SunTrust Mortgages Drive Some Growth Amid Losses

SunTrust Banks, Inc. (STI) dislosed a first-quarter loss of $815.2m, or $2.49 per share, compared to a net income of $290.6m, or $0.81 per share, in the first quarter of 2008. The bank says losses are due largely to a non-cash, after-tax charge related to the collpase of good will towards the institution. Excluding the impairment charge of $714.8mn, the first-quarter loss equals $0.46 per share. “There are two clear messages that emerge from our first quarter results,” said James Wells, SunTrust chairman and CEO.  “First, SunTrust, like other financial institutions, is still working through credit and earnings challenges as the weak economy continues to take a toll on performance.  Second, there are some preliminary signs of improvement in several key areas, including mortgage originations, consumer and commercial deposit growth, and early-stage delinquencies.” Wells said revenue improved due to significant growth in mortgage originations — likely due to a boom in refinances. Noninterest income increased 8.4% from the first quarter of 2008, driven by an almost three-fold increase in mortgage-related income, partially offset, however, by reductions in trust and investment management and retail investment income. “Given that economic challenges remain, SunTrust is sharply focused on maintaining a strong capital position and mitigating near-term recession-related risk,” Wells said. Annualized net charge-offs came in at 1.97% of average loans for the first quarter of 2009, up from 0.97% of average loans in the first quarter of 2008 and 1.72% of average loans in the fourth quarter of 2008. Nonperforming loans to total loans increased to 3.75% as of March 31, 2009 from 3.10% as of December 31, 2008 and 1.65% as of March 31, 2008, due mainly to increased levels of residential real estate and real estate construction loans. Write to Kelly Curran at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.