SunTrust 4Q earnings dented by mortgage expenses

Beats on earnings per share

SunTrust Bank (STI) posted a fourth-quarter net income of $378 million, or $0.72 per average common diluted share. This includes a $145 million mortgage-related legal provision, or $0.17 per share, related to legacy mortgage matters, to increase legal reserves and complete the resolution of a specific matter. 

Excluding the impact of this expense, adjusted earnings per share for the current quarter were $0.88 compared to $0.81, on an adjusted basis, in the prior quarter and $0.77 in the fourth quarter of 2013.

Total revenue came in at $2 billion for the current quarter, an increase of $12 million compared to the prior quarter, primarily driven by higher mortgage-related and investment banking income, partially offset by declines in other revenue categories. 

However, compared to the fourth quarter of 2013, total revenue declined $18 million, largely driven by foregone RidgeWorth revenue and lower trading income, partially offset by higher mortgage-related and investment banking income.

According to analysts with Seeking Alpha, earnings per share beat by $0.10, while revenue of $2 billion was in-line with forecasts.  

Mortgage production income for the fourth quarter increased to $61 million compared to $45 million for the prior quarter and $31 million for the fourth quarter of 2013.  The jump was due to higher mortgage production volume, improved gain-on-sale margins and a lower mortgage repurchase provision. 

Meanwhile, mortgage production volume increased 4% sequentially and 20% compared to the fourth quarter of 2013.

Mortgage servicing income escalated to $53 million in the fourth quarter, compared to $44 million in the prior quarter and $38 million in the fourth quarter of 2013, which was primarily driven by higher servicing fees, due to recent servicing portfolio acquisitions and typical fourth quarter seasonal activity.

"Core earnings growth of 18% over the past year reflects our focus on expanding client relationships and executing our core strategies.  Our strong performance in the fourth quarter and 2014 was driven by good loan and deposit growth, continued expense discipline, and improved credit quality," said William Rogers, Jr. chairman and CEO of SunTrust Banks.

“Looking into 2015, we will build on the momentum generated in 2014 to meet more client needs and expand key businesses, creating a more valuable company for all of our stakeholders," Rogers added. 

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