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SunTrust Banks profit off 26 pct, less than rivals

NEW YORK - SunTrust Banks Inc, a large US Southeast regional bank, reported on Thursday profit that easily topped analyst forecasts, even as it more than tripled the amount it set aside for loan losses.

Results suggest that SunTrust may be steering through what is widely termed the worst US financial crisis since the Great Depression better than some rivals despite heavy exposure to weakened real estate markets in Florida and Georgia. Most large US banks have reported profit declines, or losses.

Third-quarter profit for Atlanta-based SunTrust fell 26 percent. The bank expects charge-offs to remain ‘elevated’ into 2009, and plans to participate in US Treasury Secretary Henry Paulson's $250 billion plan to recapitalize banks, joining KeyCorp, Regions Financial Corp and others.

Chief Executive James Wells nevertheless said SunTrust is in position to grow, and can ‘manage successfully, albeit not unscathed, through the challenges that our industry clearly will face.’ He said the impact of a weakened economy on credit quality is ‘near-term concern number one.’

Quarterly net income fell to $307.3 million, or 88 cents per share, from $412.6 million, or $1.18, a year earlier. Revenue rose 21 percent to $2.46 billion, and excluding securities gains totaled about $2.29 billion.

Results included 34 cents per share of gains from the sale of a unit and the donation of some shares of soft drink maker Coca-Cola Co; net gains of 36 cents per share tied to debt, hedges and other assets; and a 31 cents per share charge tied to the buyback of auction-rate securities.

Analysts on average expected profit of 58 cents per share on revenue of $2.15 billion, according to Reuters Estimates.

Shares of SunTrust closed Wednesday at $40.02 on the New York Stock Exchange. They have fallen 36 percent this year, compared with a 39 percent drop in the KBW Bank Index .BKX.

LOAN LOSSES INCREASE

SunTrust set aside $503.7 million for loan losses, up from $147 million a year earlier, and loans it does not expect to be paid back rose to $392.1 million from $103.7 million. It said net charge-offs should rise 20 percent in the fourth quarter.

The bank also added deposits, amid turmoil at Southeast banking rival Wachovia Corp. Another large Southeast lender, BB&T Corp, also reported higher deposits. SunTrust said average consumer and commercial deposits rose 4 percent and deposit service charges rose 12 percent.

SunTrust said its Tier-1 capital ratio was 8.15 percent, above the 6 percent regulatory minimum, helped by the Coke transaction. Analysts have said SunTrust's plans to dispose of its 43.6 million share stake in the soft drink maker could make the bank a more attractive takeover candidate.

The bank also said it is on track to save $540 million this year from an efficiency program, and $600 million in 2009.

SunTrust ended September with $174.8 billion of assets. It operates about 1,692 branches in 11 US states and Washington, D.C.