SunTrust Banks Inc.'s second quarter profits rose 9%, topping Wall Street estimates and giving a boost to its effort to convince investors that it would represent a stronger merger partner for Wachovia Corp. than rival First Union Corp.
The Atlanta-based company said an improving loan business, where loans outstanding grew 4% during the quarter to $69.9 billion, and a repositioning of its balance sheet to reduce interest rate risk, helped lift net income to $347 million or $1.19 per diluted share. Analysts had expected the company to earn $1.16 per share, according to Thomson Financial/First Call.
SunTrust, always the first of the larger commercial banks to report earnings, is currently under close scrutiny from industry observers because of its hostile bid for Wachovia Corp. of Winston-Salem, N.C. SunTrust's unfriendly bid for Wachovia was made in May, one month after Wachovia had agreed to merge with First Union Corp. of Charlotte, N.C.
Analysts had said that the bank needed a solid quarter for its bid to survive and in the bank's earnings statement today, L. Phillip Humann, chairman, president and chief executive officer said he thought the results buttressed his case. "We believe our second quarter performance further underscores the financial strength supporting our proposal to merge with Wachovia," he said.
Shareholders are set to vote on First Union/Wachovia merger on Aug. 3, and mud slinging between SunTrust and First Union has heated up in recent days.
Earlier this week, SunTrust wrote the Securities and Exchange Commission, accusing First Union of using a questionable tax shelter involving real estate. Today, First Union ran full-page ads in newspapers including the Wall Street Journal and American Banker to coincide with its rival's earnings release.
Under the heading "Six things SunTrust won't be talking about today" First Union claims, among other things, that a SunTrust/Wachovia combination would create "serious regulatory capital concerns."