Fee income falls at SunTrust, but profits still soar
Wider margins, modest loan growth and expense controls more than made up for lower fee income at SunTrust Banks in Atlanta in the third quarter.
Net income for the $211.3 billion-asset SunTrust was $726 million, an increase of 42% from the same quarter last year. Its earnings per share of $1.56 beat the mean estimate of analysts polled by FactSet Research Systems.
Net interest income increased 5.7% to $1.5 billion. The net interest margin widened by 12 basis points to 3.27%.
Total loans not held for sale increased 2% to $147.2 billion. Compared with the year-ago quarter, commercial real estate loans increased 26% to $6.6 billion, and commercial and industrial loans increased 1% to $68.2 billion. Student lending increased 7% to $7 billion, and other direct consumer loans increased 17% to $10.1 billion.
Commercial construction, residential construction, guaranteed mortgage and home equity lending all declined.
Total deposits declined 1% to $160.4 billion.
Noninterest income declined 7.6% to $782 million because of several factors, including lower investment banking income and service fees.
For example, service charges on deposits and card fees declined because SunTrust changed its process for recognizing card rewards expenses, which resulted in four months of expenses being recorded in the third quarter. Meanwhile, investment banking income declined because of lower loan syndication and investment grade bond activity.
Noninterest expenses declined slightly to $1.4 billion. Outside processing and software expenses rose 15% to $234 million, but that was offset by lower occupancy expenses and lower employee compensation and benefits costs.
“Our commitment to investing in growth to meet more client needs is driving good loan growth which helped offset lower noninterest income,” Chairman and CEO William H. Rogers Jr. said in a press release Friday that announced the quarterly results.
“We have revenue momentum going into the fourth quarter of the year, and 2018 is on track to be the seventh consecutive year of growth in earnings per share, improved efficiency, and higher capital returns,” Rogers said.