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SunTrust Reports Big Drop in Expenses (Update 1)

  • First-quarter net income to common shareholders of $340 million, or 63 cents a share.
  • Earnings beat the consensus EPS estimate of 61 cents.
  • Provision for credit losses down to $212 million from $328 million in Q4.
  • Mortgage production revenue declines to $159 million from $241 million in Q4.
  • Expenses see broad decline of 10% quarter over quarter and 12% year over year.

Updated from 8:11 a.m. ET with late morning market action and comment from Jefferies analyst Ken Usdin.

NEW YORK ( TheStreet) -- SunTrust (STI - Get Report) on Friday reported sharp declines in credit costs and other expenses, helping the company mitigate the effect of a large and expected sequential decline in mortgage production income.

The Atlanta-based regional lender reported first-quarter net income available to common shareholders of $340 million, or 63 cents a share, compared to $350 million, or 65 cents a share, in the fourth quarter, and $245 million, or 46 cents a share, in the first quarter of 2012.

First-quarter net interest income was $1.221 billion, declining from $1.246 billion the previous quarter, and $1.311 billion a year earlier. The main factor in the sequential decline was the lower number of days in the first quarter. SunTrust's net interest margin -- the spread between the average yield on loans and investments and the average cost for deposits and borrowings -- narrowed to 3.33% in the first quarter from 3.36% in the fourth quarter and 3.49% a year earlier.

Average performing loans were $119.4 billion in the first quarter, down 1% from the previous quarter and from a year earlier, as planned declines in student loans and residential mortgage loans were partially offset by increases in commercial and industrial loans and indirect auto loans.

The first-quarter provision for loan losses was $212 million, declining from $328 million in the fourth quarter and $317 million in the first quarter of 2012. SunTrust's asset quality continued to improve, with a ratio of nonperforming loans to total loans of 1.21% as of March 31, compared to 1.27% in December and 2.16% in March 2012. The annualized ratio of net charge-offs to average loans was 0.76%, improving from 1.30% the previous quarter and 1.38% a year earlier.

First-quarter non-interest income totaled $863 million, declining from $1.015 billion in the fourth quarter, and $876 million a year earlier. Mortgage production revenue in the first quarter was $159 million, declining from $241 million the previous quarter, but increasing from $63 million a year earlier. The sequential decline in mortgage income was expected, with refinance volumes declining and lower gains on the sale of new loans in the secondary market.
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