SunTrust Posts Loss on Housing Stresses

ATLANTA (TheStreet) -- SunTrust(STI Quote) swung to a third-quarter loss due to continued stress in the housing market and writedowns on its public debt.

The Atlanta-based regional lender lost $377.1 million, or 76 cents a share, in the quarter, down from a profit of $304.4 million a year earlier and further into the red than the $164.4 million loss in the previous quarter. Analysts had expected a narrower loss of 65 cents a share, on average, according to Thomson Reuters.

SunTrust blamed the loss on $390.8 million it had to set aside for loan losses and a $292.8 million writedown on the bank's public debt. It also paid $66.4 million in preferred dividends on the government's bailout investment.

However, the bank's nonperforming loans declined for the first time since the start of the financial crisis, standing at $5.4 billion, or 4.67% of SunTrust's loan book on Sept. 30. The amount was $60 million lower than June 30, driven by improvements in commercial loans, while residential loans continued to deteriorate.

Although "tentatively optimistic" about emerging signs of stability in the economy, SunTrust CEO James Wells was much more dour than counterparts at big banks, like Bank of America(BAC Quote), whose executives called a peak in credit losses last quarter, or Wells Fargo (WFC Quote) managers, who predicted a peak in early 2010. As a regional lender without a major trading desk, SunTrust is more exposed to traditional lending than its larger competitors.

"The strength and pace of economic recovery is uncertain," said Wells, "and the resultant impact on credit losses, and thus earnings, will likely lag actual economic improvement."