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Improvement in revenues drove SunTrust Banks, Inc.'s (STI - Free Report) fourth-quarter 2016 earnings of 90 cents per share, which outpaced the Zacks Consensus Estimate of 88 cents. However, the figure was down 1% year over year.
Results reflected an improvement in net interest income and a rise in non-interest income. Further, growth in loans and deposits acted as a tailwind. However, a jump in provision for credit losses and an increase in operating expenses were the downsides.
Net income available to common shareholders was $448 million, down 4% year over year.
For 2016, earnings of $3.60 per share beat the Zacks Consensus Estimate of $3.56. Also, it was up 1% year over year. Net income available to common shareholders was $1.81 billion, down 3% from 2015.
Total revenue (fully tax equivalent basis) for the quarter grew 7% from the prior-year quarter to $2.19 billion. Further, the reported figure was above the Zacks Consensus Estimate of $2.17 billion.
For 2016, revenues (on FTE basis) increased 7% year over year to $8.74 billion. Also, this was above the Zacks Consensus Estimate of $8.64 billion.
Net interest income (FTE basis) jumped 7% year over year to $1.38 billion. The rise was attributable to growth in average earning assets and higher net interest margin (NIM). NIM was up 2 basis points (bps) year over year to 3.00%, reflecting higher earning asset yields, partially offset by higher funding costs.
Non-interest income was $815 million, up 7% from the prior-year quarter. The rise was largely driven by higher capital markets and mortgage production-related income, partially offset by lower mortgage servicing and wealth management-related income.
Non-interest expenses were up 8% from the year-ago quarter to $1.40 billion. The increase was mainly due to increases across most expense categories, other than outside processing and software expenses.
Deteriorating Credit Quality
Total non-performing assets were $919 million as of Dec 31, 2016, up 25% from prior-year quarter. The increase was mainly due to rise in energy-related loans and home equity products. Non-performing loans increased 10 bps year over year to 0.59% of total loans held for investment.
Also, provision for credit losses surged 98% from the year-ago quarter to $101 million, owing to higher net charge-offs. Further, rate of net charge-offs increased 14 bps year over year to 0.38% of total average loans held for investment.
Strong Balance Sheet
As of Dec 31, 2016, SunTrust had total assets of $204.9 billion, while shareholders’ equity summed $23.6 billion, representing 12% of total assets.
As of Dec 31, 2016, loans were up 1% on a sequential basis to $143.3 billion. Total consumer and commercial deposits grew 1% sequentially to $158.9 billion.
SunTrust’s estimated common equity Tier 1 ratio under Basel III (on a fully phased-in basis) was 9.63% as of Dec 31, 2016.
Share Repurchase
During the quarter, SunTrust bought back shares worth $240 million.
Our Viewpoint
We believe that SunTrust remains well positioned for future growth given its favorable deposit mix, continued expense discipline and enhanced credit quality. Though efficient cost-containment efforts continue to ease pressure on the bottom line, exposure to risky assets and heightened regulatory pressure will likely continue weighing on the profitability in the near term.
SunTrust Banks Inc. Price, Consensus and EPS Surprise
U.S. Bancorp’s (USB - Free Report) fourth-quarter 2016 earnings per share of 82 cents came in a penny above the Zacks Consensus Estimate. Better-than-expected results were driven by growth in net interest income and non-interest income. However, a rise in expenses and higher credit costs were on the downside.
Comerica Inc.’s (CMA - Free Report) fourth-quarter 2016 adjusted earnings per share of 99 cents came ahead of the Zacks Consensus Estimate of 95 cents. Better-than-expected results reflect higher revenues and lower expenses. Moreover, fall in provisions was another tailwind. However, lower deposits and rise in non-performing assets remain concerns.
KeyCorp.’s (KEY - Free Report) fourth-quarter 2016 adjusted earnings of 31 cents per share outpaced the Zacks Consensus Estimate of 29 cents. Better-than-expected quarterly results indicate revenue synergies from the First Niagara Financial Group acquisition deal (completed in Aug 2016). However, higher operating expenses and a rise in provision for credit losses were the downsides.
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SunTrust (STI) Beats Q4 Earnings; Provisions & Costs Rise
Improvement in revenues drove SunTrust Banks, Inc.'s (STI - Free Report) fourth-quarter 2016 earnings of 90 cents per share, which outpaced the Zacks Consensus Estimate of 88 cents. However, the figure was down 1% year over year.
Results reflected an improvement in net interest income and a rise in non-interest income. Further, growth in loans and deposits acted as a tailwind. However, a jump in provision for credit losses and an increase in operating expenses were the downsides.
Net income available to common shareholders was $448 million, down 4% year over year.
For 2016, earnings of $3.60 per share beat the Zacks Consensus Estimate of $3.56. Also, it was up 1% year over year. Net income available to common shareholders was $1.81 billion, down 3% from 2015.
Revenues Improve, Costs Up
Total revenue (fully tax equivalent basis) for the quarter grew 7% from the prior-year quarter to $2.19 billion. Further, the reported figure was above the Zacks Consensus Estimate of $2.17 billion.
For 2016, revenues (on FTE basis) increased 7% year over year to $8.74 billion. Also, this was above the Zacks Consensus Estimate of $8.64 billion.
Net interest income (FTE basis) jumped 7% year over year to $1.38 billion. The rise was attributable to growth in average earning assets and higher net interest margin (NIM). NIM was up 2 basis points (bps) year over year to 3.00%, reflecting higher earning asset yields, partially offset by higher funding costs.
Non-interest income was $815 million, up 7% from the prior-year quarter. The rise was largely driven by higher capital markets and mortgage production-related income, partially offset by lower mortgage servicing and wealth management-related income.
Non-interest expenses were up 8% from the year-ago quarter to $1.40 billion. The increase was mainly due to increases across most expense categories, other than outside processing and software expenses.
Deteriorating Credit Quality
Total non-performing assets were $919 million as of Dec 31, 2016, up 25% from prior-year quarter. The increase was mainly due to rise in energy-related loans and home equity products. Non-performing loans increased 10 bps year over year to 0.59% of total loans held for investment.
Also, provision for credit losses surged 98% from the year-ago quarter to $101 million, owing to higher net charge-offs. Further, rate of net charge-offs increased 14 bps year over year to 0.38% of total average loans held for investment.
Strong Balance Sheet
As of Dec 31, 2016, SunTrust had total assets of $204.9 billion, while shareholders’ equity summed $23.6 billion, representing 12% of total assets.
As of Dec 31, 2016, loans were up 1% on a sequential basis to $143.3 billion. Total consumer and commercial deposits grew 1% sequentially to $158.9 billion.
SunTrust’s estimated common equity Tier 1 ratio under Basel III (on a fully phased-in basis) was 9.63% as of Dec 31, 2016.
Share Repurchase
During the quarter, SunTrust bought back shares worth $240 million.
Our Viewpoint
We believe that SunTrust remains well positioned for future growth given its favorable deposit mix, continued expense discipline and enhanced credit quality. Though efficient cost-containment efforts continue to ease pressure on the bottom line, exposure to risky assets and heightened regulatory pressure will likely continue weighing on the profitability in the near term.
SunTrust Banks Inc. Price, Consensus and EPS Surprise
SunTrust Banks Inc. Price, Consensus and EPS Surprise | SunTrust Banks Inc. Quote
SunTrust currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Major Regional Banks
U.S. Bancorp’s (USB - Free Report) fourth-quarter 2016 earnings per share of 82 cents came in a penny above the Zacks Consensus Estimate. Better-than-expected results were driven by growth in net interest income and non-interest income. However, a rise in expenses and higher credit costs were on the downside.
Comerica Inc.’s (CMA - Free Report) fourth-quarter 2016 adjusted earnings per share of 99 cents came ahead of the Zacks Consensus Estimate of 95 cents. Better-than-expected results reflect higher revenues and lower expenses. Moreover, fall in provisions was another tailwind. However, lower deposits and rise in non-performing assets remain concerns.
KeyCorp.’s (KEY - Free Report) fourth-quarter 2016 adjusted earnings of 31 cents per share outpaced the Zacks Consensus Estimate of 29 cents. Better-than-expected quarterly results indicate revenue synergies from the First Niagara Financial Group acquisition deal (completed in Aug 2016). However, higher operating expenses and a rise in provision for credit losses were the downsides.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>