SunTrust Banks reported on Friday its fourth consecutive quarterly profit, as the bank set aside less money in the second quarter to cover loan losses. But SunTrust signaled job cuts loom as the Atlanta-based bank plans to reduce expenses by $300 million through 2013.
SunTrust President and CEO William Rogers said the bank plans to streamline back office departments such as technology, operations, marketing and human resources across its various business lines.
SunTrust isn't ruling out layoffs, but says it's early in the process and points to attrition and eliminating empty positions as other ways to accomplish the cuts.
“While we are not approaching this as a head count reduction exercise per se, we will be providing these services with fewer people in the future,” said Rogers, leading his first quarterly earnings conference call since taking over as chief executive. James Wells III retired as CEO last month, and he will remain board chairman through the end of the year.
Rogers did not elaborate on the number of positions that might be affected. The expense cuts are separate, he said, from expected reductions in credit costs and charged-off loans as the bank’s balance sheet improves.
Noninterest expense actually increased slightly to $1.54 billion in the quarter.
Banks nationwide have announced plans to get leaner as loan growth remains elusive and regulatory costs climb.
Chris Marinac, bank analyst with FIG Partners in Atlanta, said curtailing costs will be “critical” to SunTrust’s progress in rehabbing its business as well as with Rogers’ standing with investors.
“Bill Rogers has staked expenses as a bogey to judge him by … I think this is very healthy,” Marinac said.
SunTrust spokesman Mike McCoy said in an e-mail that regulatory overhauls and economic pressure were factors in planned cost cuts.
“It’s very early in this process and no decisions have been made regarding [cuts to] specific positions or areas,” McCoy said. “... Individuals in roles that are consolidated often find other opportunities in the bank as business needs continue to evolve.”
SunTrust reported a profit in the second quarter of $174 million, or 33 cents per share, compared to a loss of $56 million, or 11 cents per share, in the period a year ago.
That beat analysts’ expectations of 31 cents per share, according to Bloomberg.
Revenue ticked up 1.8 percent over second quarter 2010 to $2.2 billion.
Net interest income -- what SunTrust makes on loan interest, offset by what it pays to depositors -- was up 6.5 percent over the period a year ago, and up 1 percent from the first quarter of this year.
SunTrust said its credit quality improved, with declines in loans charged off, nonperforming loans and delinquent loans. Charge-offs declined 30 percent to $505 million.
The bank also reduced its allowance for loan losses by 13 percent to $2.7 billion versus the period a year ago.
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