Strong loan growth in its credit card and online lending businesses helped propel SunTrust Banks to a 10 percent jump in its interest income in the second quarter, the Atlanta bank said Friday.
SunTrust reported a modest 2 percent increase in second-quarter profit, to $492 million from $483 million a year ago, but beat analysts’ expectations. SunTrust’s stock price fell almost 2 percent Friday, to $42.40.
“Overall, I’d say we’re actually very pleased with the quarter,” said Aleem Gillani, SunTrust’s chief financial officer.
He said SunTrust’s consumer lending businesses, including credit cards, student loans and online lending, all showed solid growth, helping offset the general downward trend in interest rates, which have squeezed banks’ profit margins from lending.
“As we do more and more consumer lending, that helps with the portfolio,” said Gillani.
SunTrust’s loan portfolio grew by 6 percent in the second quarter over the previous year, to $141.2 billion, while net interest earned on loans increased by 10 percent, to $1.3 billion.
Still, the bank felt some pressure from an increase in problem loans, higher expenses and lower interest rates, partly worsened by Britain’s recent surprise vote to leave the European Union.
Gillani said the so-called Brexit vote isn’t a direct hit on SunTrust or most of its customers.
“One of the advantages of being a local hometown bank is we don’t have direct exposure,” said Gillani.
But the uncertainty and fears of recession in England and perhaps other parts of Europe is helping to drive down already historically low interest rates globally, cutting into banks’ profit margins on their loans.
“That definitely will not help the banking industry,” he said.
