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SunTrust Gets Lift From Narrowed Loss

Shares of SunTrust surged Thursday as the Southern regional bank reported a narrower than expected loss for the second quarter.



) - Shares of

SunTrust Banks

(STI) - Get SunTrust Banks, Inc. Report

surged Thursday as the Southern regional bank reported a narrower than expected loss for the second quarter.

The stock jumped 8.7% to $24.36 in recent trades on volume of 3.2 million. Through Wednesday's close at $22.42, the shares were up 10.5% so far in 2010.

Before the opening bell, SunTrust posted a net loss available to common shareholders of $56 million, or 11 cents a share, for the three months ended June 30, narrower than both its loss of $164 million, or 41 cents a share, in the year-earlier quarter, and a loss of $229 million, or 46 cents a share, in the first quarter. Excluding preferred dividends, mainly related to its government bailout funds, the bank would have earned $12 million in the June period.

"Our overall operating trends gained momentum with continued asset quality improvement, sequential quarter revenue growth, and favorable deposit volume and mix," said James M. Wells III, the bank's chairman and CEO, in a press release.

Total revenue came in at $2.16 billion, down 2% compared to a year earlier, but up 14% sequentially. Net interest margin rose 39 basis points to 3.33%.

The average analyst estimate, according to

Thomson Reuters

, was for a loss of 35 cents a share on revenue of $1.94 billion.

Like other large-cap and super-regional banks SunTrust attributed the earnings beat to improved asset quality and other positive operating trends.

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Non-interest revenues improved across all major fee income categories, SunTrust said. The second quarter also included net gains of $57 million on the sale of securities and $63 million in valuation gains on the company's public debt and related hedges carried at fair value vs. valuation losses of $20 million in the first quarter.

SunTrust recorded a $112 million gain from the sale of Visa shares in the year-earlier period.

SunTrust estimates Tier 1 common equity at June 30 to be 7.85%, Tier-1 capital ratio of 13.40%, and tangible equity to tangible asset ratios of 10.18%. For the second quarter , the company recorded $67 million in preferred dividends related to the $4.85 billion in preferred securities issued to the U.S. Treasury under the Capital Purchase Program.

"We continue to execute on our client-focused strategies and position the company to benefit from opportunities in our markets that will hasten our return to profitability," Wells said. "With solid capital and liquidity, we operate from a position of strength. Lingering operating environment uncertainties notwithstanding, we are encouraged by improving results and prospects."

SunTrust's non-performing assets, net charge offs as well as nonaccrual loans all declined in the second quarter. As a result of improved credit trends, The bank's provision for loan losses dropped 32% to $662 million compared to the year-earlier quarter, it said.

Regional banks including

BB&T (BBT) - Get BB&T Corporation Report


PNC Financial Services

(PNC) - Get PNC Financial Services Group, Inc. Report

continued the trend Thursday of improved credit quality giving a boost to earnings in the second quarter. Still BB&T missed consensus estimates of 33 cents a share by 3 cents. PNC beat Wall Street estimates by 19 cents a share, recording profit of $803 million, or $1.47 a share.

BB&T shares were falling 3% to $25.14 in morning trades, while PNC's stock was up 2.2% to $59.81.

--Written by Laurie Kulikowski in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.