SunTrust Banks said Tuesday higher real estate losses led to a 21 percent drop in quarterly profit, and boosted capital from long-anticipated transactions involving a big Coca-Cola stake it has held for nearly 90 years.
The large U.S. southeast regional bank said second-quarter net income available to common stockholders for Atlanta-based SunTrust fell to $535.3 million, or $1.53 per share, from $673.9 million, or $1.89, a year earlier.
Excluding items, the company earned 78 cents a share, which according to Reuters Estimates, topped the average Wall Street forecast of 64 cents. Year-earlier profit was $1.48 per share excluding a separate sale of Coke stock, the bank said.
Revenue increased 9 percent to $2.6 billion, compared with the Reuters estimate of $2.13 billion.
SunTrust more than quadrupled the amount it set aside for loan losses to $448 million from $104.7 million. Net charge-offs soared $323 million from $88 million.
But the bank said its disposition of 43.6 million Coke shares allowed it to boost its Tier 1 capital ratio, a measure of its ability to cover losses, by 0.68 of a percentage point, to 7.95 percent on a pro forma basis as of June 30. Regulators consider 6 percent sufficient.
The pro forma Tier 1 capital ratio assumes all of the transactions were completed by June 30.
The bank said it sold 10 million shares of Coke in June, and in July disposed of another 30 million shares. In July, SunTrust contributed another 3.6 million shares to charity.
SunTrust has held Coke shares since 1919, when predecessor bank Trust Co of Georgia helped take the soft drink maker public. The bank has a copy of the formula to make Coke.
Chief Executive James Wells said the sales of Coke shares better prepare SunTrust to address a weak economic environment, deteriorating market conditions and bank industry volatility.
Shares of SunTrust shares closed Monday at $34.14 on the New York Stock Exchange. The shares have fallen 45 percent this year, versus a 30 percent drop in the KBW Bank Index.