SunTrust Banks, Inc
) first-quarter 2013 earnings came in at 63 cents per share,
marginally beating the Zacks Consensus Estimate of 61 cents. This
also comes significantly ahead of the year-ago earnings of 46
Results benefited from lower operating expenses, partially offset
by a reduction in top line. Further, stable asset quality and
capital ratios and improved deposit balances were the other
positives for the quarter.
Net income available to common shareholders in the fourth quarter
was $340.0 million, up 38.8% from $245.0 million in the
Performance in Detail
Total revenue declined 4.7% year over year to $2.1 billion. The
decrease was primarily driven by lower net interest income.
Revenues also lagged the Zacks Consensus Estimate of $2.3 billion
Net interest income declined 6.7% from the prior-year quarter to
$1.25 billion. The fall was due to lower yields on earning
assets, a dip in commercial loan-related swap income and the
foregone dividend income as a result of the accelerated
termination of the agreements related to
The Coca-Cola Company
) shares. These were partly offset by lower rates paid on
deposits and a reduction in the long-term debt.
Net interest margin came down 16 basis points (bps) from the
year-ago quarter to 3.33%. The decrease was attributable to
reduced loan yields, partially offset by a decline in rates paid
on interest-bearing liabilities.
Non-interest income was $863.0 million, falling 1.5% from $876.0
million in the prior-year quarter. The decline was mainly driven
by reduced mortgage-related income, securities gains and trading
income, partially offset by a decrease in mortgage repurchase
Non-interest expense declined 11.5% to $1.37 billion on a
year-over-year basis. The fall was attributable to the company's
continued expense reduction initiatives and a dip in the
cyclically high costs.
SunTrust's efficiency ratio decreased to 64.46% from 69.50% in
the prior-year quarter. The decrease in efficiency ratio
indicates better profitability.
As of Mar 31, 2013, SunTrust had total assets of $172.0 billion,
while shareholders' equity stood at $21.0 billion, representing
12% of the total assets.
Average loans totaled $120.9 billion, down 1.4% year over year.
The decline was primarily due to decrease in residential real
estate and government guaranteed student loans, partially offset
by targeted growth in commercial and industrial
Average consumer and commercial deposits inched up 1.5% from the
year-ago quarter to $127.7 billion. The rise was primarily due to
increases in interest bearing transaction accounts, money market
accounts and savings accounts, partially offset by decline in
higher-cost time deposits.
Overall credit quality showed improvement during the quarter.
Nonperforming loans dropped 95 bps year over year to 1.21% of
total loans. Similarly, net charge-offs fell 62 bps from the
year-ago quarter to 0.76% of annualized average loans.
Moreover, provision for credit losses declined 33.1% from the
year-ago quarter to $212.0 million.
As of Mar 31, 2013, SunTrust's capital ratios remained strong.
Tangible equity to tangible asset ratio improved 86 bps year over
year to 9.00%, tier 1 common ratio increased 77 bps to 10.10% and
Tier 1 capital ratio was up 20 bps to 11.20%.
Moreover, as of Mar 31, 2013, book value per share and tangible
book value per share improved compared with the prior-year
quarter and were $37.89 and $26.33, respectively.
Performance of Other Regional Banks
Among other regional banks,
) first-quarter 2013 earnings came a penny ahead of the Zacks
Consensus Estimate. Growth in revenues and a fall in operating
expenses, partially offset by slightly higher provision for
credit losses, were mainly responsible for the improvement in
The Bank of New York Mellon Corporation
) first-quarter 2013 adjusted earnings marginally lagged the
Zacks Consensus Estimate. A rise in operating expenses and lower
net interest income were primarily responsible for the
SunTrust's key strength includes better average client deposits,
strong credit quality and favorable deposit mix. Moreover,
SunTrust's recent acquisitions, restructuring initiatives and
cost-cutting programs are encouraging.
However, we remain concerned about the company's exposure to
risky assets and limited margin improvement. Further, a
persistent low interest-rate environment and industry challenges
might affect its top line improvement.
SunTrust currently carries a Zacks Rank #3 (Hold).
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