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SunTrust Banks Q1 Profit Soars, Tops Estimates

SunTrust Banks Q1 Profit Soars, Tops Estimates
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4/23/2012 7:18 AM ET

SunTrust Banks Inc. (STI: Quote), a diversified financial services holding company, on Monday reported that its first-quarter profit grew more than six fold, benefited mainly by continued improvement in core business fundamentals and lower provision for bad loans. Earnings per share significantly surpassed analysts' estimates with top line also beating their view.

William Rogers, Jr. chairman and chief executive of SunTrust Banks said, "Our core performance this quarter drove a solid start to 2012 and marked a continuation of the improved momentum we built during 2011. Improved revenue, as well as continued favorable trends in loans, deposits, and credit metrics were hallmarks for the quarter."

For its first quarter, net income available to common shareholders soared to $245 million or $0.46 per share from $38 million or $0.08 per share last year.

On average, 32 analysts polled by Thomson Reuters expected earnings of $0.33 per share for the quarter. Analysts' estimates typically exclude one-time items.

Excluding effect of prior year's accelerated accretion associated with repurchase of preferred stock issued to the U.S. Treasury, net income more than doubled from $0.22 per share.

Total revenue, on a fully taxable-equivalent basis, grew 3 percent to $2.22 billion. Revenues, excluding securities gains, improved 5 percent to $2.20 billion, beating Wall Street analysts' estimate of $2.09 billion.

The company attributed the growth in revenues mainly to higher mortgage-related revenue and higher net interest income.

Net interest income grew 5 percent to $1.34 billion, driven by loan balances and lower interest expense, due to favorable trends in the deposit mix and pricing.

Meanwhile, net interest margin fell four basis points to 3.49 percent primarily due to 5 percent growth in earning assets, the company noted.

In the quarter, non-interest income declined slightly attributable to lower securities gains and card fees, largely offset by higher mortgage-related income.

Non-interest expense increased 5 percent driven by higher employee compensation and benefits expenses and higher operating losses. Rogers noted that the company's expense savings program continues to progress.

Provision for credit losses was $317 million, lower than last year's $447 million. The company noted that credit quality continued to improve with net charge-offs, non-performing loans and assets, and early stage delinquencies all declining.

The bank said its estimated capital ratios continue to be well above current regulatory requirements, as well as the Basel III proposed guidance. The Tier 1 common ratio increased to 9.30 percent.

SunTrust in mid-March had fell short by at least one measure of the U.S. Federal Reserve's four regulatory minimum levels under a hypothetical stress scenario, according to results of the latest round of bank stress tests released by the Fed.

The tests, called the Comprehensive Capital Analysis and Review, were conducted by the Fed to evaluate whether the large bank holding companies would have sufficient capital in times of severe economic and financial stress to continue to lend to households and businesses. Many of the large bank holding companies, which passed the stress tests, later announced dividend increases and/or stock buyback programs.

SunTrust shares closed Friday's regular trading at $22.60, down $0.14 or 0.62 percent.

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by RTT Staff Writer

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