Noninterest Income and Expense Improvements Contributed to Core Earnings Growth
ATLANTA, Jan. 18, 2013 /PRNewswire/ -- SunTrust Banks, Inc. (NYSE: STI) today reported net income available to common shareholders of $350 million, or $0.65 per average common diluted share, for the fourth quarter of 2012. This compares to earnings per share of $0.13 in the fourth quarter of last year and $1.98 per share in the prior quarter, which included $1.40 per share related to third quarter actions the Company announced to improve its risk profile and strengthen its balance sheet. For 2012, SunTrust earned $3.59 per share compared to $0.94 per share in 2011.
"Favorable performance trends continued, including strong noninterest income and lower expenses, marking another quarter of core earnings expansion," said William H. Rogers, Jr., chairman and chief executive officer of SunTrust Banks, Inc. "We concluded the year in an even stronger position, driving higher revenue and efficiency gains, while further improving our overall risk profile."
Fourth Quarter 2012 Financial Highlights
Continued favorable core performance trends helped drive net income available to common shareholders of $350 million, or $0.65 per average common diluted share.
Reported revenue decreased $1.6 billion from the prior quarter due to the third quarter gain associated with the accelerated termination of the agreements regarding The Coca-Cola Company ("KO") common stock.
Excluding securities gains, revenue increased $388 million from the prior quarter and $262 million from the prior year.
Noninterest income increased $413 million from the prior quarter due to record investment banking income and a lower mortgage repurchase provision. These items, together with higher core mortgage production income, also drove the $310 million growth from the prior year.
Net interest income decreased $25 million from the prior quarter, primarily due to the previously announced loan sales, and the net interest margin declined 2 basis points. Net interest income decreased $48 million compared to the fourth quarter of last year due to lower earning asset yields.
Noninterest expense decreased $216 million from the prior quarter, due to the third quarter write-down of affordable housing investments and the charitable contribution of KO shares to the SunTrust Foundation, as well as lower employee compensation and reduced credit-related expenses. Noninterest expense decreased $157 million from the fourth quarter of last year due to a decline in cyclically-high costs and the fourth quarter 2011 expense related to the potential national mortgage servicing settlement.
Fourth quarter 2012 noninterest expense included a charge associated with the recent agreement in principle regarding the Independent Foreclosure Review.
Current quarter results benefited from favorable discrete tax items.
Average performing loans decreased $1.7 billion, or 1%, compared to the prior quarter primarily due to the sales of government guaranteed mortgage and student loans. Average performing loans increased $3.6 billion, or 3%, over the fourth quarter of last year, due to targeted growth, particularly in commercial and industrial loans.
Average client deposits increased $2.6 billion, or 2%, from the prior quarter, and $2.8 billion, or 2%, from the fourth quarter of last year. The favorable shift in the deposit mix toward lower-cost demand deposits continued.
Estimated capital ratios continue to be well above current regulatory requirements. The Tier 1 common equity ratio increased to an estimated 10.00%, up from 9.82% at the end of the prior quarter.
In December, the Company issued $450 million of Series E preferred stock.
The overall risk profile of the balance sheet continued to improve. Nonperforming loans declined $184 million, or 11%, sequentially and were 1.27% of total loans as of year-end, compared to 1.42% last quarter and 2.37% a year ago.
During the quarter, the Company reclassified consumer and mortgage loans that were discharged as a result of Chapter 7 bankruptcy. This resulted in a $232 million addition to nonperforming loans and $79 million in charge-offs and loan loss provision.
Provision for credit losses and net charge-offs were essentially flat compared to the prior quarter, after adjusting for unusual items recognized in both quarters.