SunTrust Banks, PNC Financial Q4 Profit Decline; SunTrust Beats View

(RTTNews) - Regional banks SunTrust Banks Inc. (STI) and PNC Financial Services Group, Inc. (PNC) on Friday reported decline in profit for the fourth quarter amid lower revenues, while recording lower provisions for credit losses amid improved credit quality.

However, SunTrust's adjusted earnings per share beat analysts' expectations, and revenues matched their estimates. PNC Financial's revenues for the quarter beat analysts' expectations.

SunTrust Banks reported an 8 percent decline in profit for quarter, reflecting a legal provision and lower trading revenues. PNC Financial reported a 2 percent decline in profit for the quarter on lower revenues, while its provision for credit losses also declined.

For the fourth quarter, SunTrust's net income available to common shareholders declined to $378 million or $0.72 per share from $413 million or $0.77 per share in the previous-year quarter.

The latest quarter's results include a legal provision of $145 million or $0.17 per share, related to legacy mortgage matters, to increase legal reserves and complete the resolution of a specific matter.

Adjusted earnings for the quarter were $0.88 per share, compared to $0.77 per share in the same period last year. On average, 20 analysts polled by Thomson Reuters expected earnings of $0.78 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenue for the quarter declined 1 percent to $2.04 billion from $2.06 billion in the year ago quarter. Analysts were looking for revenue of $2.04 billion.

The decline in revenue was largely driven by foregone RidgeWorth revenue and lower trading income, partially offset by higher mortgage-related and investment banking income.

Net interest income edged up slightly from last year to $1.248 billion, as a 24 basis point decline in net interest margin was offset by growth in average earning assets.

Non-interest income declined 2 percent to $795 million, largely driven by foregone RidgeWorth revenue and lower trading income, partially offset by higher mortgage-related and investment banking income.

Trading income decreased 30 percent from last year to $40 million, primarily driven by lower fixed income-related trading revenue.

Non-interest expense rose 4 percent from last year to $1.41 billion and includes the legal provision. Provision for credit losses decreased 27 percent to $74 million, as asset quality continued to improve.

For fiscal 2014, SunTrust's net income available to common shareholders rose to $1.72 billion or $3.23 per share from $1.30 billion or $2.41 per share last year. Adjusted earnings for the year were $3.24, compared to $2.74 in the prior year.

Total revenue for the year rose to $8.31 billion from $8.19 billion in the previous year.

Street expected the company to earn $3.26 per share for the year on revenues of $8.24 billion.

PNC Financial's net income attributable to common shareholders for the fourth quarter declined to $988 million or $1.84 per share from $1.01 billion or $1.87 per share in the prior year.

Analysts expected the company to report earnings of $1.74 per share. Analysts' estimates typically exclude special items.

Total revenue for the quarter declined 3 percent to $3.95 billion from $4.07 billion in the year-ago quarter. Analysts consensus was $3.80 billion.

Net interest income declined 7 percent from the prior-year quarter to $2.10 billion, reflecting lower purchase accounting accretion. Core net interest income decreased due to lower earning asset yields and lower investment securities balances, among others.

Net interest margin declined to 2.89 percent from 3.38 percent last year, reflecting lower loan yields, an increase in borrowed funds and lower benefit from purchase accounting accretion.

Meanwhile, non-interest income rose 2 percent to $1.85 billion. Client fee income growth was reflected in higher corporate service fees, including higher merger and acquisition advisory fees, service charges on deposits and asset management revenue.

Provision for credit losses declined 54 percent from the year-ago period to $52 million as overall credit quality continued to improve.

The company's non-interest expense rose 1 percent from last year to $2.54 billion.

For fiscal 2014, PNC Financial's net income declined to $3.947 billion or $7.30 per share from $3.952 billion or $7.36 per share in the prior year. Total revenue for the year decreased to $15.38 billion from $16.01 billion last year.

Street expected the company to report earnings of $7.21 per share for the year on revenues of $15.23 billion.

STI closed Thursday's trading at $36.71, down $0.66 or 1.8 percent on a volume of 5.94 million shares. PNC closed Thursday's trading at $82.42, down $0.58 or 0.70 percent on a volume of 4.7 million shares.