SunTrust Banks Inc. posted earnings of $136 million for the first quarter, up 7% from a year earlier. But its net interest margin shrank, largely because of tough competition in deposit pricing and adjustable rate mortgages.
Results were exactly on target with Wall Street expectations of $1.18 per share, but the bank's margin dropped to 4.58% on March 31, from 4.6% a year before.
Noninterest income also declined, to $176.9 million from $180.6 million. Trust income was up slightly, to $65 million from $63.9 million in the 1994 quarter, but analysts were still disappointed with what one called "earnings quality" at the Atlanta-based bank.
"It wasn't a particularly impressive quarter," said Anthony Davis, with Dean Witter Discover & Co. "Fee income continues to be a challenge for them. They have some problems in terms of account retention. It's not what we had hoped."
Mr. Davis said he was particularly concerned about the dramatic drop in SunTrust's provision for loan losses. The provision dropped to $25.5 million on March 31 from $33.9 million at the same time last year.
The Dean Witter analyst argued that the $8.4 million difference was used to boost the bottom line. "We had expected pretty aggressive provisioning," he said. "I'm surprised at the degree the provision fell."
Jim Armstrong, head of SunTrust investor relations, responded that with chargeoffs of $11.5 million the provision was more than adequate. But fee income has "been tough for us," he acknowledged.
Mutual fund income was down about $2.7 million from a year earlier, and deposit fees fell by about $2.4 million, he said. In addition, the bank suffered a $300,000 securities loss.
SunTrust's ratio of expenses to revenues also ratcheted up, quarter over quarter, from 59.24% to $59.5%.
Meanwhile, Synovus Financial Corp., Columbus, Ga., reported a 17.9% jump in first-quarter net income, to $24.1 million, or 32 cents per share. The bank credited 22% growth in net interest income, driven by a 50-basis-point jump in the net interest margin, and a 12.6% reduction in the loan-loss provision.
New Orleans-based Hibernia Corp. also saw earnings improve, 14%, to $26.4 million. The bank benefited from lower-than-normal taxes and a $2.4 million gain on the sale of three banking offices. +++ SUNTRUST BANKS INC. Atlanta Dollar amounts in millions (except per share) First Quarter 1Q95 1Q94 Net income $136.0 $127.1 Per share 1.18 1.04 ROA 1.35% 1.32% ROE 18.46% 17.60% Net interest margin 4.58% 4.60% Net interest income 424.9 403.5 Noninterest income 176.9 180.6 Noninterest expense 358.1 346.0 Loss provision 25.5 33.9 Net chargeoffs 11.5 15.3 Balance Sheet 3/31/95 3/31/94 Assets $42,760.0 $40,576.0 Deposits 31,274.0 30,860.0 Loans 29,235.0 25,904.0 Reserve/nonp. loans 3.55% 2.49% Nonperf. loans/loans 0.64% 0.91% Nonperf. assets/asset 0.63% 0.94% Nonperf. assets/loans + OREO NA NA Leverage cap. ratio NA 6.79% Tier 1 cap. ratio NA 8.66% Tier 1+2 cap. ratio NA 10.20% ===