SunTrust Banks, Inc. (STI) reported Friday a significant increase in second-quarter profit, benefited by lower bad loan provisions and higher revenues, despite margin pressure. Quarterly earnings per share and top line beat analysts' estimates. According to the financial services holding company, continued improvement in core business fundamentals helped drive net income.
Chairman and Chief Executive Officer William Rogers, Jr. said, "We delivered another quarter of improved results marked by solid non-interest income growth and increased average performing loan balances, which were up nearly $10 billion from the second quarter of last year. We remain focused on executing our strategies to drive better core performance and efficiency across the organization."
For the second quarter, net income available to common shareholders climbed 55 percent to $270 million from $174 million last year. Earnings per share grew 52 percent to $0.50 from prior year's $0.33.
The latest quarter results included a $13 million non-cash debt extinguishment charge related to the previously announced redemption of higher cost trust preferred securities.
On average, 34 analysts polled by Thomson Reuters expected the company to report earnings of $0.44 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenue for the three-month period increased 2 percent to $2.25 billion versus $2.20 billion last year, mainly due to higher mortgage-related revenue.
Total revenue, excluding net securities gains/losses, grew 2.8 percent to $2.23 billion and topped analysts' consensus of $2.17 billion for the quarter.
The company's net interest income increased 2 percent, primarily due to higher loan balances and favorable trends in deposit mix and pricing. These were partially offset by lower yields on average earning assets.
Net interest margin, however, declined 14 basis points from last year to 3.39 percent hurt by a 40 basis point decline in loan yields, the result of the continued low interest rate environment.
In the quarter, provision for credit losses plunged 23 percent to $300 million. The allowance for loan losses was $2.3 billion, or 1.85 percent of total loans.
Non-interest income for the quarter increased 3 percent, due primarily to higher mortgage production income as strong production volumes continued through the quarter, the company noted. The growth was partially offset by lower securities gains, investment banking income, and card fees.
In the quarter, card fees fell 37 percent from the prior year as the regulations on debit card interchange fees became effective at the beginning of the fourth quarter of 2011.
The company added that its investment banking income declined on lower syndicated finance fee income, while trading income was benefited by higher core trading income due to improved market conditions.
According to the company, average performing loans increased $9.7 billion from last year as a result of targeted loan growth, while certain real estate-related loan portfolios continued to decline. Average demand deposits increased 23 percent.
In pre-market activity, SunTrust Banks shares are currently trading at $24.45, up $0.21 or 0.87 percent.
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