SunTrust Banks (NYSE:STI) has decided to sever relationship with companies that manage private prisons and immigration holding facilities in the United States. It will not be providing loans to such companies any longer.
SunTrust has become the fourth Wall Street bank to distance itself from prison financing, having gauged its riskiness. Earlier, JPMorgan (NYSE:JPM) , Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC) had announced plans of breaking off relationships with the industry.
In a report published by the U.S. Department of Justice in 2016, it was found that privately operated federal facilities were less secure and considerably more punitive than publicly operated ones. This attracted attention of activists who protested that these companies are trying to profit from the detainment of people and children.
Also, amid the tightening immigration policies under President Trump, protests against the financing of the prison industry increased.
CoreCivic Inc. and GEO Group Inc. are two major private prison operators in the United States. SunTrust is one of the several banks that provide financing to these companies. The bank has been underwriting bonds and syndicating loans for them over the past few years.
A spokesman at GEO Group said, “It’s unfortunate that misleading political activism has been allowed to impact a decade-long banking relationship."
"This decision is about caving to political pressure," said Brandon Bissell, manager of public affairs at CoreCivic. "It sends a terrible message to others in the private sector."
Apart from SunTrust, BNP Paribas (PA:BNPP) and U.S. Bancorp are two other big banks that finance the private prison industry.
Shares of SunTrust have gained 14.7% over the past six months compared with the industry’s rally of 11.3%.
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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