SunTrust Banks logged a 23 percent gain in fourth-quarter profit, but an executive also warned that the oil patch collapse could bite its loan portfolio in months to come.
The Atlanta bank cited continued cost-cutting and favorable tax settlements for its $484 million quarterly profit, up from $394 million a year earlier.
For all of 2015, SunTrust’s profit was $1.9 billion vs. almost $1.8 billion in 2014. Revenue for the year fell 2 percent, to $8.2 billion.
In an interview Friday, SunTrust Chief Financial Officer Aleem Gillani said oil businesses are currently keeping up on payments on $3.3 billion of loans from the bank. That will likely change, however, if crude oil prices remain at depressed levels.
The price of benchmark U.S. crude oil has risen about $5 a barrel since hitting a low of $26.55 Wednesday, but remains about 70 percent below its $107-per-barrel peak in mid-2014.
“We’re just trying to get ahead of this,” said Gillani. “If oil stays in the mid-$20s for a year or two, these are the companies that can get in trouble.”
SunTrust bumped up its non-performing loan total by $209 million in the fourth quarter, largely due to downgrades of loans to oil exploration firms and the firms that provide drilling and other oil field services. Those firms account for about 40 percent, or roughly $1.3 billion, of SunTrust’s $3.3 billion energy business loan portfolio.
A bigger chunk of those loans could become vulnerable in the future. But energy business loans only account for about 1 percent of SunTrust’s $135 billion total loan portfolio, said Gillani.
Overall, SunTrust reported strong financial results because “we continue to get better at managing expenses,” said Gillani. He said the bank’s bottom line also got a boost from resolving income tax issues with “three or four states,” but didn’t elaborate.
Over the past year, SunTrust has shed 44 bank branches and more than 500 employees. Last year, SunTrust outsourced much of its information technology work to outside firms, Computerworld magazine reported in October, and SunTrust laid off about 100 workers.
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