By Andrew R. Johnson and Everdeen Mason
SunTrust Banks Inc. said its fourth-quarter earnings rose 20% as
a drop in the regional bank's expenses masked a decrease in
revenue, which was hit by lower mortgage activity.
The Atlanta-based bank's shares rose 2.9% to $39.10 in pre-open
trading Friday as results beat analysts' estimates.
SunTrust, like other regional banks, has seen mortgage
refinancing wane due to higher home-loan rates. The drop in
activity, combined with muted economic growth, has put pressure on
banks to slash costs to make up for tepid loan demand.
The company reported a profit of $426 million, up from $356
million a year earlier. Per-share earnings, which reflect the
payment of preferred dividends, were 77 cents compared with 65
cents a year ago.
Revenue, excluding securities gains, fell 10% from a year
earlier to $2.06 billion on lower net interest income and mortgage
production income.
Analysts polled by Thomson Reuters expected earnings of 69 cents
a share on $2.04 billion in revenue.
SunTrust's total loans grew 5.3% from a year earlier to $127.9
billion, spurred by growth in business and commercial real-estate
loans.
Other regional banks have reported mixed lending results for the
fourth quarter.
PNC Financial Services Group Inc., a Pittsburgh-based bank, said
Thursday its loan portfolio grew 5% from a year earlier to $195.6
billion, driven by an 8% jump in commercial loans. The company
expects "modest growth" in loans the first quarter, Chief Financial
Officer Robert Reilly said.
But Winston-Salem, N.C.-based lender BB&T Corp. said its
loan portfolio increased 1.1% from a year earlier to $114.8 billion
but was down 1.2% from the third quarter, a drop the bank
attributed to a consumer-lending unit it recently sold. That
business had about $500 million in its loan portfolio.
Banks are hoping recent signs of economic improvement could
translate into stronger demand for loans this year by businesses,
which have been cautious about taking on new debt. Many lenders say
use of commercial credit lines by companies has remained stubbornly
low as borrowers use cash on hand to fund their operations.
A resurgence in business activity could help offset continued
sluggishness in the mortgage business, which has been upended as a
refinancing boom that bolstered many banks came to a halt last
year.
SunTrust said mortgage-lending income plummeted to $31 million
in the fourth quarter, down from $241 million a year earlier.
Mortgage originations fell 51% to $3.9 billion in the quarter, with
refinancing loans falling 70%.
The company has been cutting costs to offset slow loan growth
and low interest rates. Noninterest expense dropped 8.8% from a
year earlier to $1.38 billion.
SunTrust said in October that it would pay more than $1 billion
to settle federal allegations of mortgage violations, as the bank
aimed to put behind it costly legal issues stemming from the
financial crisis.
The Atlanta bank had said it would pay $468 million in cash and
provide $500 million in relief to borrowers under agreements with
the Justice Department, Department of Housing and Urban
Development, and Federal Reserve.
It also reached deals with government-backed mortgage firms
Fannie Mae and Freddie Mac to resolve claims that it sold the
companies shoddy loans, costing more than $200 million.
For the quarter, the bank's net interest margin, which measures
the bank's lending and investing profitability, narrowed to 3.2%
from 3.36% a year earlier and but was up from 3.19% in the third
quarter.
The provision for credit losses was $101 million in the quarter,
down from $328 million a year earlier and up from $95 million in
the prior quarter.
Write to Andrew R. Johnson at andrewr.johnson@wsj.com and
Everdeen Mason at everdeen.mason@wsj.com
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