Regional outlet SunTrust Banks (STI) earned $250 million in the first quarter, a 47% jump from $180 million a year earlier as mortgages contributed greatly to revenue growth.
The Atlanta bank also reported earnings of 46 cents a share, beating analysts polled by Thomson Reuters who estimated earnings of 33 cents. EPS grew from 8 cents a share in the first quarter of 2011.
Loans increased 3% in the first quarter, as guaranteed mortgages and student loans contributed to growth. Real estate loan portfolios, however, continued to drop, SunTrust said.
“Improved revenue, as well as continued favorable trends in loans, deposits, and credit metrics were hallmarks for the quarter,” Chief Executive William Rogers said in a news release. Total revenue grew 3% from a year earlier to $2.22 billion.
SunTrust also adjusted its fourth-quarter income downward to $74 million from an initially reported $155 million. The bank recorded a $120 million charge, or $81 million after tax, for a potential settlement related to its mortgage-servicing practices, according to spokesman Michael McCoy.
The health of SunTrust’s mortgage business improved in the first quarter, as related production income returned to a $63 million profit from a $1 million loss a year earlier.
Mortgage originations increased 12% and 33% from a quarter and year earlier, which the bank attributed to higher refinance activity from low interest rates and an extension of the Home Affordable Refinance Program. Rogers, in a conference call, said three-fourths of originations in the first quarter were refinancings, with a third of that from HARP.
"We have to eventually see some purchase volume, though, to keep momentum up," Rogers said. "Refinancing eventually runs its course."
SunTrust's geographic market includes a huge number of homeowners underwater, with many more now eligible under HARP after changes that lifted previous limits on loan-to-value ratios. Georgia and Florida mortgages in negative equity made up 34.1% and 44.3%, respectively, of the market in February according to CoreLogic (CLGX).
Income from mortgage servicing grew to $81 million for the first three months of 2012 from $72 million a year earlier. The bank’s servicing portfolio fell to $155 billion from $164 billion in the first quarter 2011.
Nonperforming loans, as percentage of all lending, dropped for the 11th straight quarter. The measure fell to 2.16% in the first quarter, down from 2.37% and 3.46% from a quarter and year earlier, respectively. Those loans totaled $2.6 billion as of March 31.
SunTrust held $122.5 billion in average loans and $125.8 billion in commercial and consumer deposits, both up from a year and quarter earlier.