SunTrust Banks' CEO Discusses Q1 2012 Results - Earnings Call Transcript

SunTrust Banks (STI)

Q1 2012 Earnings Call

April 23, 2012 8:00 am ET

Executives

Kris Dickson -

William Henry Rogers - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Aleem Gillani - Chief Financial Officer and Corporate Executive Vice President

Kristopher Dickson -

Analysts

Kevin Fitzsimmons - Sandler O'Neill + Partners, L.P., Research Division

Matthew H. Burnell - Wells Fargo Securities, LLC, Research Division

Betsy Graseck - Morgan Stanley, Research Division

Kenneth M. Usdin - Jefferies & Company, Inc., Research Division

Kevin J. St. Pierre - Sanford C. Bernstein & Co., LLC., Research Division

Brian Foran - Nomura Securities Co. Ltd., Research Division

Craig Siegenthaler - Crédit Suisse AG, Research Division

Ryan M. Nash - Goldman Sachs Group Inc., Research Division

Gregory W. Ketron - UBS Investment Bank, Research Division

Presentation

Operator

Welcome to the SunTrust First Quarter Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, please disconnect at this time. I would now like to turn the conference over to Mr. Kris Dickson, Director of Investor Relations. You may begin.

Kris Dickson

Thanks, Wendy. Good morning, everyone. Thanks for joining SunTrust's First Quarter Earnings Conference Call. In addition to the press release, we've also provided a presentation that covers the topics we plan to address today during our call. The press release, presentation and detailed financial schedules are available on our website, www.suntrust.com. This information can be accessed by going to the Investor Relations section of the website.

With me today, among other members of our executive management team, are Bill Rogers, our Chairman and Chief Executive Officer; Aleem Gillani, our Chief Financial Officer; and Tom Freeman, our Chief Risk Officer.

Before we get started, I need to remind you that our comments today may include forward-looking statements. These statements are subject to risk and uncertainty, and actual results could differ materially. We list the factors that might cause actual results to differ materially in our press release and SEC filings, which are available on our website.

During this call, we will discuss non-GAAP financial measures in talking about the company's performance. You can find the reconciliation of these measures to GAAP financial measures in our press release and on our website.

Finally, SunTrust is not responsible for and does not edit nor guarantee the accuracy of earnings teleconference transcripts provided by third parties. The only authorized live and archived webcasts are located on the website.

With that, I'll turn the call over to Bill.

William Henry Rogers

Okay, Kris, thanks. And I'll begin today's call with some brief comments on the first quarter, and then I'm going to pass it over to Aleem to provide the details on the results. We'll start on Slide 3 of our presentation where we hit the high-level points. Net income for the quarter was $245 million and earnings per share was $0.46, which was $0.33 increase over last quarter and a $0.38 increase over the prior year. Growth in revenue and continued favorable loan deposit and asset quality trends drove the improved results.

Both net interest income and noninterest income were up over last quarter. On the net interest income side, we benefited from higher loan balances, lower cost deposit growth and a reduction in funding costs, such that our net interest margin expanded 3 basis points. Sequential quarter fee income was up sharply, and most notably in mortgage production, as low interest rates and HARP 2 drove significant refinance activity. On a year-over-year basis, fee income was stable as high mortgage revenue this quarter offset the lost income due to debit interchange changes and lower security gains.

Expenses declined from prior quarter, and we've made significant progress against our Playbook for Profitable Growth expense savings goal. Today, we've put in place annualized savings of $190 million, and as such, we're on track to achieve the $300 million goal for the program. So while I'm pleased with the progress, this is ultimately about establishing an efficiency-minded culture, which will allow us to exceed our goal without a bounce-back.

Now moving to the balance sheet. Favorable loan and deposit trends continued this quarter. Performing loans were up 3%, with growth in targeted categories and declines in high-risk loans. We also saw sustained lower-cost deposit growth. Credit quality also continued to improve with marked decreases in all primary credit metrics. Nonperforming loans were down another 9% this quarter, and net charge-offs were down 11% sequentially.

Lastly, we generated positive capital growth and our capital ratios remained strong and well in excess of our current and proposed regulatory requirements.

Now that being said, however, let me take a moment to proactively address CCAR. As part of the process moving forward, we'll be resubmitting our capital plan. We're required to submit the revised plan by mid-June and then expect to hear back by the end of the third quarter. First quarter results will be included in our submission, and we'll be running another full stress test. This new submission will only cover any proposed capital actions for the fourth quarter of this year and first quarter of 2013 as anything beyond that will be incorporated in the next year's CCAR process. So we're still in the process of learning all the variables. There's not much to report at this time. We're going to be working closely with our board as we decide what to include in our revised submission.

So with that, Aleem, let me turn it over to you.

Aleem Gillani

Thanks, Bill. Good morning, everybody. Thank you for joining us. I'll begin my comments this morning on Slide 4 with a high-level overview of the income statement.

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