The financial sector was replete with bad news yet again on Wednesday, though Tuesday's three-quarter-point rate cut by the Federal Reserve continued to help the sector stay afloat for much of the day.
As with so many others in the industry, mortgage-market cavorting has helped infect SunTrust (STI Quote), making it the latest big bank to report that putrid market conditions essentially annihilated its fourth-quarter profit -- in this case to just $3.3 million, or a penny a share. That almost wholly wipes out last year's earnings of $498.6 million, or $1.39 a share. Analysts polled by Thomson Financial were looking for a profit of 31 cents a share, excluding items.
SunTrust blames these results mostly on the shrinking value of holdings in mortgage-backed securities, collateralized debt obligations and structured investment vehicles (SIVs), as well as a costly restructuring of the SIVs. At the time of purchase, it said, these were all "predominantly AAA or AA-rated." The SIV bail-out was announced last month, along with news of SunTrust's share of a Visa antitrust settlement, which ended up costing the bank $76.9 million. ...
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