Staying true to its steady and conservative traditions, SunTrust Banks Inc. reported on Thursday a 12% increase in net income for the second quarter, to $185 million.

Atlanta-based SunTrust, the first of the 25 biggest banking companies to release quarterly results, maintained healthy revenue growth to offset the effects of tighter margins and higher expenses.

A 13% boost in total revenue was fueled by fee income, with 73% of the $94 million increase coming from such sources, according to L. Phillip Humann, chairman, president, and chief executive officer.

The revenue rise for the first half was $180.3 million. The latest returns on assets and equity-1.32% and 21.88%, respectively-were within 1 basis point of first-quarter readings.

"In what is becoming an increasingly difficult operating environment, I think they are doing quite well," said R. Harold Schroeder, an analyst with Keefe, Bruyette & Woods Inc. "They are a very conservative and well-managed company."

"The sources and magnitude of our revenue gains are very satisfying and reflect our growth efforts over the past several years," said Mr. Humann.

SunTrust's earnings per share were up 14% for the quarter, to 88 cents, which was a cent above the analyst consensus estimate. For the six months, net income rose 12%, to $365.9 million, and per-share earnings jumped 15%, to $1.73.

Noninterest income grew $68.8 million in the second quarter, up 30.2% from a year earlier, primarily from trust, investment services, and mortgage banking. Trust revenues grew to $95.4 million from $78.7 million, for example, while mortgage fees increased to $19 million from $10.9 million.

The fee gains were diluted somewhat by higher expenses. Costs for personnel, office space, equipment, and marketing all grew in the second quarter, which SunTrust spokesman James C. Armstrong said was attributable to many factors.

The company's recent acquisition of Equitable Securities had a slight negative impact on personnel expense, he said. In addition, SunTrust is spending money on year-2000 technology issues and on installing some 15,000 new personal computers and common software programs across the company.

Net interest income in the second quarter was $504.7 million, up 5% from a year earlier, as the net interest margin hit 3.96%, down 7 basis points from the first quarter and 20 basis points from the second quarter of 1997.

"They had more of a decline in the net interest margin than other banks," said Sean J. Ryan, an analyst with Lehman Brothers. He noted, however, that the company is merely falling back to where many other major banking companies have been for a while.

The provision for loan losses totaled $33.5 million for the second quarter, up $4.3 million from a year earlier. Net chargeoffs for the latest quarter were $29.4 million, and the chargeoff ratio was an annualized 0.28% of average loans.

Also issuing its report Thursday, Crestar Financial Corp. of Richmond, Va., said it earned $87.4 million in the second quarter, up 15% from a year earlier.

The $26.2 billion-asset company's 77 cents per share, which beat analysts' estimates by a penny, was up 9 cents, or 13%.

Return on assets was 1.39% and return on equity 16.46%.

Chairman Richard G. Tilghman said the quarter was distinguished by strong commercial loan growth, record mortgage production, growth in the investment group, and improved credit quality.

Compared with the first quarter, net interest income was up 3%, to $236.7 million; average loans were up 4%, to $16.2 billion; the net interest margin contracted 12 basis points, to 4.06%; and noninterest income excluding securities gains and losses was up 7%, to $114 million.

Crestar announced the sale to Fleet Financial Group, Boston, of credit card accounts outside its core markets in the Washington, Virginia, and Maryland region. It said part of an expected $54 million gain for the third quarter would be used to cover certain incremental expenses. +++

SunTrust Banks Inc.

Atlanta

Dollar amounts in millions (except per share)

Second Quarter 2Q98 2Q97

Net income $185.0 $165.4

Per share 0.88 0.77

ROA 1.32% 1.31%

ROE 21.88% 21.21%

Net interest margin 3.96% 4.16%

Net interest income 504.7 479.2

Noninterest income 296.9 228.1

Noninterest expense 482.8 413.3

Loss provision 33.5 29.2

Net chargeoffs 29.4 23.9

Year to Date 1998 1997

Net income $365.9 $326.5

Per share 1.73 1.51

ROA 1.33% 1.32%

ROE 21.87% 20.71%

Net interest margin 3.99% 4.20%

Net interest income 1,002.2 951.2

Noninterest income 583.2 453.9

Noninterest expense 953.9 827.3

Loss provision 62.1 55.4

Net chargeoffs 51.3 41.4

Balance Sheet 6/30/98 6/30/97

Assets $61,393.0 $55,463.0

Deposits 36,983.0 35,833.0

Loans 41,647.0 37,684.0

Reserve/nonp. loans 558.0% 430.10%

Nonperf. loans/loans 0.33% 0.46%

Nonperf. assets/assets 0.27% 0.39%

Nonperf. assets/loans + OREO

0.39% 0.57%

Leverage cap. ratio NA 6.77%

Tier 1 cap. ratio NA 7.60%

Tier 1+2 cap. ratio NA 11.00% ===

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