SunTrust rides strong mortgage performance to increase income in Q1

SunTrust’s reported that its earnings increased to $47 million, or 84 cents a share, up from $429 million or 78 cents a share from the first quarter of 2015, and it’s revenue rose 5.4% to $2.1 billion.

Analysts projected 75 cents per share profit on $2.03 billion in revenue, according to Thomson Reuters for an article by Austen Hufford for the Wall Street Journal.

From the article:

SunTrust, which operates about 1,400 branches across southern and mid-Atlantic states, has had a more cautious outlook in recent quarters than many of its peers and has predicted lower-for-longer interest rates.

Noninterest expenses grew 3% in the first quarter, to $1.28 billion due to due to higher marketing and outside processing costs.

The company set aside $101 million in the first quarter, an increase from $50 million of the fourth quarter of 2015 and $46 million from the prior year, according to the article. 

The bank also rode higher revenue from mortgage servicing, which runs in contrast to some of the nation's largest nonbank mortgage servicers.

According to SunTrust's earnings statement, its mortgage production income for the current quarter was $60 million, compared to $53 million for the prior quarter and $83 million for the first quarter of 2015.

The $7 million increase from the prior quarter was primarily due to higher refinance activity and slightly higher gain-on-sale margins, SunTrust said. Mortgage application volume increased 37% compared to the fourth quarter of 2015.

The $23 million decrease compared to the first quarter of 2015 was driven primarily by a decline in gain-on-sale margins and reduced refinance activity.

Mortgage servicing income was $62 million for the current quarter, compared to $56 million in the prior quarter and $43 million in the first quarter of 2015. 

The $6 million increase from the prior quarter was driven by improved net hedge performance combined with a decline in the servicing asset decay, partially offset by a seasonal reduction in servicing fees. 

The $19 million increase compared to the first quarter of 2015 was also due to improved net hedge performance and a decline in the servicing asset decay, accompanied by higher servicing fees as a result of a larger portfolio, the bank said.