’d add to that what Aleem said is it’s really sort of a continuation of the strategy. We’ve had record quarters in the last two quarters relative to CRE and commercial banking and the activity that they’re doing to contribute to the that investment banking line and also the continuation of strategy year-over-year our average fee meaning we are sort of improving in relative importance. So, even if the units aren’t the same, the value of those units are a lot higher, and so it’s up almost 35% year-over-year. So, the strategy also is manifesting itself and moving down that left side relative to importance to our clients.

Okay. So is there any -- these are hard to predict line items but is there any reason this wouldn’t be a good jumping off point for the rest of the year in terms of the performance you did this quarter on the fees and should things get cyclically a little bit better given that March kind of improved?

Yes, I mean relative to this quarter or to this line item, investment banking specifically I would expect this as a good jumping off point, I would expect the second quarter to be better than the first quarter. All that being said, these are choppy markets, I mean we -- this was a tail of the last part of the quarter was really good and the first two-thirds of the quarter were not. So we’re heading in the quarter with some momentum. I would expect it to be a little bit better but against the second quarter of last year which was a record. So I am not sure we’ll be at that level but I think we can improve relative to this quarter and have that be a good as you said launching pad for the year.

Next question is from Kevin Barker of Piper Jaffray. Your line is open.

In your energy portfolio, the oilfield services has been performing better than those peers with only 32% criticized. How much of that lower criticized is primarily due to hedges that are still on the oilfield services and do you see a bunch rolling off through 2016?

Kevin I’m not sure how much of that relates to hedges. I’ll tell you one of the reasons why oilfield services for us may not be performing as badly as you would expect relative to others. Part of our oilfield services business includes clients who don’t cover solely the energy industry. They’ve got other businesses as part of their overall business and so even though we categorize that for us as oilfield services it’s perhaps a lower risk base and a broader client base than you might see at other firms.

And then a follow-up on the loan growth comments that you made earlier. You’ve obviously put a lot more emphasis on LightStream in that platform over the past year. Could you detail how much of your incremental loan growth that we’ve seen in the past couple of quarters was due to LightStream and what average yields you were getting from the products that are sold through that platform?

Now the overall loan growth and we think about this segment as our consumer direct, LightStream, Greensky, Credit Card other products that fit into our overall consumer direct strategy and loan growth there and that business has been very substantial. It is a 20% year-over-year loan growth and we’re very happy with that business. We’re very happy also by the way with the credit quality that we’re seeing in that business and we’re going to continue to expect to be able to meet more clients’ needs and broaden out that business overtime.

What average yields are you seeing in that consumer direct channel?

I don’t have that number right off the top of my head Kevin. We’ll ask Ankur to back to you on the yields and components of that business.

Next question is from Matt Burnell of Wells Fargo Securities. Your line is open.

Just a follow-up I guess a little bit on the capital return story. I realized there is not a lot you can say about your CCAR submission. But I am curious about conceptually how you’re thinking about the potential for energy related credit cost to affect the overall payout ratio relative to the upcoming capital planning cycle versus 2015. You mentioned 2015, you were at sort of mid 60% ratio, does any concern about oil related credit affect your thinking about the capital return story going forward?

Well the way that the submission is structured, as you know there is a extremely adverse case it is a hypothetical case that the FRB and regulators create that we are required to submit against. That assumes basically not just a recession but a depression and assumes therefore very high levels of provisioning and charge-offs, incorporated within that case we incorporated a sensitivity on our energy portfolio. And so submitted that, our -- whatever our result is and our ability to grow our pay-out ratio overtime already incorporates that number within it Matt so if we receive a positive result in June, it will already have included that number with that Matt.

And then just secondly, you mentioned some of the challenges affecting the private wealth management business at least in the relatively near-term. I guess I’m curious how you think about the Department of Labour rule and does that have a meaningful impact on your private wealth management business?

Yes Matt I don’t -- we -- so to start as a framework, we’ve been fiduciaries for over 100 years so our private wealth business has sort of have been dominated by our fiduciary component of our business. So, it’s a concept that we’re certainly comfortable with. We’re obviously guiding through the order and spending some time. Our teams have been thinking about this for a long time in terms of structural changes and being ready. So, I think this is in the highly manageable category will it have a marginal impact? Maybe, will it also have some opportunity relative to others? Maybe, so, I don’t think this is going to be a big story in terms of change in direction of our private wealth business.

Thank you. The next question is from Vivek Juneja of JPMorgan. Your line is open.

A couple of question Bill, Aleem, first in terms of the increased capital return you talk about, how are you thinking about dividends versus buybacks?

Well Vivek, we’ve talked with several of our owners and the kind of feedbacks that we’ve received overtime is that they’ve liked our balanced approach, they’ve liked the way that we’ve been able to grow dividends and buyback over the course of several years and we would anticipate that that type of a balanced approach is going to continue to be what our owners would like to see from us in the future.

Okay. Is there a payout ratio Aleem you’re trying to target on the dividend side?

Well no not that of specific ones Vivek, there are a couple of points and when you think about total payout ratio in the past SunTrust has been running sort of between 60% and 80%. We’re glad that we moved up within that band last year and we hope to continue progress this year and specifically to dividends you’re aware of the regulatory guidance that anything over 30% require or will receive increased scrutiny. I’ll tell you I don’t know exactly what that means but I know that I don’t want it. So we’ll probably -- you can probably anticipate that we will keep that in mind.

Okay. And a different question, just switching gears. On the consumer direct, can you talk a little bit about the credit metrics of what you are underwriting?

Consumer direct.

Yes that is a good one, credit metrics overall well I think probably the biggest point to make there is when you think about charge-offs. Charge-offs for our LightStream and Greensky businesses combined in the first quarter of this year were less than $2 million. So, as you think about $3.5 billion in portfolio and less than $2 million in actual charge-offs that’s a pretty terrific set of credit metrics.

And Vivek it is also, as you know this is a prime, super prime portfolio focus so the average FICO scores and LightStream and Greensky are 760/750 plus. So this is sort of a different strategy related to this portfolio for us.

All right, our last question comes from Marty Mosby of Vining Sparks. Your line is open.

I wanted to ask you about as you look at expenses from one quarter to the next so if you just kind of roll into the next, you have the seasonal expenses, on employee benefits that goes down and then you have some seasonal expenses in other that goes up. And then how is your investment kind of trajectory? So I will just kind of think of those three things and will they net-out to stable expenses or somewhat of a maybe a give back or a down expense which would show what we saw last year which was a big improvement in efficiencies going from first to second quarter?

Well Marty as we think about expenses, you know what we do is we focus on the efficiency ratio rather than sort of individual expense line items and our philosophy is to continue to try to improve operating leverage and improve the efficiency ratio overall. Having said that, if I think about that and the expense line for this year, one of the things that we’ve said earlier this year is we expect our quarterly expenses to average between $1.3 billion and $1.35 billion with that number being contingent on revenue obviously as we focus on the efficiency ratio. I don’t think that there is much of a change to that with stable revenues I would continue to think about expenses averaging and I say that carefully averaging between 1.3 billion and 1.35 billion we might get quarters higher or quarters lower. But that is kind of a expense base for us I think is the fair number for you to anticipate and model.

And then you talk about the improvement in a sense of some stabilization in the energy related non-performers in criticized that you likely kind of have gotten ahead of that issue given the metrics that we’re seeing in the portfolio that looks favorable. You didn’t really breakout the provision in a sense of that how much of roughly $100 million is related to energy this particular quarter and the buildup of some of those non-performers and is there kind of a path that you could see we’re actually provisioning begins to actually may be leg down a bit just because the rest of the portfolio is performing so well?

If you’d look at this quarter Marty, our provision for energy was about $30 million and about half of that was a charge-off and about half of that was a reserve build to give you a sense of sizing that is how to look at Q1. If I think about going forward from here though the rest of the year our overall energy reserves I think can play out a couple of different ways. Assuming there is no oil price drop, right assuming that oil prices are relatively stable to where they are now, I think a couple of things can happen, one our energy reserves can be relatively stable, as we have charge-offs we continue to provide for those and maintain our reserve coverage about where it is or two, energy reserves could decline as we work through certain credits and as the formation of problem credits from here close. So I think excluding a big decline in energy prices I can see either of those scenarios from here.

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

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