The liquidation of millions of shares of Coca-Cola stock boosted SunTrust Bank’s profit in the third quarter and helped the Atlanta-based lender shed the bad loans it piled up in the wake of the economic crisis.
Third quarter was an eventful one for SunTrust. Last month, the bank accelerated the planned sale of nearly $2 billion in Coke stock, which helped cushion the blow from a series of steps designed to improve the bank’s risk.
The asset sales helped reduce SunTrust’s non-performing loans, or loans no longer earning interest, by 47 percent compared to third quarter 2011, the bank said Monday.
The Coke stock sale and moves to shed soured loans resulted in a $753 million increase in net income in third quarter, or $1.40 per share.
Including the third quarter stock and asset sell offs, SunTrust net income for common shareholders surged to $1.07 billion, or $1.98 per share, compared to $211 million, or 39 cents a share in third quarter 2011.
The bank also announced it had reached its goal of $300 million in annualized cost savings as it attempts to streamline its business.
“It’s not lost on me or anyone else at SunTrust that there is still more work to do,” said SunTrust Chairman and CEO William Rogers Jr.
SunTrust said on Monday it increased by $371 million its reserves for mortgage repurchase requests by Fannie Mae and Freddie Mac. SunTrust has been dogged by mortgage loans made during the boom that investors —- including Fannie and Freddie — are now demanding they buy back.
SunTrust officials said that the reserve should cover expected losses on mortgage loans made and sold to the government-backed mortgage giants before 2009.
Revenue, excluding the Coke stock sale, was $1.9 billion, down 13 percent, which also reflects efforts to sell off loans.
Chris Marinac, a FIG Partners bank analyst, said the steps to reduce risk put the onus on SunTrust to grow revenue.
“Now it’s back to how well can you grow loans and push income,” he said.
SunTrust said traditional business lending, known as commercial and industrial, grew 12 percent in third quarter compared to the same period last year. Though the pipeline among companies for new loans appears strong, prospects are taking longer to decide whether or not to borrow money, Rogers said.
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