In blunt comments about cost control, William H. Rogers Jr. showed that he is trying to manage expectations as the new chief executive of SunTrust Banks Inc.
"Expenses are too high for this environment," Rogers told investors and analysts Friday in his first earnings call since being promoted to CEO on June 1.
The Atlanta bank, which has struggled for a while because of real estate-related credit losses, produced strong second-quarter earnings and recently repaid its federal bailout. Still, Rogers confronted the fact that noninterest expenses rose 2.6%, to $1.54 billion, from a year earlier.
Rogers and Chief Financial Officer Aleem Gillani cited several factors for the higher expenses, including a $66 million increase for employee compensation, as SunTrust added client service and loss mitigation staff.
Rogers reiterated SunTrust's previously announced long-term plan to cut expenses by $300 million by the end of 2013. The cost cutting will include eliminating redundant shared services, he said. "While we are not approaching this as a head count reduction per se, we will be providing these services with fewer people in the future," Rogers said during the conference call. "This isn't a quick fix, where you lop off a lot of expenses to achieve a short-term objective."
Net income rose 138%, to $178 million, from a year earlier. Profit rose to 33 cents a share, beating analysts' estimates by 2 cents. Asset quality improved, and SunTrust's loan-loss provision fell 40.8% year over year, to $392 million.
Nonperforming loans fell 23%, to $3.6 billion, from a year earlier. Average loans rose 1.6%, to $114.9 million. But new loans are coming in slower than SunTrust executives prefer.
"Loan growth and loan demand remained weaker than we would like," Gillani said during the call.
Revenue rose 1.8%, to $2.19 billion, from a year earlier.
Management expects to ask the board's permission for a "modest increase" in the dividend for later this year, officials said.
In March, SunTrust received permission to repay $4.85 billion it received under the Troubled Asset Relief Program during the financial crisis.
The bank announced in April that it was promoting Wells to succeed James M. Wells 3rd, who turned 65 in May.
Rogers, 53, was named president in December 2008 and chief operating officer in November 2010. Rogers began his career as a management trainee in 1980 at Trust Co. of Georgia, a SunTrust predecessor, and has steadily moved up the ranks.
Wells will stay on as chairman through December. He had been the CEO since 2007 and has been chairman since 2009.
