June 14, 2012

SunTrust Bank Foreign Exchange & Global Trade Solutions International Expansion

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Euro Declines as Odds of a Greek Exit Increase

Politics

GreeceGreece's political leaders have so far failed to form a coalition government, increasing the odds of another election in mid-June. This has reignited concerns over Greece’s ability to satisfy the terms of its two bailouts that have already been negotiated. A Greek exit from the Euro will likely put pressure on Portugal and Spain’s bond markets.FranceSocialist Francois Hollande’s defeat of Nicolas Sarkozy in the presidential runoff last month signaled a shift to the left in France. However, the relative stability of the French bond markets suggests the president-elect’s cabinet picks could be market-friendlyGermanyGerman Chancellor Merkel gave up little ground in Germany’s demands for austerity despite the worst election result her party had in more than half a century. Growth vs. austerity debate will likely intensify in the coming weeks.

On the HorizonMarket Reaction

• The European Commission said that the Euro region will contract 0.3% this year, the first contraction since 2009. With the economic slump deepening in the Euro zone, unemployment at the highest level in 15 years, and a slowing U.S. economy, prospects for a third round of bond purchases by the Federal Reserve, known as QE3, have increased recently.• There is speculation Spain may be given more leeway to meet its budget deficit target next year. If so, there may be pressure for other countries to follow including France, which would have to pass large cuts to achieve its current deficit target.• European Central Bank (ECB) President Mario Draghi has been reluctant to lower the interest rate below the record low of 1%. At the last meeting on June 6th, the ECB left the benchmark rate unchanged at 1%. However, Draghi said that the monetary union is “unsustainable” in its current form, keeping the door open for the ECB to withhold further stimulus until governments do more to deal with the causes of the crisis.

Source: Bloomberg

• Risk sold off broadly across currency markets with funds flowing into the U.S. Dollar and Japanese Yen.• Market perception of a Greek exit has risen sharply. According to a recent Bloomberg poll, 57% of investors predict an exit by year-end.• The Dollar Index (DXY) has rise over 5% since the French election, breaking key resistance at 80 as investors sought safety following the European election results.• Commodities weakened in light of the USD strength with WTI falling nearly 21% since the beginning of May.• World equity indices traded lower with the S&P 500, Nikkei 225, and DAX indexes are all in negative territory for 2012.• The US 10-year note yield fell to a record low of 1.45% on as investors sought the perceived safety of US treasuries. Conversely, interest rate swaps rose as credit spreads widened across assets.

For ConsiderationHow does the changing value of the U.S. dollar affect your future revenues and margins?How does your budget rate compare to current market levels?Have you hedged your net currency exposure to protect cash flows, income statement or balance sheet items?Are you examining foreign acquisitions or asset divestitures?

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Euro-zone Charts Are Starting to Break Down

Source: Bloomberg

10-YR Spanish Govt. Bond Price 10-YR Spanish Bond -10-YR German Bund Yield Spread

EURUSD Spot Rate

After breaking below the head & shoulders pattern in May, EUR has declined sharply below the previous low for 2012 at 1.2625. This week, it reversed after making a low of 1.2288. This level approximates 150% (Fibonacci extension percentage) of the move from 1.4940 to 1.3146 (May-Sept. 2011). On the upside, the immediate resistance is at the1.2600 area. On the downside, minor support at 1.2150 will be followed by major support at 1.1875. This level marks the low reached in June of 2010.

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Call Option

ISSUE: Client wants to protect the USD cost of a Foreign Currency acquisition but also retain upside market potential.

SOLUTION: The Call Option protects against negative market impact but allows the client to take advantage of favorable market movement.

Outright Forward

ISSUE: Client needs to protect the USD cost of a Foreign Currency-denominated equipment purchase, with payment to be made in one year’s time.

SOLUTION: The Outright Forward provides the client a guaranteed rate of exchange for a specified delivery date one year from now.

Swap

ISSUE: Client needs to fund an inter-company Foreign Currency Loan with USD and wants to protect the repayment value in one year’s time.

SOLUTION: A FX Swap simultaneously locks in both the sale and purchase of foreign currency to neutralize exposure to future rate fluctuations.

Window Forward

ISSUE: Client makes product purchases in Foreign Currency on an incremental basis with flexible payment terms.

SOLUTION: The Window Forward provides a guaranteed exchange rate while allowing variable delivery dates within a range of time.

Client Limit Orders

ISSUE: Client wants to monitor exchange rates and enter into a transaction if the currency moves to a favorable level.

SOLUTION: Client places a limit order with SunTrust which is executed if the pre-specified rate trades at any time, 24 hours a day.

Time Deposit

ISSUE: Client looking for a short-term investment of Foreign Currency cash balances for later use.

SOLUTION: The Time Deposit allows a client to deposit currency balances earning the interest rate of the currency deposited.(Minimum $25K/7-day tenor)

Online Trading

ISSUE: Client wants an alternative solution to manual (phoned in) foreign currency wire requests.

SOLUTION: Client is set up on SunTrust Online Foreign Exchange to execute currency transactions with real time rates via the web.

Foreign Check Conversions

ISSUE: Client wants to bill and receive payments by way of foreign denominated checks or drafts but ultimately needs USD.

SOLUTION: Client is set up for Global Check Clearing to receive a preferred rate of exchange on conversion and immediate use of USD funds.

Incoming Foreign Funds

ISSUE: Client wants to bill and receive foreign currency payments via wire and control the exchange to USD.

SOLUTION: Customer wires foreign funds to SunTrust’s currency accounts for their credit upon immediate conversion into USD.

Foreign Exchange Solutions

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Import Documentary Collection

ISSUE: The Buyer imports products from foreign suppliers that are not willing to give open terms but will accept Documentary Collections instead of LC’s.

SOLUTION: The Import Doc Collection provides security because the banks handle the documents in exchange for payment & does not requires credit lines as with LC’s.

Export Letter of Credit

ISSUE: The Seller (Beneficiary) needs a secure way to get paid when selling products or services to a foreign buyer.

SOLUTION: The Export LC provides the Seller a promise of payment from the issuing bank provided they comply with the terms of the letter of credit. The Export LC also serves as payment mechanism for the trade transaction.

Import Letter of Credit

ISSUE: The Buyer (Applicant) is concerned about the risk of paying cash in advance for a product or service to a foreign supplier and cannot negotiate open account terms.

SOLUTION: The Import LC provides a measure of security to both parties; the supplier must comply with the terms of the LC before the bank will pay. Buyer must apply and qualify for bank credit.

Export Documentary Collection

ISSUE: The Seller is exporting to foreign clients where they have a certain level of confidence but are not ready to offer open account terms and/or do not want to incur the costs of an LC.

SOLUTION: The Export Documentary Collection provides a degree of protection while reducing handling costs associated with letters of credit.

Standby Letter of Credit

ISSUE: Client (Applicant) needs to provide assurance of financial or other performance obligation to a foreign or domestic business counter party

SOLUTION: The Standby Letter of Credit protects the Beneficiary in the event of Applicant’s default with the financial backing of the issuing bank. The Applicant must apply and qualify for bank credit.

Online Trade Services (OTS)

ISSUE: Clients (Importers & Exporters) want an automated, online system for handling letter of credit and documentary transactions with the bank.

SOLUTION: OTS allows clients to electronically process (transmit & receive) instructions for the issuance and payment of letters of credit and documentary collections.

Export-Import Bank (Ex-Im Bank) Loan

ISSUE: Client exports and wants financing for export inventory, A/R and export development activities for more than $1,000,000.

SOLUTION: Provides export working capital line of credit . Must meet Ex-Im Bank’s financial criteria. US products or services only; restrictions on military products

SBA Export Working Capital Loan

ISSUE: Client exports and wants financing for export inventory, A/R and export development activities for more than $500,000.

SOLUTION: Provides export working capital line of credit up to $5,000,000. Borrower must meet U.S. Small Business Administration eligibility requirements.

SBA Export Express Loan

ISSUE: Small business client exports and wants financing for export inventory, A/R and export development activities.

SOLUTION: Provides export working capital line of credit up to $500,000. Borrower must meet U.S. Small Business Administration eligibility requirements.

Global Trade Solutions

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Standby Letter of Credit

ISSUE: Non-Profit or Company (Applicant) needs to provide assurance of financial or other performance obligation to a foreign or domestic business counter party (Beneficiary)

SOLUTION: The Standby Letter of Credit protects the Beneficiary in the event of Applicant’s default with the financial backing of the issuing bank (SunTrust.) The Applicant must apply and qualify for bank credit.

Global Trade Solutions

When should a Non-Profit or Company use a Letter of Credit ?

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Issue: Non-Profit or Company (Contractor/Applicant) is preparing a proposal for NATO (Purchaser/Beneficiary) and the Purchaser/Beneficiary requires a certain type of letter of credit to guarantee the Contractor’s performance.

PERFORMANCE GUARANTEE

As a guarantee of performance under the Contract, the Contractor shall deposit with the Purchaser/Beneficiary within thirty (30) calendar days from the Effective Date of Contract a bank guarantee (the “Performance Guarantee”) to the value of ten per cent (10%) of the total contract price.

SOLUTION: The Standby Letter of Credit protects the Purchaser/Beneficiary in the event of Contractor/Applicant’s default, with the financial backing of the issuing bank (SunTrust.) The Contractor/Applicant must apply and qualify for bank credit.

Global Trade Solutions – Standby Letter of Credit

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Process: SunTrust Non-Profit Client (Contractor/Applicant) provides following information to SunTrust:

- Details/copy of Contract

- Completed and signed SunTrust Standby Letter of Credit Application and Agreement

- If a line of credit already established*, credit approval sought by SunTrust Relationship Manager (RM)

- RM and Client consult with SunTrust Global Trade Solutions (GTS) to go over beneficiary language and application

SunTrust International Operations:

-RM sends application and beneficiary language to SunTrust International Operations for standby LC issuance.

-Turnaround time within 48 hours from receipt of complete standby LC application and agreement and beneficiary language.

- Operations issues electronic draft or final based on client and beneficiary request (draft can be emailed.) Final must be sent via SWIFT to beneficiary’s bank as designated on application.

Solution: The Standby Letter of Credit protects the Purchaser/Beneficiary in the event of Contractor/Applicant’s default or non-performance, with the financial backing of the issuing bank (SunTrust.)

* If line of credit not in place, RM will obtain information to underwrite and seek credit approval. The line of credit can be used to serve as collateral for issuance of the standby letter of credit. Cash in DDA is other option.

Global Trade Solutions – Standby Letter of Credit

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Export Letter of Credit

ISSUE: Non-Profit (Seller/Beneficiary), whose mission is to provide humanitarian assistance, is negotiating a sale of 3,800 metric tons of rice to a Buyer in Liberia. The sale would be made based on an “at-sight” irrevocable letter of credit to be confirmed by Sun Trust.

SOLUTION: The Export Letter of Credit protects the Seller/Beneficiary in the event of Buyer’s (Applicant) and/or the Issuing Bank’s default. The Buyer (Applicant) must apply and qualify for bank credit at its bank in order for the Letter of Credit to be issued and sent to SunTrust for the benefit of the Non-Profit Client of SunTrust.

Global Trade Solutions

Tools for an association to use to get paid on international commerce

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Process: SunTrust Non-Profit Client (applicant) provides following information to SunTrust:

- Transaction Details: Product, $ Amount, Shipment Date(s), Payment Terms, Issuing (Foreign) Bank Name & Country; Expiry Date

- SunTrust GTS provides Letter of Credit Guide with instructions to Non-Profit Client to send to Buyer on how to have its bank issue the Letter of Credit to SunTrust

- There is no credit approval required for the SunTrust Non-Profit Client since it is the Beneficiary (or recipient) of the Letter of Credit being issued by its Buyer.

- SunTrust Client and SunTrust GTS will go over draft of the Letter of Credit when received by SunTrust

What Happens Next:

-SunTrust International Operations verifies the authenticity of LC and passes this LC on to the beneficiary(the seller/exporter)-The beneficiary reviews the LC to determine whether LC is acceptable to them.-The beneficiary ship the goods to the applicant once LC is accepted by the beneficiary-The beneficiary procures all the documents required in LC and presents them to SunTrust to collect payment.-SunTrust Bank will examine the document to determine if all documents in compliance with LC terms.-SunTrust will forward documents to the issuing bank to collect payment.-The issuing bank will release fund to SunTrust if they determine all terms of LC have been complied with. OR, If the documents are found with discrepancy(ies), the issuing bank will contact the applicant for waiver of discrepancy(ies).-If the Waiver from applicant is obtained by the issuing bank, they will wire the proceed to SunTrust.-Once SunTrust receives fund, we will credit or wire the fund to the beneficiary’s account.

Global Trade Solutions – Export Letter of Credit

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Your SunTrust FX & GTS Team

Craig Jackson

VP

Currency Risk Management

Contact Information3333 Peachtree Rd. NE11th Floor Atlanta, GA 303261-877-726-97331-404-926-5790Craig.Jackson@SunTrust.com

Michael Filchock

Director

Global Trade Solutions

Contact Information8330 Boone Blvd.7th Floor Vienna, VA 22182703-442-1516Michael.Filchock@SunTrust.com

Hai-nah Ellison

Vice President, Trade Advisor

Global Trade Solutions

Contact Information919 E. Main St.2nd Floor Richmond, VA 23219804-782-7476Hai-nah.Ellison@SunTrust.com

Steve Goeke

Associate

Currency Risk Management

Contact Information3333 Peachtree Road NE11th Floor Atlanta, GA 30326800-494-9782Steve.Goeke@SunTrust.com

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Important DisclosuresThis presentation is for informational purposes only. By accepting this information, the recipient agrees that it will use the information only to evaluate its potential interest in the strategies described herein.

This document is not a research report under rules and regulations and is not a product of any SunTrust Robinson Humphrey (“STRH”) research department. The information contained in this material has been prepared by the Foreign Exchange Desk of STRH who supports underwriting, sales, lending and trading activities of STRH. The information contained herein is based on sources which SunTrust Robinson Humphrey believes to be reliable but we do not represent that it is accurate or complete. Allprices, yields and opinions are subject to change due to market forces and other conditions. This communication is not to be considered as a recommendation of any proposed transaction or provide any other product or service.

Conflict Disclosure

The person distributing this material may have already provided any strategy or idea to STRH trading desks, which may have already acted on the strategy or idea. STRH may seek to do business with the companies mentioned in this material and may have either a long or short position in the securities or products mentioned in this material. Employees of the trading, sales and capital markets desks are compensated based on the profitability of STRH’s trading, sales and underwriting activities as well asthe Debt Capital Markets division’s overall profitability. This material may be inconsistent, and reach different conclusions, with other STRH desk material or research reports. STRH is under no obligation to bring them to the attention of recipients of this information.

SunTrust Robinson Humphrey is the trade name for the corporate and investment banking services of SunTrust Banks, Inc. and its subsidiaries, including SunTrust Bank.

Foreign Exchange, risk management products and services and agency services including derivatives products are offered by SunTrust Bank.

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