SunTrust’s pain continues with $183.5 million loss

The distressed real estate market and lingering recession continue to cause problems for Atlanta-based SunTrust, which reported its third straight quarterly loss on Wednesday.

The company lost $183.5 million in the three months that ended June 30, compared to profit of $540 million in the same period a year ago.

“SunTrust is working through credit and earnings challenges as the weak economy continues to impact performance,” James M. Wells III, SunTrust’s chairman and CEO, said in a conference call with analysts.

SunTrust stepped up efforts to clear troubled loans off its books in the second quarter, writing off $801 million in soured loans, a 31 percent increase from the first quarter. The bank also earmarked an additional $161 million to cover possible future losses, bringing the company’s loan loss reserve to $2.9 billion.

Analysts said they expect SunTrust to report losses for some time to come as the bank works through its problem loans.

Chris Marinac, an analyst at FIG Partners in Atlanta, said he doesn’t expect SunTrust to return to profitablity until 2011. But he said SunTrust is doing what it must to climb out of the hole it’s in.

Marinac said his research shows SunTrust will suffer loan losses of $12.6 billion during the current cycle running from 2007 through 2011. Through the second quarter, the bank has taken about $5.1 billion in losses.

But he’s confident SunTrust will weather the storm.

“I think the company has the earnings and the capital to work though” the losses, he said.

SunTrut executives said there are some early indications that things may be turning around. The bank reported an increase in deposits and a drop in the rate of loans going bad.

“Though we’re obviously not pleased to report a loss for the quarter, we are encouraged by this quarter’s results,” Wells said.