Real-Estate Exposure Slams Regional Bank Earnings


Regional banks SunTrust Banks and Fifth Third Bancorp posted lower quarterly profits Tuesday as they set aside substantially more money to cover bad loans.

The banks are the last of the 15 largest U.S. commercial banks and thrifts to report first-quarter results. All but BB&T said earnings fell, and several reported losses.

Profit fell 45 percent at Atlanta-based SunTrust to $283.6 million, or 81 cents a share, from $513.9 million, or $1.44 a share, a year earlier.

Cincinnati-based Fifth Third said profit fell to $292 million, or 55 cents a share, from $359 million, or 65 cents a share.

Analysts on average expected profit per share of $1.03 at SunTrust and 49 cents at Fifth Third, according to Reuters Estimates.

SunTrust and Fifth Third said the nation's real-estate slump, especially in Florida, forced them to set aside more money for loan losses as a growing number of borrowers and property developers fell behind on payments. Fifth Third said it was also hurt by its exposure to Michigan.

"We've not yet seen any indication the credit cycle has peaked," Fifth Third Chief Executive Kevin Kabat said on a conference call. "For the near term, we expect credit conditions to continue to be difficult."

The provision for credit losses rose tenfold to $560 million at SunTrust, while Fifth Third increased the amount it set aside more than sixfold to $544 million. Nonperforming assets roughly tripled at both banks.

"Growth in credit costs associated with the residential real-estate correction continued to take a toll," SunTrust Chief Executive James Wells said. "The backdrop of emerging recession fears clouds the near-term outlook."

Results for both banks included large one-time gains tied to credit-card network Visa's initial public offering last month.

SunTrust said it plans this quarter to finish transactions concerning its estimated $2.6 billion stake in Coca-Cola , boosting capital by about $1 billion. The bank has held its Coca-Cola shares since 1919, and has a copy of the formula to make Coke.

At the end of March, SunTrust had about $179 billion of assets, operating about 1,678 branches in 11 states and Washington, D.C.

Fifth Third ended March with $111 billion of assets, operating about 1,232 branches in 11 states.