SunTrust Banks, Inc.
) fourth-quarter 2013 earnings per share of 77 cents beat the
Zacks Consensus Estimate of 70 cents. Significantly lower
provision for credit losses and expenses were the primary drivers
of this impressive performance. Moreover, this compares favorably
with 65 cents earned in the year-ago quarter.
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For the full-year 2013, SunTrust recorded adjusted earnings per
share of $2.74 versus $2.19 in 2012. Earnings were also well
ahead of the Zacks Consensus Estimate of $2.34.
In the pre-trading session, SunTrust's stock price gained over
2.0%, reflecting a positive response among investors. However,
the positive reaction could be part of the overall positive
market sentiment prevailing at present. The stock price movement
during the trading session will actually indicate as to whether
SunTrust has been able to meet expectations.
Higher-than-expected results were driven by decrease in provision
for credit losses and operating expenses, partially offset by
decline in the top line. Further, credit quality improved in the
quarter while capital ratios were a mixed bag.
Net income available to common shareholders was $413.0 million,
increasing 18.0% from the prior-year figure of $350 million.
Performance in Detail
Total revenue (excluding net securities gains) came in at $2.06
billion, declining 10.0% from the prior-year quarter figure of
$2.29 billion. However, it beat the Zacks Consensus Estimate of
For 2013, total revenue was $8.2 billion, down 22.6% from $10.6
billion in 2012. However, total revenue surpassed the Zacks
Consensus Estimate of 8.5 billion.
Net interest income declined 2.3% from the prior-year quarter to
$1.2 billion. The fall was due to lower yields on interest
earning assets, partially offset by a rise in earning assets and
reduced interest expense.
Net interest margin fell 16 basis points (bps) from the year-ago
quarter to 3.20%. The decline was mainly due to reduced earning
asset yields, partially offset by a decline in interest-bearing
Non-interest income (excluding securities gains) was $814.0
million, falling 19.8% from $1.0 billion in the prior-year
quarter. The decline was mainly attributable to a drop in
mortgage production income.
Non-interest expense decreased 8.8% to $1.4 billion on a
SunTrust's efficiency ratio increased to 66.82% from 65.93% in
the prior-year quarter. An increase in efficiency ratio indicates
deterioration in profitability.
As of Dec 31, 2013, SunTrust had total assets of $175 billion
while shareholders' equity was $21 billion, representing 12% of
the total assets.
Average loans totaled $125.6 billion, up 3.3% year over year.
Average consumer and commercial deposits were $127.5 billion
almost in line with the year-ago quarter figure.
Overall credit quality depicted an improvement during the
quarter. Nonperforming loans fell 51 bps year over year to 0.76%
of total loans. Similarly, net charge-offs fell 90 bps from the
year-ago quarter to 0.40% of annualized average loans.
Moreover, provision for credit losses declined 69.2% from the
year-ago quarter to $101 million.
As of Dec 31, 2013, SunTrust's capital ratios were a mixed bag.
Tangible equity to tangible asset ratio improved 18 bps year over
year to 9.00%. However, Tier 1 common equity ratio decreased 24
bps to 9.80% and Tier 1 capital ratio was down 33 bps to 10.80%.
As of Dec 31, 2013, book value per share and tangible book value
per share improved compared with the prior-year quarter and were
at $38.61 and $27.01, respectively.
We believe that disciplined expense management, strong credit
quality and a favorable deposit mix will continue to support
SunTrust's financials. However, we remain concerned about the
company's exposure to risky assets and limited margin
improvement. Further, a persistent low interest rate environment
and ongoing industry challenges might affect its top-line growth
in the near term.
SunTrust currently carries a Zacks Rank #3 (Hold).
Among other major regional banks,
Fifth Third Bancorp
) are scheduled to report results on Jan 23 while
Northern Trust Corp.
) will release earnings on Jan 22.