Company Says Progress on Key Performance Initiatives Overshadowed by Earnings Impact of
Challenging Market Conditions
ATLANTA�SunTrust Banks, Inc. (NYSE: STI) today reported net income available to common shareholders for the third quarter of 2007 of $412.6 million compared to $535.6 million in the third quarter of 2006. Net income per average common diluted share was $1.18 compared to $1.47 in the third quarter of 2006. The results included approximately $161 million in net valuation losses, or $0.28 per diluted common share after tax, and $45 million in severance expenses, or $0.08 per diluted common share after tax.
�It�s disappointing that the positive impact of continuing progress in our broad-based program to drive enhanced shareholder value was overshadowed by the difficult market conditions that affected our industry in the third quarter and that, obviously, took a significant toll on our results,� said James M. Wells III, President and Chief Executive Officer of SunTrust.
Specifically, Mr. Wells noted that the positive impact of continued expense discipline and continued net interest margin expansion was, as anticipated, offset by a decline in market value of certain financial assets held by SunTrust and severance expense related to a previously announced efficiency initiative. Third quarter results also reflected a higher provision for loan losses attributable to the deterioration in the credit environment.
�Clearly, we are not immune to the deterioration in the housing market and related turmoil in the capital markets and change in the credit cycle,� Mr. Wells observed. �That said, we remain encouraged by the underlying strength in key product areas and by the progress of our ongoing drive to enhance productivity and efficiency across the Company.�
During the quarter, the Company recognized approximately $161 million in net valuation losses. The net losses pertained primarily to mark-to-market valuations on loan warehouses and trading assets and liabilities carried at fair value. Most of the losses are unrealized, and the Company continues to evaluate alternatives in order to maximize the economic value of these assets. The after-tax earnings impact of the $161 million in net valuation losses was $0.28 per diluted common share.
The Company also incurred $45 million in severance costs during the quarter. The severance costs are for employees impacted by the elimination of 2,400 jobs during 2007 and 2008. Approximately 1,000 employees were notified of position eliminations in late August. These positions were eliminated as part of the organization review aspect of the Company�s broad-based E2 Efficiency and Productivity Program.
Idiotic Management is so RIGHT!!!!! They get rid of all the knowledge base and replace with a bunch of people that do not know what they are doing. They have no idea what is going on. It is a set up to be bought. The ones that are left want to leave because they do not know how to do their job. There is no one there to ask.