SunTrust Looks Strong As Earnings Climb 6%

ATLANTA -- SunTrust Banks Inc. on Tuesday reported third-quarter net income of $93.6 million, 6% above the year-ago level and well within analysts' expectations.

The strong showing by the Atlanta-based company is not likely to be repeated by many major southeastern banks, which are still struggling with loan-quality problems related to the slump in commercial real estate. The bankruptcy of a Jacksonville, Fla., real estate developer, in particular, is expected to pinch earnings at several banks in the region.

Southeastern Projections

Wachovia Corp., Winston-Salem, N.C., is expected to show a gain similar to SunTrust's. Projections are for a 4% increase in profits to $78.4 million.

The consensus for NCNB Corp. is about $107 million in earnings, up 88% from $57 million a year ago, when the Charlotte, N.C.-based bank made heavy additions to reserves because of problem real estate.

NCNB's merger partner, C&S/Sovran Corp., Atlanta, has already forecast a loss of up to $55 million.

In another third-quarter preview, First Union Corp., Charlotte, said it is expecting profits of about $78 million, down 8% from $84.3 million in the third quarter last year.

The major uncertainty remains Jacksonville-based Barnett Banks Inc. Analysts estimate profits of $29.8 million, up from $25.8 million in the year-earlier period. But the recent Chapter 11 bankruptcy filing of Koger Properties Inc., a Jacksonville real estate developer, could force Barnett to bolster its reserve, which stood at $449 million, or 76% of nonperforming loans, at the end of the second quarter.

"It's not clear what impact the Chapter 11 filing of Koger will have on the quarter" for Barnett, said Kathryn Bissette, banking analyst with Sterne, Agee & Leach Inc. in Atlanta.

Barnett was one of Koger Properties' smaller unsecured creditors, with only $11 million outstanding, but the banking company is believed to carry substantial additional collateralized exposure.

SunTrust's Loan Quality

SunTrust experienced only a modest 3% increase in nonperforming assets in the third quarter.

Most of SunTrust's problems were Koger-related. In Florida, SunTrust's nonperforming assets increased $17 million in the third quarter, to $317.2 million, with $16 million attributed to the Koger bankruptcy.

In Georgia, where Koger built several office complexes, SunTrust attributed $6 million of its $16.5 million increase in non-performers to Koger. That means $22 million of its $33.5 million increase in those states can be chalked up to Koger.

By contrast, SunTrust's credit quality improved in Tennessee, previously its most troublesome market. Nashville subsidiary Third National Corp. reported nonperforming assets of $270.2 million, down $11.6 million from the previous quarter.

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