SunTrust Banks Inc., the first of the large regional banks to report third-quarter results, said Tuesday it earned $155.6 million, up 8% from a year earlier.
The Atlanta-based bank credited the increase to strong loan growth and a firm control of expenses.
SunTrust chairman and chief executive James B. Williams said the bank continued down the path it in the first half of this year, citing a jump in earning assets and increased efficiency.
Analysts agreed. This was a typical "right-on-the-money" quarter for SunTrust, they said.
But Henry "Chip" Dickson, a bank analyst with Smith Barney Inc., noted that noninterest revenue wasn't quite as high as it should have been.
"Fee income did not meet the strong quarter that they had in the second quarter," he said. "But SunTrust put down some solid numbers."
Net interest income was $464.2 million for the quarter, up 7.9%. For the nine-month period, net interest income rose 5.4% to $1.4 billion.
Loans were $33.8 billion in the third quarter, up 12.7% from the year- earlier period, and deposits were $34.9 billion, up 11.6%.
Anthony R. Davis, bank analyst at Dean Witter, said that although the bank did not have growth in core deposits, it used wholesale funding to support loan growth.
SunTrust also showed an increase in credit card installments and residential mortgages, according to Sally Pope Davis, an analyst with Goldman, Sachs & Co.
SunTrust took a $10.5 million charge to cover its contribution to the recapitalization of the Savings Association Insurance Fund. However, analysts said the charge wouldn't do much to damage results.
The bank had enough reserves to cover it, said Dean Witter's Mr. Davis.
Net chargeoffs were $56.5 million for the quarter, compared to $37.4 million a year earlier, and analysts said the uptick wasn't alarming because it was off such a low base to begin with and came from commercial, not consumer, loans.
The principal source of commercial chargeoffs came from factoring loans, which the bank makes to retailers in the garment business and textile manufacturers.
Net income for the nine months ended Sept. 30 was $458.1 million, or $2.04 per share, compared to $20.6 million, or $1.83 per share, in the first nine months of 1995.
Return on assets was 1.35% and return on equity 18.86% through Sept. 30, compared to 1.38% and 18.43% for the same span a year earlier.
The bank's efficiency ratio showed some improvement, at 58.9% for the quarter, compared to 59.9% in the year-earlier period.
Analysts said they were surprised to see expenses down, because SunTrust has made substantial investments in its so-called "Growth Project" - a multiyear plan to increase revenues in the bank's lines of business.
"Despite the hirings from the project, expenses were down, and the bank has been doing a great job of consolidation and getting the banks hunkered down for expense control," said Mr. Davis.
As part of the project, the bank will add more supermarket branches in its southeastern region to increase margins.
Analysts said SunTrust's loan growth may not be representative of what other banks report.
"The southeastern states of Florida, Georgia, and Tennessee, where SunTrust is centered, have had good growth," said Goldman Sachs' Ms. Davis.
SunTrust also benefited from its share buyback program, which is expected to continue in the coming months. The bank repurchased about one million shares during the third quarter.
At Sept. 30, SunTrust's assets totaled $49.6 billion, a 14.5% increase from a year earlier. +++
SunTrust Banks Inc. Atlanta Dollar amounts in millions (except per share) Third Quarter 3Q96 3Q95 Net income $155.6 $143.7 Per share 0.70 0.63 ROA 1.35% 1.38% ROE 18.86% 18.43% Net interest margin 4.38% 4.47% Net interest income 464.2 430.1 Noninterest income 197.2 182.6 Noninterest expense 389.6 363.1 Loss provision 30.0 29.1 Net chargeoffs 27.9 13.9 Year to Date 1996 1995 Net income $458.1 $420.6 Per share 2.04 1.83 ROA 1.37% 1.36% ROE 18.88% 18.48% Net interest margin 4.39% 4.50% Net interest income 1,352.1 1,282.1 Noninterest income 611.0 533.7 Noninterest expense 1,184.0 1,070.9 Loss provision 81.2 80.8 Net chargeoffs 56.5 37.4 Balance Sheet 9/30/96 9/30/95 Assets $49,633.0 $43,357.0 Deposits 34,974.0 31,316.0 Loans 33,824.0 30,001.0 Reserve/nonp. loans 386.2% 390.8% Nonperf. loans/loans 0.55% 0.59% Nonperf. assets/assets 0.48% 0.56% Nonperf. assets/loans + OREO 0.71% 0.81% Leverage cap. ratio NA 6.78% Tier 1 cap. ratio NA 8.04% Tier 1+2 cap. ratio NA 10.01% ===