SunTrust Banks, Inc. (STI) reported Friday a 39 percent climb in first-quarter profit and earnings per share came in above Wall Street estimates, benefited by continued expense reductions and improvement in credit quality. The diversified financial services holding company's quarterly revenues, meanwhile, declined and missed estimates as both net interest and noninterest incomes declined.
Chairman and Chief Executive Officer William Rogers, Jr. said, "First quarter 2013 earnings were notably higher than last year. Our expenses declined meaningfully, not only related to the continued abatement of cyclically high costs, but also as a direct result of our concerted efforts to improve our efficiency."
Rogers added that the efficiency ratio declined over five percentage points from last year, despite lower revenue associated with mortgage production income and the effects of seasonality in other categories.
In its first quarter, SunTrust Banks' net income available to common shareholders grew to $340 million from $245 million last year. Earnings per share grew 37 percent to $0.63 from $0.46 a year ago. On average, 30 analysts polled by Thomson Reuters expected the company to report earnings of $0.61 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenue, on a fully taxable-equivalent or FTE basis, dropped 5 percent to $2.114 billion. Revenue, FTE excluding securities gains, decreased 4 percent to $2.112 billion. Seventeen analysts had consensus revenue estimate of $2.25 billion for the quarter.
Net interest income for the quarter declined to $1.25 billion from $1.34 billion last year due to net interest margin compression of 16 basis points as the decline in earning asset yields outpaced the decline in interest-bearing liability costs. Net interest margin was 3.33 percent, lower than last year's 3.49 percent.
The company experienced a 34 basis point decrease in loan yields, driven by the continued low interest rate environment and a decrease in commercial loan-related swap income, as well as a 60 basis point decrease in the yield on the investment securities portfolio, mainly due to the forgone dividend income associated with Coca-Cola Co. (KO) stock.
The provision for credit losses declined approximately 35 percent from last year to $212 million.
Non-interest income was $863 million, lower than $876 million in the prior year quarter primarily driven by reductions in mortgage servicing related income, securities gains, and trading income and was largely offset by a lower mortgage repurchase provision.
Non-interest expense of $1.4 billion declined 12 percent from last year reflecting the company's continued expense reduction initiatives and the abatement of cyclically high costs. Expenses were at their lowest level in three years, the company said.
Average loans decreased 1 percent, predominantly related to declines in residential real estate and government guaranteed student loans, substantially offset by targeted growth in commercial and industrial loans.
Meanwhile, the company's average client deposits increased 1 percent. The company said it experienced a shift out of higher cost time deposits into lower cost deposit products.
SunTrust Banks shares closed Thursday's trading at $27.32, down $0.29 or 1.05 percent.
For comments and feedback: editorial@rttnews.com