Legacy mortgage matters dent SunTrust 2Q14 earnings
Net income hits $387M
SunTrusts Banks (STI) reported a second-quarter net income of $387 million, or $0.72 per share, compared to $0.73 in the prior quarter and $0.68 in the second quarter of 2013.
For the first half of 2014, earnings per share were $1.45, and excluding the items described below, were $1.54 per share, 18% higher than the first half of 2013.
However, earnings were negatively impacted by SunTrusts's agreement to pay $320 million to resolve the criminal investigation into the company’s Home Affordable Modification Program by the U.S. Department of Justice.
According to the DOJ, SunTrust misled numerous mortgage servicing customers who sought mortgage relief through HAMP.
“Specifically, SunTrust made material misrepresentations and omissions to borrowers in HAMP solicitations, and failed to process HAMP applications in a timely fashion,” the report said.
Earnings also included a $105 million pre-tax gain pursuant to the completion of the sale of its asset management subsidiary, RidgeWorth Capital Management.
The progression of other legacy mortgage-related matters resulted in a net $25 million accrual reversal, along with negatively impacting net income in the current quarter by $49 million, or $0.09 per share.
Total revenue was $2.2 billion for the current quarter, up $171 million, or 8%, compared to the prior quarter.
But excluding the sale of RidgeWorth, total revenue edged up by $66 million, or 3%, compared to the prior quarter, primarily driven by broad-based growth across most noninterest income categories.
Compared to the second quarter of 2013, total revenue, excluding the sale of RidgeWorth, fell by $4 million as higher investment banking and mortgage servicing income was offset by a decline in mortgage production income.
"Favorable revenue trends, particularly growth in loans, deposits and fee income, coupled with continued expense discipline and further asset quality improvements led to solid core earnings growth this quarter," said William Rogers, Jr., chairman and CEO of SunTrust Banks.
"The sale of RidgeWorth and resolution of certain legacy mortgage matters enable us to further sharpen our efforts to deepen client relationships, expand key businesses, and improve efficiency to benefit our shareholders, clients and communities," he added.