Moody's downgrades SunTrust

Moody's Investors Service said it downgraded the senior debt rating of SunTrust Banks, Inc. to Baa1 from A1, the subordinated debt rating to Baa2 from A2 and the preferred stock rating to Ba2 from A3. The holding company's short-term rating was downgraded to Prime-2 from Prime-1.

SunTrust Bank's long-term senior debt was lowered to A2 from Aa3 and its subordinated debt rating was lowered to A3 from A1. The bank's Prime-1 short-term rating was affirmed.

The outlook is negative.

According to the agency, the downgrade resulted from the significant credit costs embedded in its loans, in particular its large commercial and residential real estate portfolios. These costs have climbed materially over the past year and will remain elevated in the near-term.

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