SunTrust Banks, Inc. (STI), the holding company for SunTrust Bank, reported Thursday a loss for the third quarter, that reflected debt charges, higher loan-loss provisions and a sharp fall in revenues, in the midst of continued challenging economic and credit operating environment. Looking to the balance of 2009 and into 2010, the company said it remains focused on risk-mitigation, efficiency and executing client-driven initiatives to deliver steadily improving results.
Net loss for the quarter was $316.9 million, compared to prior year's net income of $312.4 million. SunTrust Banks said its third-quarter net loss available to common shareholders was $377.1 million or $0.76 per share, compared to a net income of $304.4 million or $0.87 per share in the prior year period.
The latest quarter results included $131.3 million or $0.16 per share of mark-to-market losses on the company's public debt and related hedges carried at fair value.
On average, 26 analysts polled by Thomson Reuters expected the company to report a loss of $0.65 per share for the quarter. Analysts' estimates typically exclude special items.
According to the company, the loss in the quarter was primarily attributable to the $390.8 million increase in the provision for loan losses and a $292.8 million increase in valuation losses associated with the fair value of the company's public debt.
Commenting on the results, James Wells III, SunTrust Chairman and Chief Executive Officer, stated, "Our third quarter bottom line results reflected the difficult operating environment for more traditional banks. Continued recession-related earnings pressures included higher credit costs, softer fee income and generally weak loan demand, as consumers de-leverage and businesses pay down existing credit lines and defer investments. Nevertheless, we are encouraged by some positive core business trends and the prospect of an improving economy."
Total revenue, on fully taxable equivalent basis, for the quarter, declined 21% to $1.943 billion from $2.461 billion in the year-ago period. Excluding net securities gains and losses, fully taxable-equivalent total revenue fell 17.1% to $1.897 billion from $2.288 billion a year ago. Fourteen analysts' consensus estimate was $2.11 billion for the quarter.
Overall revenue remained cyclically soft with stable net interest income and lower noninterest income, the company said. On a fully taxable equivalent basis, net interest income for the quarter was $1.168 billion, down 0.6% from $1.176 billion last year, reflecting an expanded net interest margin to 3.10% from prior year's 3.07% that was offset by a reduction in average earning assets.
The company noted that the growth in margin was due to a significant increase in client deposits, as well as an improved mix of deposits, that enabled a reduction in higher cost sources of funding. Non-interest income for the quarter declined 39.7% to $775.1 million from $1.285 billion in the previous year.
In the quarter, provision for loan losses was $1.134 billion, up 125% from $503.7 million a year ago. Noninterest expense fell 14.2% to $1.429 billion from $1.665 billion in the previous year.
In the preceding second quarter, SunTrust had recorded net loss of $183.5 million, net loss available to common shareholders of $164.4 million or $0.41 per share, compared to prior year's net income. Fully taxable-equivalent revenue declined 15.6% to $2.19 billion. Fully taxable-equivalent net interest income was $1.12 billion and noninterest income was $1.072 billion, both lower than last year.
Among peers, Regions Financial Corp. (RF), a holding company for the Regions Bank, Tuesday posted a loss in the third quarter, reflecting increased loan loss provision and a charge related to branch consolidation. The Birmingham, Alabama-based company's third-quarter net loss available to common shareholders was $437 million or $0.37 per share, compared to a profit of $79 million or $0.11 per share last year. Net interest income declined to $845 million from $922 million last year, while non-interest income rose to $772 million from $719 million a year earlier.
BB&T Corp. (BBT) recently reported a sharp decline in third-quarter profit to $152 million or $0.23 per share from prior year's $358 million or $0.65 per share, hurt by a significant provision for credit losses and other costs related to the credit environment. Net interest income, on a taxable equivalent basis, advanced 14.2% to $1.27 billion, and non-interest income increased 18.7% to $940 million, reflecting another strong performance from BB&T's mortgage banking operation during the quarter, as well as increased revenue from BB&T's insurance operation and other nondeposit fees and commissions.
Last week, First Horizon National Corp. (FHN), the holding company for First Tennessee Bank NA, reported a narrower-than-expected net loss for its third quarter, helped by lower provision for loan losses as well as reduced non-interest expense. On a continuing operations basis, loss was $24.81 million or $0.20 per share, compared to loss of $120.47 million or $0.57 per share in the previous year. According to Memphis, Tennessee-based First Horizon, it experienced positive results in key areas during third quarter 2009, which reflected encouraging signs including overall credit quality improvement, average core deposit growth, net interest margin expansion, and further balance sheet reduction. Total revenues for the quarter dropped 5% year-over-year to $494.72 million.
For the first nine months of fiscal 2009, SunTrust's net loss was $1.316 billion, compared to prior year's net income of $1.143 billion. Net loss available to common shareholders was $1.417 billion or $3.41 per share, compared to net income of $1.116 billion or $3.19 per share last year.
Net loss available to common shareholders, excluding goodwill/intangible impairment charges other than MSRs, was $702.2 million or $1.69 per share, compared to prior year's net income of $1.143 billion or $3.27 per share.
Total fully taxable equivalent revenue for the nine-month period dropped 12.8% to $6.350 billion from $7.284 billion a year earlier, and total revenue - fully taxable equivalent-excluding securities gains and losses declined 4.5% to $6.325 billion from $6.622 billion last year. For the nine months, fully taxable-equivalent net interest income declined 4.1% year-over-year to $3.382 billion, and total noninterest income fell 21% to $2.968 billion.
Looking forward, Wells reiterated that with recent actions to bolster capital, liquidity, and reserves, "SunTrust possesses the resources necessary to successfully manage through sustained economic weakness should it occur."
STI, which has been trading in a broad range of $6.00 to $43.33 for the past 52 weeks, closed Wednesday's regular trading session at $20.76, down $0.06, on a volume of 10.8 million shares.
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