SunTrust Banks reported on Monday improved earnings in first quarter, riding better credit trends and helped in part by fee income from its mortgage business.
Atlanta-based SunTrust said revenue was $2.22 billion, up 3 percent in first quarter compared to the same period a year ago. Fee income was essentially flat compared to a year ago, though up significantly from fourth quarter 2011, buoyed by home mortgage refinances.
SunTrust officials said mortgage refinancing was aided by low interest rates and a government program to assist borrowers who owe more than what their homes are worth. SunTrust’s business is largely focused in Sun Belt states like Georgia and Florida, markets ravaged after the housing bubble burst.
SunTrust said net income to common shareholders was $245 million, or 46 cents per share, compared to $38 million, or 8 cents per share in first quarter 2011, beating analysts' expectations.
“Our core performance this quarter drove a solid start to 2012 and marked a continuation of the improved momentum we built during 2011,” SunTrust Chairman and CEO William H. Rogers Jr., said in a news release.
Average loans increased 6 percent over first quarter 2011 and 3 percent over the last quarter of 2011.
SunTrust also noted improved credit trends. The bank reported net charge offs of bad loans declined 22 percent from a year ago. Non-performing loans, those no longer earning interest, declined for the 11th straight quarter.
Another area of improvement related to mortgage loan repurchase demands. Investors, often government-backed Fannie Mae and Freddie Mac, have alleged some loans made during the boom that big banks bundled and sold as securities didn't meet the terms of the investment agreements, resulting in losses.
Repurchase demands by these investors spiked in fourth quarter 2011 to $636 million, but declined to $448 million in first quarter 2012. Though an improvement over the year-end quarter, it was still more than 40 percent higher than a year ago.
Chris Marinac, a bank analyst with FIG Partners, said SunTrust showed improvement in the quarter. He equated the outlook for mortgage repurchases to a hilly marathon course. Fourth quarter 2011 was a rough hill, while first quarter of this year was easier.
“I think this is unfortunately going to be an up-and-down battle,” he said.
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