Results Driven by Favorable Trends in Core Performance and Previously Announced Actions to Improve Risk Profile and Strengthen Balance Sheet
ATLANTA, Oct. 22, 2012 /PRNewswire/ -- SunTrust Banks, Inc. (STI) today reported net income available to common shareholders of $1.1 billion, or $1.98 per average common diluted share, for the third quarter of 2012. Third quarter results include the impact of previously announced actions to improve the Company's risk profile and strengthen its balance sheet. Including these transactions, which are outlined below, earnings per average common diluted share increased $1.48 from the second quarter of 2012 and $1.59 from the third quarter of 2011. For the first nine months of 2012, SunTrust earned $2.94 per share compared to $0.81 per share earned in the same period last year.
Third Quarter Impact of Previously Announced Actions to Improve Risk Profile and Strengthen the Balance Sheet
•The acceleration of the termination of agreements regarding shares owned in The Coca-Cola Company ("KO") resulted in a pre-tax securities gain of $1.9 billion. In addition, SunTrust donated one million shares of KO, valued at $38 million, to the SunTrust Foundation which increased noninterest expense.
•The mortgage repurchase provision of $371 million increased the mortgage repurchase reserve to a level that is expected to cover the estimated losses on loans sold to Government Sponsored Enterprises ("GSEs") prior to 2009 and negatively affected noninterest income.
•The sale of $0.5 billion of nonperforming mortgage and commercial real estate loans increased charge-offs and the loan loss provision by $172 million.
•The movement of $1.4 billion of delinquent and current student loans and $0.5 billion of delinquent Ginnie Mae loans to loans held for sale decreased noninterest income by $92 million.
•Additionally, valuation losses related to the planned sale of $0.2 billion of affordable housing investments resulted in a $96 million increase in noninterest expense.
•Collectively, these actions contributed $753 million to net income available to common shareholders, or $1.40 per average common share, in the third quarter.
"This quarter's actions more favorably position the Company for the future. In addition, we demonstrated another quarter of improved core performance," said William H. Rogers, Jr., chairman and chief executive officer of SunTrust Banks, Inc. "As we manage through the challenging revenue environment, we remain intensely focused on deepening client relationships and improving efficiency." Mr. Rogers noted that favorable core performance trends include strong mortgage production income, continued commercial and industrial loan growth, solid noninterest bearing deposit account gains, and a marked decrease in nonperforming loans.
Third Quarter 2012 Financial Highlights
•The aforementioned actions to reduce risk and strengthen the balance sheet, in addition to continued improvement in core business fundamentals, drove net income to common shareholders of $1.1 billion, or $1.98 per average common diluted share.
•Revenue increased $1.6 billion from the prior quarter and the third quarter of last year. •Noninterest income increased $1.6 billion from the prior quarter and the third quarter of last year, primarily driven by the aforementioned actions to improve the risk profile and strengthen the balance sheet. Core noninterest income growth was driven by higher mortgage production and investment banking income.
•Net interest income decreased $5 million, or 0.4%, from the prior quarter primarily due to the lost dividend income from the KO transaction. Net interest margin declined one basis point, primarily due to the lower dividend income and loan yields, offset by lower deposit rates paid and the redemption of higher cost trust preferred securities. Net interest income increased $8 million, or 1%, from the third quarter of last year due to higher average loan balances and favorable deposit trends.
•Noninterest expense increased $180 million from the prior quarter and $166 million from the third quarter of last year primarily due to the loss related to the expected sale of affordable housing investments and the charitable contribution to the SunTrust Foundation.
•Average performing loans increased $0.9 billion over the prior quarter and $9.5 billion over the third quarter of last year as targeted loan growth, particularly commercial and industrial loans, more than offset declines in certain real estate-related loan portfolios.
•Average client deposits declined $0.5 billion, or 0.4%, from the prior quarter, while the favorable shift in the deposit mix toward lower cost accounts continued with a $1.2 billion, or 3%, increase in demand deposits. Average client deposits were up $2.4 billion over the same quarter last year.
•Estimated capital ratios continue to be well above current regulatory requirements. The Tier 1 common equity ratio increased to an estimated 9.80%, up from 9.40% at the end of the prior quarter.
•The overall risk profile of the balance sheet improved due to the disposition of nonperforming and delinquent loans.
•Nonperforming loans declined 30% sequentially and were 1.42% of total loans as of quarter end compared to 2.76% a year ago.
•Provision for credit losses increased $150 million and $103 million compared to the prior quarter and third quarter of 2011, respectively. Increases in both periods were a result of incremental charge-offs related to the sale of nonperforming loans and a credit policy change regarding junior lien loans during the third quarter.