(Includes updated share price.)

SunTrust Banks ( STI) on Wednesday closed up 6.7% to $16.19 after it reported a second-quarter net loss of $183 million that was not as bad as Wall Street had expected.

Factoring in dividends paid to the federal government associated with the financial sector bailout, the net loss available to common shareholders was $164 million, or 41 cents a share. That beat the Thomson Reuters analyst consensus of a loss of 52 cents a share.

In comparison, the company posted net income of $540 million in the second quarter of 2008. However, earnings performance improved from the previous two quarters, with net losses of $815 million during the first quarter and $348 million during the fourth quarter of 2008.

The Atlanta holding company stressed its enhanced capital strength, after increasing its Tier 1 capital by $2.3 billion through an offering of common shares, asset sales and a tax benefit.

After federal bank regulators completed their stress tests on the largest 19 domestic bank holding companies in May, SunTrust was instructed to raise another $2.2 billion in common equity, in addition to the $4.85 billion the company had already received when it sold preferred shares to the Treasury through the Troubled Assets Relief Program, or TARP.

Other bank holding companies ordered to raise additional common equity as a result of the stress tests included Citigroup ( C), Bank of America ( BAC), Wells Fargo ( WFC), Regions Financial ( RF), KeyCorp ( KEY), Fifth Third Bancorp ( FITB) and PNC Financial ( PNCC).

SunTrust also retired $750 million in preferred shares issued previous to TARP, bringing it to estimate a Tier 1 common equity ratio of 7.35% as of June 30, up from 5.83% the previous quarter. SunTrust estimated a Tier 1 leverage ratio of 11.04%, up from 10.14% in March.

As expected, loan quality continued to deteriorate, with nonperforming assets (including nonaccrual loans and repossessed assets) comprising 3.49% of total assets, up from 3.75% last quarter and 1.48% a year earlier.

Net loan charge-offs for the first quarter totaled $801 million, while the company set aside $962 million for loan-loss reserves.

SunTrust CEO James M. Wells III pointed out that early state loan delinquencies were declining and said "with enhanced capital, improved liquidity, and bolstered reserves, we have the resources necessary to continue to manage successfully through sustained economic weakness."

SunTrust shares recently were falling 3.2% to $14.70.
Philip W. van Doorn joined TheStreet.com Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, 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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