UPDATE 1-SunTrust profit rises on lower mortgage repurchase provisions

Fri Jan 18, 2013 6:49am EST

* Q4 EPS $0.65 vs est $0.61

* Net interest margin down 10 basis points

* Q4 Mortgage production income $241 mln vs loss of $62 million year earlier

Jan 18 (Reuters) - SunTrust Banks Inc posted a profit for the fifth straight quarter as the bank set aside less money to cover mortgage repurchase requests and earned more from its investment banking business.

Net income rose to $350 million, or 65 cents per share, from $71 million, or 13 cents share, a year earlier.

Analysts on average were expecting the regional bank to earn 61 cents per share, according to Thomson Reuters I/B/E/S.

Investment banking income rose to $112 million from $87 million, from a year earlier.

Mortgage production income rose to $241 million, compared with a loss of $62 million a year earlier, as the bank set aside less money for mortgage repurchase.

The bank had taken a $375 million charge in the third quarter to cover requests from Fannie Mae and Freddie Mac to buy back mortgages it sold to the regulators before 2009.

Net interest margin - the difference between what the bank earns on loans and pays out on deposits - fell 10 basis points to 3.36 percent, as the U.S. Federal Reserve keeps interest rates low to boost the economy.

SunTrust was part of the 10 mortgage servicers that agreed to pay a total of $8.5 billion to end a U.S. government-mandated case-by-case review of housing crisis foreclosures.

The settlement followed the "robo-signing" scandal that emerged in 2010 involving allegations banks pursued faulty foreclosures by using defective or fraudulent documents.

The bank's credit quality improved in the quarter, with non-performing loans being 1.27 percent of its total loan book, down from 2.37 percent a year earlier.

SunTrust, which suffered large losses due to the financial crisis, was one of the four big U.S. banks whose capital plans, including raising dividends and buying back shares, were rejected by the Federal Reserve in March as part of its stress-test reviews.

The Fed did not object in August to SunTrust's revised capital plan, which did not include dividend increases or share buybacks.

Shares of the Atlanta-based lender, which have risen about 6 percent since reporting its third quarter results in October, closed at $29.57 on Thursday on the New York Stock Exchange.

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