A rise in revenues drove SunTrust Banks, Inc.‘s STI second-quarter 2016 adjusted earnings of 89 cents per share, which outpaced the Zacks Consensus Estimate of 87 cents. Also, the figure was in line with the prior-year tally. The reported quarter result excluded 5 cents of benefit from discrete items.
Results reflected an improvement in net interest income benefiting from the Dec 2015 rate hike 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 marginal rise in operating expenses were the downsides.
Net income available to common shareholders was $475 million, up 2% year over year.
Suntrust Banks Inc. (STIÂ -Â Analyst Report) EPS BNRI & Surprise Percent – Last 5 Quarters | FindTheCompany
Improving Net Interest Income Drove Results
Total revenue (fully tax equivalent basis) grew 7% from the prior-year quarter to $2.22 billion. Further, the reported figure was above the Zacks Consensus Estimate of $2.14 billion.
Net interest income (FTE basis) surged 10% year over year to $1.32 billion. The rise was attributable to loan growth and a higher net interest margin (NIM).
Further, NIM was up 13 basis points (bps) year over year to 2.99%, reflecting higher benchmark interest rates and lower premium amortization in the securities portfolio.
Non-interest income was $898 million, up 3% from the prior-year quarter. The rise was largely driven by higher mortgage-related revenues and $44 million net asset-related gains, partially offset by decline in capital markets and wealth management-related income.
Non-interest expenses inched up 1% from the year-ago quarter to $1.35 billion. The increase was due to a rise in all expense components except outside processing and software costs, net occupancy expenses and other non-interest expenses.
Deteriorating Credit Quality
Total non-performing assets were $1 billion as of Jun 30, 2016, up 52% from the prior-year quarter. The increase was mainly due to downgrades in certain energy-related loans. Non-performing loans increased 31 bps year over year to 0.67% of total loans held for investment.
Also, provision for credit losses surged drastically to $146 million from $26 million in the year-ago quarter. The significant rise was due to higher energy-related charge-offs, moderating asset quality improvements and loan growth. Further, rate of net charge-offs increased 13 bps year over year to 0.39% of total average loans held for investment.
Strong Balance Sheet
