SunTrust: Good Quarter, Shrinking Future Loser

Mutascio also said that although the net interest margin was "essentially flat," net interest income declined slightly "as the company's average earning asset base actually decreased to $153.2 billion from $154.9 billion in 2Q12, given balance sheet contraction in the form of lower investment securities balances," and that "management expects the net interest margin to compress in the mid-single-digit range in 4Q12 and net interest income to be lower than the 3Q12 level due to the balance sheet contraction."

"With the balance sheet actions taken in 3Q12 (loan sales and contracting investment securities balances) and well as slower than anticipated loan growth, we are now projecting 2013 full year average earning assets of just $153.4 billion," he said.

SunTrust reported that through its cost-cutting program, annualized "savings now exceed the $300 million goal for the program," however, Mutascio noted that "our total operating expense estimate for 2013 has increased to $6.05 billion from $5.90 billion due to lower core cost saves than expected," and that aside from a $13 million decline in Federal Deposit insurance Corp. insurance premiums and $11 million in savings from "a reclassification of credit card costs... core operating expenses would have been dead flat with the 3Q11 level despite the cost save initiatives."

SunTrust's shares have now returned 57% year-to-date, following a 40% decline during 2011.

The shares trade for 1.1 times their reported Sept. 30 tangible book value of $25.72, and for 10 times the consensus 2013 EPS estimate of $2.80.

Interested in more on SunTrust? See TheStreet Ratings' report card for this stock.

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-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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