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The three Southeast banks, each slow to shake off its troubles, report first-quarter results next week. Improvement is expected from each, though plenty of challenges remain.
April 20 -
The Fed's results found Ally Financial Inc. in the weakest position in a hypothetical scenario in which the economy experienced a nosedive. Citigroup Inc. and SunTrust Banks Inc. would just barely fall short of capital minimums in such an event.
March 13 -
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 24
SunTrust Banks (STI) benefited from a jump in mortgage refinance activity during the first quarter, but executives shied away from characterizing the momentum as sustainable.
The Atlanta bank reported loan growth across most categories and a meaningful decline in credit costs. "Our progress is steady," William Rogers Jr., the company's chairman and chief executive, said during a conference call to discuss the results. "We're on the path to improve performance relative to our opportunity."
SunTrust is still seeking solid footing in an uncertain economy. Refis played a major role in the company's quarterly turnaround, making up three-quarters of its mortgage volume. A third of the refinance activity was tied the Home Affordable Refinance Program (HARP).
Continued success "depends on a lot of variables," Rogers said in discussing the mortgage business. "If you think about our markets — the amount of homes underwater — it is still a significant opportunity for us," he said. "We have to eventually see some purchase volume, though, to keep the momentum up. While we see a glimpse of it … it is still not the big driver."
The mortgage business has always been a blessing and a curse for SunTrust, giving its results a nice lift in good times but serving as a major drag after the implosion of the housing market. The company continues to struggle with mortgage-repurchasing agreements from prior originations; SunTrust has a special provision to cover those costs.
In the first quarter SunTrust charged off $113 million tied to mortgage repurchases, and its total reserve to cover future costs rose to $175 million at March 31. Repurchase demands totaled $448 million in the quarter, representing a 30% decrease from the fourth quarter, Aleem Gillani, the company's chief financial officer, said during the call.
Rogers characterized the company's commercial and large corporate lending performance as "good," noting that utilization of credit lines "is basically flat" and has continued to remain flat through mid-April.
Still, the $178.2 billion-asset company's quarterly results were a vast improvement. Earnings more than tripled from the fourth quarter and rose 39% from a year earlier, to $245 million. Revenue rose 8% from the fourth quarter and 3% from a year earlier, to $2.2 billion.
A meaningful increase in net income helped lift capital levels, which is critical for SunTrust
Rogers said SunTrust is working with its board on a revised capital plan, which it must provide to the Fed by mid-June. The company should get a response from the Fed by the end of the third quarter.
"First-quarter results will be included in our submission and we will be running another full stress test," Rogers said during Monday's conference call. "This new submission will only cover any proposed capital actions for the fourth quarter of this year and first quarter of 2013."
Total loans rose slightly from the fourth quarter and 7% from a year earlier, to $122.7 billion, fueled largely by refinance activity. The net interest margin expanded 3 basis points from the fourth quarter but shrank 4 basis points from a year earlier, to 3.49%.
Overall, net interest income rose 1% from the fourth quarter and 5% from a year earlier, to $1.3 billion.
The loan-loss provision fell 3% from the fourth quarter and 29% from a year earlier, to $317 million. Net chargeoffs declined 11% from the fourth quarter and 26% from a year earlier, to $422 million. Nonperforming loans totaled $2.6 billion at March 31, compared with $3.9 billion a year earlier.
Noninterest income rose 21% from the fourth quarter and remained relatively flat from a year earlier, at $876 million. The company attributed the improvement to strong mortgage refinancing activity.
Noninterest expenses fell 8% from the fourth quarter and rose 5% from a year earlier, to $1.5 billion. SunTrust disclosed that it had cut 567 positions during the fourth quarter.
