SunTrust net sinks 98 percent on real estate, writeoffs
NEW YORK (Reuters) - SunTrust Banks Inc (STI.N), a large U.S. southeast regional bank, on Wednesday said quarterly profit tumbled a larger-than-expected 98 percent, hurt by a tripling of credit losses and a bailout of money market mutual funds.
The decline reflected what Chief Executive James Wells called "rapid deterioration" in residential real estate, with particular softness in southern Florida and the Atlanta area, and capital markets that were "anything but stable."
Florida and Georgia were two of the five U.S. states with the highest foreclosure totals in November, RealtyTrac said.
Fourth-quarter net income for Atlanta-based SunTrust to $11.1 million from $506.3 million a year earlier. Profit per share fell to 1 cent from $1.39.
Analysts on average expected profit of 22 cents per share, according to Reuters Estimates. Revenue fell 15 percent to $1.74 billion, below the average forecast of $1.91 billion.
"The fourth quarter was disappointing for the industry but even more so at SunTrust," wrote Goldman Sachs & Co analyst Lori Appelbaum. Write-downs were "much bigger than expected," she wrote.
SunTrust is the last of the 10 largest U.S. commercial banks to report fourth-quarter results. All suffered declines in operating earnings or lost money, topped by Citigroup Inc's (C.N) $9.83 billion loss.
In the fourth quarter, SunTrust set aside $356.8 million for loan losses, up from $115.8 million a year earlier, and nonperforming assets nearly tripled to $1.66 billion.
The bank also took a $510 million write-down to buy back securities from money funds and a commercial paper vehicle that the bank sponsored. Results also included $45 million of losses from trading and mortgages, and $76.9 million for an antitrust settlement involving Visa Inc and American Express Co (AXP.N).
Bank of America Corp (BAC.N), Legg Mason Inc (LM.N), SEI Investments Co (SEIC.O) and Wachovia Corp WB.N have also stepped in to bail out some of their funds after market turmoil caused many investments once thought safe to become illiquid.
In morning trading, SunTrust shares were up $1.49, or 2.4 percent, at $62.50, as the banking sector enjoyed broad gains. The shares had earlier traded as much as 8.8 percent lower, and touched their lowest level since April 2003.
COCA-COLA STAKE
Despite the write-downs, Chief Financial Officer Mark Chancy said SunTrust expects to maintain its quarterly dividend of 73 cents per share.
He also said the bank is talking with regulators about its 43.6 million-share stake in Coca-Cola Co (KO.N), worth close to $2.6 billion on Tuesday. He said any transaction would boost Tier-1 capital by about $1 billion.
SunTrust has held the Coca-Cola shares since 1919, when predecessor bank Trust Co of Georgia helped take Coke public, and has a copy of the formula to make Coke.
The bank said it is ahead of schedule on a plan to eliminate 2,400 jobs by the end of this year and save $530 million annually by 2009. Cost savings in 2007 were $215 million, topping the original $135 million target, it said.
Lending income in the fourth quarter rose 1 percent from a year earlier to $1.17 billion, helped by an increase in net interest margin to 3.13 percent from 2.94 percent. Noninterest income fell 35 percent to $576 million, despite double-digit gains from deposit service charges and credit cards.
SunTrust ended the year with $179.6 billion of assets. It operates about 1,683 branches in 11 states and Washington, D.C. Through Tuesday, its shares were down 26 percent in the last year, compared with a 32 percent drop in the 24-member Philadelphia KBW Bank Index .BKX.
(Additional reporting by Martinne Geller; Editing by John Wallace and Dave Zimmerman)
