Robust loan growth in Atlanta and lower funding costs helped boost second-quarter earnings at SunTrust Banks Inc. by 8% to $152.1 million.

While the Atlanta-based bank also benefited from improved fee income, higher expenses dampened bottom line gains.

"They continue to do what they said they're going to do - nothing more and nothing less," said R. Harold Schroeder, an analyst with Keefe, Bruyette & Woods Inc.

Dean Witter's Anthony R. Davis cautioned that SunTrust's earnings probably will not be representative of other big regional banks reporting over the next two weeks. SunTrust manages a relatively small credit card portfolio - only $770 million in outstandings - and did not experience a significant deterioration in consumer credit quality, which could become a problem at other institutions.

SunTrust also received an abnormal boost in its net interest margin, up 8 basis points from the first quarter to 4.43%, due to downward repricing on a money market account. SunTrust attracted billions in new deposits in the first quarter by offering a teaser rate of 6.50%, which has subsequently fallen to 4.85% for accounts holding $100,000 and up.

SunTrust reported a big jump in noninterest income from the year-earlier quarter, up 15% to $200 million. But the improvement came from just a few areas - principally trust, mortgages, and service charges - reflecting a narrower product mix at SunTrust compared to rivals such as NationsBank Corp. and First Union Corp.

"We may see better fee income at some of these other banks that have bigger presences in mortgage banking and investment management," Mr. Davis said.

SunTrust spokesman James Armstrong cited the increase in mortgage and trust fees as indications of progress with the bank's "Growth Project," a multi-year program to boost revenues in several major business lines.

But analysts noted that expenses related to that project, including hiring hundreds of new employees for its growing network of supermarket branches, offset much of the earnings improvement. SunTrust's total noninterest expense jumped 12% to $393.4 million from the year-ago quarter.

"I'm kind of hard-pressed to find real evidence of notable Growth Project revenues to date," Mr. Davis said. "Expenses are growing double- digit year to year. At this point, the Growth Project is still probably a net expense."

Net interest income gained 6% in the quarter, to $454.3 million. SunTrust's 11% annualized loan growth was driven by residential mortgages and commercial lending in Atlanta, which is currently the Southeast's fastest-growing region. +++

SunTrust Banks Inc.

Atlanta Dollar amounts in millions (except per share) Second Quarter 2Q96 2Q95 Net income $152.1 $140.9 Per share 0.68 0.61 ROA 1.36% 1.36% ROE 18.93% 18.56% Net interest margin 4.43% 4.47% Net interest income 454.3 427.1 Noninterest income 200.1 174.2 Noninterest expense 393.4 349.7 Loss provision 26.2 26.2 Net chargeoffs 16.0 12.0 Year to Date 1996 1995 Net income $302.5 $276.9 Per share 1.34 1.20 ROA 1.37% 1.35% ROE 18.90% 18.51% Net interest margin 4.39% 4.52% Net interest income 888.0 852.0 Noninterest income 413.8 351.1 Noninterest expense 794.4 707.8 Loss provision 51.2 51.7 Net chargeoffs 28.7 23.5 Balance Sheet 6/30/96 6/30/95 Assets $48,067.0 $44,248.0 Deposits 35,016.0 31,683.0 Loans 32,401.0 30,080.0 Reserve/nonp. loans 371% 371% Nonperf. loans/loans 0.60% 0.61% Nonperf. assets/assets 0.52% 0.57% Nonperf. assets/loans + OREO 0.77% 0.84% Leverage cap. ratio NA 6.80% Tier 1 cap. ratio NA 8.09% Tier 1+2 cap. ratio NA 10.06% ===

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