Several regional banks reported strong third-quarter earnings on Tuesday, suggesting that global economic woes have yet to hit any but the biggest of institutions.
SunTrust Banks Inc., Atlanta, said its earnings for the period jumped 12%, to $188.8 million, and Birmingham, Ala.-based SouthTrust Corp. scored a 21% increase, to $94.7 million. Some other banks in the South also posted strong results, generally meeting or beating analysts' expectations.
The announcements-the first round of the industry's earnings releases- point to what may be a widening split between regional banks and their bigger brethren.
The regionals, relatively unexposed to international markets, equity markets, and hedge funds, could well post stellar returns while the industry's larger competitors take a beating.
Last week the newly formed Citigroup said it expected to report a 53% decline in third-quarter earnings, on a pro forma basis. The company was formed by the Oct. 8 merger of Citicorp and Travelers Group.
Tuesday's reports from the Southeast showed "double-digit, year-to-year gains, which the rest of the market would love to have," said Sean J. Ryan, an analyst with Bear, Stearns & Co.
SunTrust, with 91 cents per share, beat consensus forecasts by a penny, while SouthTrust, with 57 cents per share, matched predictions, according to First Call Corp.
"We're seeing good loan growth, outstanding credit quality, and fee income generally growing well. We do not see or reflect any sort of recession in our numbers," said James C. Armstrong, a SunTrust spokesman. "I've seen better times, but I've also seen a lot worse times," he added.
But there are hints of trouble ahead. Most of the companies reporting Tuesday are struggling with narrowing margins, SunTrust and SouthTrust among them. SunTrust's net interest margin shrunk to 3.87% from 4.04% in the same period a year ago as the company continued to struggle to find low-cost deposits. SouthTrust saw its margin shrink to 3.71% from 3.89%.
But some, including BB&T Corp. and Synovus Financial Corp., saw improvement in margins.
And none of the southeastern companies reporting Tuesday set off warning bells about credit quality problems.
"Are things slowing? Yes," said Nancy A. Bush, an analyst with Ryan, Beck & Co. "Can we say we're headed for a recession? Not yet."
Ms. Bush said economic evidence of a recession would become evident more quickly in other areas of the country. "I doubt very seriously you're going to find it in the southeastern companies," she said.
BB&T, based in Winston-Salem, N.C., said it earned $127.2 million, up 92.1% from the same period in 1997, which included nonrecurring charges of $42.7 million. The $33.9 billion-asset company met analysts' expectations with earnings per share of 44 cents.
Richmond, Va.-based Crestar Financial Corp. reported an 11.8% gain, to $88.9 million. Crestar, which has $25.8 billion of assets, sold $576 million in credit card loans to Fleet Financial Group during the quarter, resulting in a pretax gain of $54 million. But the company said it spent about $44 million to restructure consumer lending operations and for personnel-related costs associated with the company's pending merger with SunTrust.
Hibernia Corp., New Orleans, earned $46.7 million, up 21%. The $13.3 billion-asset company beat analysts' forecasts by a penny, reporting earnings per share of 29 cents.
Stephen A. Hansel, Hibernia Corp.'s chief executive officer, said his company is in "outstanding fundamental condition," showing double-digit gains in consumer and commercial loans.
The $9.8 billion-asset Synvous, based in Columbus, Ga., said it earned $47.4 million, up 10.1%. Earnings per share were 18 cents, in line with expectations.
