Southern Banks Post Mixed Results; Continuing Financial Woes
January 21 2011 - 7:15PM
Dow Jones News
SunTrust Banks Inc. (STI) cemented its return to profitability
with rising revenue in the fourth quarter, but earnings for two
other Southern banks indicate that overcoming the financial crisis
remains a painfully slow process.
The results show that the South is struggling longer to leave
the mortgage meltdown behind than even the Midwest, a region that
was considered less attractive before the financial crisis because
the economy there was less robust.
The Southern economy was fueled by population growth and the
services industry, which resulted in a residential and commercial
real estate boom. "The mortgage problems are largely rooted in the
South," as were commercial real estate and construction loan
losses, said Kenneth Usdin, an analyst with Jefferies & Co.
"The Midwest emerged earlier" from the crisis.
Not only had the Southeastern banks more delinquent loans, "but,
more importantly, they were slower in addressing those issues than
financial institutions in the Midwest," said Frank Barkocy, the
director of research at Mendon Capital Advisors.
However, like in other parts of the U.S., Southern lenders said
loan demand is returning, particularly from businesses, adding to
the optimism about the banking industry's improving revenue outlook
for this year.
SunTrust stood out, analysts said. Revenue at the Atlanta bank,
the largest bank that solely operates in Southern states, rose
almost 20% from a year earlier, and was flat from the third
quarter. (Revenue at several banks fell from the third quarter.)
SunTrust reported a $185 million profit, its third consecutive
profitable quarter, and the results beat analysts' expectations. A
year earlier, it lost $248 million.
BB&T Corp. (BBT) of Winston-Salem, N.C., one of the first
banks to have repaid TARP last year, reported a 12% rise in
fourth-quarter profit from a year earlier, to $217 million. Revenue
was flat, at $2.3 billion. The bank put away more money for
delinquent loans than several analysts had expected.
First Horizon National (FHN) reported a loss of $48.7 million,
compared with a prior-year loss of $70.6 million. The latest period
included $63 million in costs related to its TARP repayment. The
bank had aggressively expanded its mortgage business, until the
board of directors changed course in 2007 and forced management
changes. Fourth-quarter revenue fell 10%. to $393 million,
following an 18% decline a year earlier.
Shares of SunTrust and BB&T rose on Friday, partly because
short sellers covered their positions, analysts said. But "there
was some real buying," particularly in BB&T's stock, Usdin
said.
SunTrust shares closed up 5.9%, BB&T rose 4.8%, First
Horizon fell 1.7% and Bank of America fell 2%.
BB&T, which had surprised investors last year with a sharp
increase in losses from loans that aren't paid back, set aside $643
million for future loan losses, 11% less than a year earlier, and
Chief Risk Officer Clark Starnes told analysts during a conference
call he expects the provision to decline further now that the
economy improved. (BB&T had bought Colonial BancGroup Inc.,
which collapsed under the weight of soured real estate loans.)
First Horizon Chief Financial Officer BJ Losch said in an
interview, "We've turned a corner on our road to recovery, but it
will still take a few years to get to the level of profitability
and returns we want to be at."
--Tess Stynes and Corrie Driebusch contributed to this
article.
-By Matthias Rieker, Dow Jones Newswires; 212-416-2471;
matthias.rieker@dowjones.com
First Horizon (NYSE:FHN)
Historical Stock Chart
From Mar 2024 to Apr 2024
First Horizon (NYSE:FHN)
Historical Stock Chart
From Apr 2023 to Apr 2024