SunTrust (STI) Beats on Q1 Earnings as Expenses Decline

SunTrust Banks ' STI first-quarter 2018 earnings of $1.29 per share outpaced the Zacks Consensus Estimate of $1.11. Also, the figure compared favorably with the prior-year quarter's earnings of 91 cents.

Results were primarily driven by rise in net interest income, lower expenses as well as lower provisions. Also, an improvement in overall asset quality was a tailwind. However, decline in non-interest income hurt results to some extent.

Net income available to common shareholders for the quarter was $612 million, up 36% from the prior-year quarter.

Net Interest Income Increases, Costs Decline

Total revenues (taxable equivalent basis) for the quarter were $2.26 billion, almost stable year over year. However, the figure lagged the Zacks Consensus Estimate of $2.28 billion.

Net interest income (FTE basis) increased 4% year over year to $1.46 billion.

On a year-over-year basis, net interest margin was up 15 basis points (bps) to 3.24%, mainly reflecting higher earning asset yields, lower premium amortization expenses and positive mix shift in the loan portfolio.

Non-interest income was $796 million, down 6% from the prior-year quarter. The decline was due to a fall in capital markets-related income, mortgage-related income as well as client transaction-related fees.

Non-interest expenses declined 3% from the year-ago quarter to $1.42 billion, largely due to lower operating losses and other non-interest expenses.

Credit Quality Improved

Total non-performing assets were $778 million as of Mar 31, 2018, down 9% from the prior-year-quarter end. Non-performing loans fell 5 bps year over year to 0.50% of total loans held for investment.

Further, the rate of net charge-offs decreased 10 bps year over year to 0.22% of total average loans held for investment. Also, provision for credit losses plunged 76% from the year-ago quarter to $28 million.

Strong Balance Sheet

As of Mar 31, 2018, SunTrust had total assets of $204.9 billion while shareholders' equity was $24.3 billion, representing nearly 12% of total assets.

As of Mar 31, 2018, loans held for investments were $142.6 billion, down marginally from the prior-quarter end. Total consumer and commercial deposits increased 1% from the prior quarter to $161.4 billion.

SunTrust's estimated common equity Tier 1 ratio under Basel III (on a fully phased-in basis) was 9.85% as of Mar 31, 2018.

Share Repurchase

During the reported quarter, the company bought back shares worth $330 million.

Our Viewpoint

SunTrust remains well positioned for growth, given its favorable deposit mix and enhanced credit quality. Easing margin pressure and initiatives to enhance efficiency are likely to support its revenues. However, a slowdown in the mortgage business is expected to hurt the top-line growth. This makes us apprehensive for the near-term. Also, exposure to risky loan portfolio remains a concern.

SunTrust Banks, Inc. Price, Consensus and EPS Surprise

SunTrust Banks, Inc. Price, Consensus and EPS Surprise | SunTrust Banks, Inc. Quote

SunTrust carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Performance of Other Major Regional Banks

Despite dismal investment banking performance, higher interest rates, trading rebound and tax cuts drove Bank of America's BAC first-quarter 2018 earnings of 62 cents per share, which outpaced the Zacks Consensus Estimate of 59 cents. Net interest income growth, higher card income and impressive equity trading income supported revenues. Operating expenses recorded a decline. Additionally, provision for credit losses remained stable.

Comerica Inc. CMA reported adjusted earnings per share of $1.54 in first-quarter 2018, up from the prior-year quarter's adjusted figure of $1.02 on high interest income. The Zacks Consensus Estimate was $1.49. Higher revenues and improved credit metrics were recorded. Moreover, rise in loans was another tailwind. Nonetheless, lower deposits and rise in expenses were undermining factors.

The PNC Financial Services Group PNC reported first-quarter 2018 earnings per share of $2.43, beating the Zacks Consensus Estimate by a penny. Moreover, the bottom line reflected 24% increase from the prior-year quarter.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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