Juneja rates all three banks "outperform."
SunTrust reported second-quarter earnings available to common shareholders of $365 million, or 68 cents a share, increasing from $340 million, or 63 cents a share , in the first quarter, and $270 million, or 50 cents a share, during the second quarter of 2012. The company's noninterest expenses totaled $1.397 billion in the second quarter, increasing from $1.363 billion the previous quarter, but declining from $1.546 billion a year earlier.
SunTrust's credit related expenses were down 31% year-over-year to $125 million during the second quarter. The company expects its "normalized" annual costs to decline to a level of less than $325 million, implying another 35% reduction from second-quarter levels, and implying quite a bit of expense leverage for earnings growth.
Bank of America's noninterest expenses declined to $16.081 billion in the second quarter, from $19.500 billion the previous quarter and $17.048 billion a year earlier. The first-quarter number reflected the MBIA settlement.
Bank of America said its expenses tied to Legacy Asset Servicing (LAS) -- mainly on problem loans acquired along with Countrywide Financial in 2008 -- totaled $2.3 billion during the second quarter. The bank said had previous projected its quarterly LAS expenses would decline to $2.1 billion by the end of 2013. The company on July 17 said that by the fourth quarter, it now expected these expenses to drop below $2.0 billion.
When asked during the company's earnings conference call if $16 billion would be a good starting point for third-quarter expenses, Bank of America CFO Bruce Thompson said, "that's correct."
Wells Fargo's second-quarter noninterest expense declined to $7.213 billion, from $7.377 billion in the first quarter, and $7.580 billion in the second quarter of 2012. The sequential decline mainly reflected seasonal bonuses paid during the first quarter. The company's efficiency ratio - essentially the number of pennies of overhead costs for each dollar of revenue - was 57.3% during the second quarter, improving from 58.2 a year earlier. Wells Fargo's goal is to keep the efficiency ratio in a range of 55% to 59%.
-- Written by Philip van Doorn in Jupiter, Fla.