1st Union Gains 24%, SunTrust 10%
Leading the charge of third-quarter earnings, two southeastern superregionals reported robust net income driven by solid loan growth, stable net interest margins, and improved asset quality.
First Union Corp. earned $235 million, up 24% from the year-ago period. SunTrust Banks Inc. returned $132 million to the bottom line, representing a 10% gain.
"The loan growth that we're seeing has really been stupendous," said Dean Witter analyst Anthony R. Davis.
First Union beat a Wall Street earnings per-share consensus estimate of $1.32 by three cents. SunTrust was fight in line with consensus at $1.11 a share.
Several smaller southeastern regionals also turned in excellent performances Tuesday.
SouthTrust Corp., Birmingham, Ala., earned $44.5 million, up 15% from the year-ago quarter. Synovus Financial Corp., Columbus, Ga., reported net income of $22 million, 17% higher than last year's third quarter.
First Virginia Banks Inc., Falls Church, earned $27.6 million, down slightly from $28.5 million in the year-ago period. But First Virginia's profitability level - with a 1.52% return on assets - remains among the highest in the industry.
Baton Rouge, La.-based Premier Bancorp, which reported late Monday, said its earnings of $20 million were up 9% from the year-ago quarter.
Charlotte, N.C.-based First Union, which has $74 billion in assets, said continuing strength in net interest income, fee income, loan growth and credit quality contributed to its earnings improvement. Third quarter results represent a 1.31% return on average assets and 17.29% return on equity.
First Union's net interest income gained 10% from the year-ago quarter to $799 million, driven largely by 12% loan growth.
Chief financial officer Robert T. Atwood said First Union's commercial loans surged "pretty much across the board," with particular strength in Florida, North Carolina and Virginia. Mr. Atwood said consumer loans, which grew slightly more than commercial, were led by credit card and indirect auto.
Fee income was up 5% during the period, to $303 million, on the strength of increased trust, brokerage, and mortgage banking income. Mr. Atwood said the increase in brokerage commissions came from Lieber & Co., the mutual funds company First Union acquired in June.
SunTrust, with $42 billion in assets, managed to offset a decline in noninterest income, which was down 5% to $173 million, with a 3% increase in net interest income, which reached $422 million.
"They met everyone's expectations, as they are wont to do," said Robinson-Humphrey analyst John Coffey. "These guys are probably as well positioned as anyone to withstand rising interest rates and the quarter kind of bore that out."
SunTrust investor relations spokesman Jim Armstrong said the Atlanta-based banking company has been experiencing 9% to 10% annualized loan growth this year, led by adjustable-rate single family mortgages.
SunTrust also benefited from a 30% drop in its loan-loss provision, to $35 million from $50 million in the year-ago quarter, and its continuing share repurchase program, which helps earnings per-share by spreading net income over a smaller base.
SunTrust bought back 1.4 million of its own shares during the fourth quarter, bringing to 7.3 million the number repurchased since the board authorized a 12 million-share buyback last October.
The fall in fee income was caused principally by a decline in mutual funds commissions, down to $2.3 million from $6.8 million in the year-ago quarter, related to this year's stagnant stock market. Mortgage origination fees also fell with the end of the refinancing boom. SouthTrust, which has $17 billion in assets, reported earnings per-share of 55 cents, right in line with consensus estimates.
Synovus, with $5.9 billion in assets, earned 33 cents in the quarter, a cent more than analysts predicted. Premier, with $5.3 billion in assets, reported 59 cents per-share, 7 cents more than expected.
First Virginia, with $7.2 billion of assets, was the only disappointment in the group.
Its 85 cents a share came in 6 cents below estimates. Third-Quarter Highlights Earnings % (million) increaseFirst Union $235 24%First Financial 14 21Synovus Financial 22 17SouthTrust 45 15SunTrust Banks 132 10Premier Bancorp 20 9Sources: Individual banks
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