South Financial Group posts deeper 3Q loss

Increased loan loss reserves cause South Financial Group's wider 3rd-quarter loss

• On 4:08 pm EDT, Wednesday October 21, 2009

GREENVILLE, S.C. (AP) -- South Financial Group Inc., a Southeast regional bank, said it posted a wider third-quarter loss as the company increased its reserves amid tighter credit markets, and an analyst downgraded the stock.

The stock declined 45 cents, or 31.3 percent, to 98 cents in late afternoon trading.

The company posted a loss available to common shareholders, after the payment of dividends on preferred stock, of $340.8 million, or $1.95 per share. A year ago, the company lost $31.2 million, or 43 cents per share.

Results in the most recent quarter included a $200 million charge for deferred tax assets.

Revenue declined 8.7 percent to $113.5 million from $124.3 million.

Analysts polled by Thomson Reuters expected a 44-cent loss and revenue of $115.3 million.

South Financial increased its reserves for loan losses. At the end of the quarter, South Financial had $339.5 million reserved for losses, compared with $200.7 million set aside at the end of the quarter a year ago.

Net interest income, the difference between how much it costs the bank to borrow money and how much it receives from lending money to customers, declined $5.9 million.

"Net interest income did decline from lower average loan balances due in large part to our efforts to reduce noncore loans," H. Lynn Harton, president and CEO, said in a statement.

SunTrust Robinson Humphrey analyst Jennifer H. Demba downgraded the stock to "Neutral" from "Buy" and said that the deferred tax asset is the first seen this earnings season. It also overshadowed a fundamentally better quarter, Demba added.

"We believe the market will react very negatively," Demba wrote in a client note.

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