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Click on individual bank names in the table below to access American Banker's coverage of each company's earnings report. Links to relevant coverage, filings, releases, and bank benchmark profile data can be found in the Related Links area of each article.
April 29
After raising the bar for themselves at the end of last year, banks are finding that first-quarter loan growth numbers are falling short of their own expectations.
PNC Financial Services Group Inc. increased its average commercial loans by 4.1% from the fourth quarter of 2010, but total average loans were up just a fraction of a percent, and the Pittsburgh company described the demand for borrowings as generally being soft.
Among the other large banks that disclosed quarterly results on Thursday, BB&T Corp. reported that total loans and leases held for investment inched up 1% from the fourth quarter, lagging the 3%-5% growth pace that the company had forecast for the year. First Horizon National Corp. lamented the persistence of low credit-line utilization rates and acknowledged having a ways to go to compensate for the runoff of loans no longer considered strategic to the company.
Even Fifth Third Bancorp, which boasted of feeling "very good" about its loan originations, got an unpleasant first-quarter surprise in the form of early loan paydowns and a sharp drop in loan yields. The Cincinnati company tied both of those developments to the low rates beckoning borrowers to the capital markets, where cheap money allowed customers to refinance loans and put pressure on loan pricing in an already competitive environment.
For many banks, the effects of weak lending activity are showing up in net interest income. That, combined with prevalent weakness in fee revenue, has the earnings season shaping up to be, as Nomura Securities analyst Brian Foran described it in a note to clients Thursday, a story of "provision-driven beats, but pre-provision misses."
Several bank executives expressed sunnier sentiments about the second half of the year, when they expect loan growth to pick up with more gusto. Kevin Kabat, CEO at Fifth Third, sought to assure analysts that his projections are grounded more in lending pipelines than in lending pipe dreams.
"We have eliminated hope and dreaming from any forecasts," Kabat said on a conference call to discuss the Cincinnati company's results for the first quarter, in which net income of $265 million represented a reversal from a $10 million loss in the year-ago quarter, but also a 20% decline from the fourth quarter. "A lot of our confidence comes really directly from the marketplace relative to our conversations with clients and their expectations. Maybe it's predominated [by] the manufacturing orientation in our footprint, but we're hearing clients being cautiously optimistic."
First Horizon's net interest income declined $9.8 million to $135.5 million in the first quarter, a 6.7% decline that the company pinned largely to lower loans to mortgage companies. But D. Bryan Jordan, CEO at First Horizon, said the Memphis company was moving in the right direction on asset growth.
"Our pipeline for new loan production at the end of the first quarter was up slightly from where it was at the end of the fourth quarter," he told analysts, citing new commercial and industrial loans to companies above $100 million in revenue as a bright spot.
Executives had been similarly optimistic after the fourth quarter, when banks after long last had started showing signs of a rebound in loan demand. But after what many of them described as a decent start to the first quarter of the new year, demand seemed to sputter.
U.S. Bancorp Chairman and Chief Executive Richard Davis hypothesized last week that rising oil prices and the supply chain interruptions caused by the earthquake-related troubles in Japan prompted would-be borrowers to take a breather midway through the quarter.
On U.S. Bancorp's earnings call April 19, Davis said the Minneapolis bank's quarter-to-quarter loan growth of 0.7% was "wholly insufficient … given the kind of money we have here that we can deploy back into loans. But we're setting everything up for that moment when people finally decide to pull the string and use their lines of credit or use their own deposits or get a new loan."
While loan growth at BB&T was at a slower pace than what the Winston-Salem, N.C., company expected, CEO Kelly King was pleased nonetheless.
BB&T's outlook on loan growth remains unchanged; King and his management team reiterated that they expect an increase in total loans of 3% to 5% this year.
"We're still hiring revenue producers. Even though we are controlling costs within our company, we are focused on hiring and investing in these businesses to continue to get them to grow," Daryl Bible, the bank's chief financial officer, said in an interview. "We believe we are going to be successful at growing revenue faster than anybody else," he added.
