- First-quarter net income to common shareholders of $340 million, or 63 cents a share.
- Earnings beat the consensus EPS estimate of 61 cents.
- Provision for credit losses down to $212 million from $328 million in Q4.
- Mortgage production revenue declines to $159 million from $241 million in Q4.
- Expenses see broad decline of 10% quarter over quarter and 12% year over year.
The first-quarter provision for loan losses was $212 million, declining from $328 million in the fourth quarter and $317 million in the first quarter of 2012. SunTrust's asset quality continued to improve, with a ratio of nonperforming loans to total loans of 1.21% as of March 31, compared to 1.27% in December and 2.16% in March 2012. The annualized ratio of net charge-offs to average loans was 0.76%, improving from 1.30% the previous quarter and 1.38% a year earlier.
First-quarter non-interest income totaled $863 million, declining from $1.015 billion in the fourth quarter, and $876 million a year earlier. Mortgage production revenue in the first quarter was $159 million, declining from $241 million the previous quarter, but increasing from $63 million a year earlier. The sequential decline in mortgage income was expected, with refinance volumes declining and lower gains on the sale of new loans in the secondary market.
SunTrust's efficiency ratio improved to 64.46 in the first quarter from 65.93 the previous quarter and 69.50 a year earlier. The efficiency ratio is, essentially, the number of pennies of expenses a bank incurs for each dollar of revenue. The company's first-quarter return on average assets was 0.83%, improving from 0.81% in the fourth quarter and 0.57% in the first quarter of 2012. SunTrust's return on average common equity for the first quarter was 6.77%, compared to 6.86% the previous quarter and 4.94% a year earlier. The company's estimated Basel I Tier 1 common equity ratio was 10.10% as of March 31, increasing from 10.04% in December. Investors were impressed with SunTrust's cost-cutting, sending the bank's stock was up 4% in late morning trading, to $28.35. Jefferies analyst Ken Usdin has a "hold" rating on SunTrust, with a $31 price target, and in a note to clients early on Friday wrote that "the beat looks pretty clean as strength in credit and expenses offset greater-than-expected declines in mortgage banking. There is some concern on how STI improves the EPS run rate from here, but the stock has underperformed enough in recent weeks that it might hold up ok on the report." SunTrust's shares closed at $27.32 Thursday, pulling back 3% year-to-date, following a 62% return during 2012. The shares trade just above their reported March 31 tangible book value of $26.33, and for 9.4 times the consensus 2014 EPS estimate of $2.92. The consensus 2013 EPS estimate is $2.67. SunTrust in March said it would repurchase up to $200 million worth of shares through the first quarter of 2014, and that at its next board of directors meeting would consider doubling its quarterly dividend to 10 cents a share. STI data by YCharts
Interested in more on SunTrust? See TheStreet Ratings' report card for this stock. -- Written by Philip van Doorn in Jupiter, Fla. >Contact by Email. Follow @PhilipvanDoorn