SunTrust sees signs of profitable third quarter

SunTrust Banks expects to post its first profit in two years for the third quarter, citing better-than-expected deposit volume, lower balances in its high-risk construction loan portfolio and solid performance in its investment banking and mortgage businesses.

If its projection holds true for the three-month period that ends Sept. 30, the profit would reverse a string of quarterly losses the Atlanta-based banking giant has racked up since the third quarter of 2008.

Mark A. Chancy, SunTrust's chief financial officer, mentioned the forecast Tuesday at a Barclay's Capital Financial Services Conference in San Francisco.

"Now we are expecting an uptick in credit-related and advertising expenses during the quarter to contribute to slightly higher quarter-to-quarter expenses," Chancy said. "But when you put together all of the elements together that I've just outlined, one thing we do want you to walk away from today's presentation with is that we are expecting positive earnings per share for the quarter."

Wall Street analysts' consensus forecast is for a loss of 20 cents for the quarter.

Chancy also said the bank will likely lower its $3.2 billion loan loss reserve, given that loan delinquencies are improving. It lowered reserves by $20 million in the second quarter but did not give a figure for how much it plans to reduce them in the third.

Asked when the bank will begin to repay its $4.85 billion loan received from the federal government's Troubled Asset Relief Program, Chancy said the bank will pay it back but has not given a public timetable.

"So with credit metrics improving, with profitability returning, we are going to continue to work with our regulators and are focusing on exiting TARP," Chancy said, "at the appropriate time in as shareholder-friendly a fashion as possible."