SunTrust Banks Inc. and BB&T Corp. reported solid, if convoluted, earnings on Wednesday that were strong enough to leave analysts optimistic about both companies' growth prospects for 2000.
Atlanta-based SunTrust, the nation's ninth-largest bank holding company, posted earnings per share of $1.06 for the fourth quarter, up 23% from a year earlier, and $3.92 for the year, up 15%.
Meanwhile, BB&T of Winston-Salem, N.C., reported net income of 52 cents per share for the quarter and $1.97 for the year, increases of 18% and 17%, respectively.
"In spite of all the doom and gloom surrounding banks, we are off to a pretty good start to earnings," said Jeff Davis, an analyst with J.C. Bradford & Co. in Nashville, Tenn.
Though the earnings statements were positive, they were not pretty.
It took a bit of gymnastics by analysts to understand SunTrust's earnings figure. The company, which has $95.4 billion of assets, recorded a one-time gain of $202 million during the fourth quarter related to the sale of its credit card portfolio to MBNA Corp., and $107 million in one-time charges for merger conversion, bond portfolio repositioning, and loan chargeoffs.
Excluding those one-time events, SunTrust beat analyst estimates for the quarter by a penny, according to First Call/Thomson Financial. SunTrust said that it expects to increase earnings per share by about 12% to 14% next year, putting it in line to hit analysts' $4.42 consensus estimate for 2000.
"Although messy, 1999 was a pretty solid year for SunTrust," L. Phillip Humann, chairman, president, and chief executive officer, said during a conference call with analysts. "We continued our record of historical earnings growth, while at the same time taking a number of steps to enhance our strategic focus and competitive positioning for the future."
There were some down notes. Officials said they expect the company's net interest margin, which dropped 8 basis points during the fourth quarter, to 3.79%, to fall slightly further to 3.7% to 3.75% this year. And SunTrust's efficiency ratio remained at a relatively high 60.63% for 1999.
Still, Christopher Marinac, an analyst with Robinson-Humphrey Co. in Atlanta, said he was pleased with the results, as well as the timing of the charges.
"They are taking advantage of the flexibility that a one-time gain can give you to do some housecleaning," he said.
"The net result is that SunTrust is well positioned, and should have an easier time hitting earnings next year than most banks will."
Shares of SunTrust were trading late Wednesday at $60.5625, up $1.4375.
At BB&T, results for the quarter also beat estimates by a penny, according to First Call. The company took merger-related charges of $16 million in the fourth quarter and $46.2 million during the entire year. Still, it reported a return on equity of 19.16%, up from 18.5% in 1998, and a return on assets of 1.46%, which matched 1998's number.
BB&T bought banks in Maryland, West Virginia, Georgia, and Virginia last year, as well as the Richmond, Va., investment banking firm Scott & Stringfellow Financial Inc. and 12 insurance agencies.
"In this quarter, as in past ones, they proved that they know how to acquire companies and how to integrate them," said Charles N. Ernst, an equity analyst with Putnam, Lovell, de Guardiola & Thornton Inc. in New York. "They continue to produce very solid results."
Analysts said BB&T officials remain confident that it can increase income by the 11% needed to match the consensus estimate of $2.21 per share for 2000. Its efficiency ratio for the year was 50.8%.
However the company's stock continues to hover near its 52-week low of $24.75, trading late Wednesday at $26, up 87.5 cents.
John A. Allison, chairman and chief executive officer of BB&T, said that although he was "very pleased" with the results, he was frustrated by his company's stock price.
"Financial stocks have been depressed by concerns that rising interest rates will affect future earnings and by disappointing results reported by some individual banks," he said. "We remain optimistic that 2000 will be another strong year for BB&T. Our business is doing well."