SunTrust Banks Inc. is outstripping its own predictions for revenue gains from the purchase of Crestar Financial Corp., a bank executive said Friday.
The $91.1 billion-asset banking company-which closed its purchase of Richmond, Va.-based Crestar on Dec. 31-said it is seeing strong signs of earnings growth in its new markets.
"We are slightly ahead of schedule on our revenue synergies," said Eugene Putnam, senior vice president and head of investor relations at SunTrust. "We're very pleased to see that we're continuing to grow revenue throughout the Crestar markets, as well as in our SunTrust markets."
Former Crestar branches have been capitalizing on their new ability to offer SunTrust's broader array of products and services, he said.
"We've seen growth in the trust and investment banking businesses in the Crestar markets, while mortgage banking and student lending have risen across the entire franchise," he added.
Contrary to some recent reports, however, Mr. Putnam said Atlanta-based SunTrust is not ahead of schedule for its merger-related cost savings. The banking company expects to achieve roughly $95 million, or about 75%, of the $130 million of savings in 1999. The balance will appear in 2000, Mr. Putnam said. These cost-reduction targets were announced along with the deal last July, he said.
"We are right on schedule with cost savings both in terms of dollar amounts to be realized and the timing in which we expect them to show up," Mr. Putnam said. SunTrust is slated to release its second-quarter earnings on July 13.
The bank expects to continue to pare its costs through 2001, Mr. Putnam added, through means that have little to do with the Crestar purchase. The bank has engaged McKinsey & Co. to help streamline internal processes and boost efficiency, he said.
"The merger was the catalyst to standardize our operating models, but we would have done it anyway," Mr. Putnam said.
SunTrust's early success came partly because no branches were closed in the merger and because customers did not have to deal with changing account managers.
"They went in with a cautious and conservative approach," said R. Harold Schroeder, an analyst with Keefe Bruyette & Woods. "We've certainly been encouraged by what we've seen so far."
Richard X. Bove, an analyst with Raymond James Associates, last week increased his 1999 earnings estimate for SunTrust to $3.90 per share, from $3.80.
Others, however, argue that the true proof of SunTrust's success will be when it merges operations with Crestar, probably in the second quarter of 2000.
"Organizationally, they are doing this in a smart way, but we really won't know what the results are until they convert systems, accounts, and signs," said David M. West, an analyst with Davenport & Co. in Richmond.