Business Journal
Tuesday, April 22, 2008 - 10:57 AM EDT
SunTrust Banks said net income fell about 44 percent in the first quarter, as the company continued to take a beating from the housing crisis and credit crunch and had to increase its provision for loan losses.
The Atlanta-based company reported net income of $290.6 million and earnings of 81 cents a share. That's down from net income of $521.2 million and earnings of $1.44 a share in the first quarter of 2007.
As the deterioration of residential real estate markets continued in the first quarter, the company increased its provision for loan losses to $560 million, increasing the ratio of allowance to total loans outstanding to 1.25 percent as of March 31. The increase in the allowance for loan and lease losses was also attributable to an increase in expected losses in the existing residential mortgage, home equity lines of credit and residential construction portfolios.
SunTrust also had $163.7 million in net valuation losses during the first quarter, mostly from mark-to-market valuation adjustments on trading assets and loan warehouses, and certain asset-backed securities classified as available for sale. The after-tax earnings impact of the net valuation losses was $101.5 million.
SunTrust is the fifth-largest financial institution in South Florida, with nearly $8.43 billion in deposits, 100 offices and a market share of 5.63 percent as of June 30, according to the latest report from the Federal Deposit Insurance Corp.
Statewide, SunTrust is the third-largest financial institution -- behind Bank of America and Wachovia -- with 554 offices, $33.89 billion in deposits and a market share of 9.07 percent, as of June 30, according to the FDIC.
Through sales, maturities and pay-downs, SunTrust said it has cut its exposure to these distressed assets by more than $1 billion since the end of 2007, leaving the quarter-end exposure at $1.6 billion.
Average loans for the first quarter were $123.3 billion, up 1.4 percent from the first quarter of 2007. The increase was primarily in commercial loans, as average residential real estate and consumer loans dropped due to balance sheet management strategies, while construction declined due to slowing residential building activity and company efforts to reduce exposure.
"Growth in credit costs associated with the residential real estate correction continued to take a toll in the first quarter; further, the backdrop of emerging recession fears clouds the near-term outlook," SunTrust President and Chief Executive Officer James M. Wells III said. "However, SunTrust is financially strong, with ample liquidity, adequate capital, and a solid balance sheet, and we are effectively managing through this difficult economic environment. Perhaps most importantly, we are encouraged by underlying progress in key business lines, good deposit and some modest loan growth, and the positive impact of improved expense discipline."
As of March 31, SunTrust had $179 billion in total assets.
SunTrust ended 2007 with a 99 percent drop in net income.
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