As reported in the Wall St. Journal, Huntington Bancshares Inc. (HBAN) posted its first profit in more than a year in the first quarter, while KeyCorp (KEY) and SunTrust Banks Inc. (STI) posted smaller-than-expected quarterly losses.
Regional banks have surged roughly 30% this year. However, this week’s earnings reports allow investors to see the level of loan loss reserve additions needed, which has crimped earnings power over the last two years. Minimal loan-loss provisioning will be the biggest potential lever in terms of sequential earnings improvement, analysts say. Wall Street is also looking for improvements in delinquency levels and declines in growth of nonperforming assets.
True to what other regional banks are showing, loan losses at the three banks continued to weigh on the balance sheets. But earnings reports still beat estimates.
“First-quarter results represented a very significant step forward for Huntington,” said Chairman and Chief Executive Stephen Steinour. “Last October, we said it was important that Huntington return to profitability as soon as possible. We are very pleased to have reached this goal a year faster than the analyst consensus anticipated.”
The beleaguered regional bank has seen worse-than-expected loan losses because of instability in its markets. But it said in January that it expected to return to quarterly profitability sometime this year.
For the quarter, Huntington reported a profit of $39.7 million, or a penny a share, compared with a year-earlier loss of $2.43 billion, or $6.79 a share. The most-recent quarter included $38.2 million of net tax benefit, while the year-earlier quarter included $2.6 billion of write-downs. Revenue jumped 10% to $634.7 million.
Analysts polled by Thomson Reuters had most recently forecast a loss of 15 cents on $617 million in revenue.
Loan-loss provisions were $235 million, down from $291.8 million a year earlier and $894 million in the prior quarter. Net charge-offs, or loans lenders don’t think are collectible, fell to 2.58% of average loans from 3.4% a year ago and 4.8% in the previous quarter. Nonperforming loans, those near default, increased to 5.17% from 4.46% a year earlier but dropped from 5.57% in the prior quarter.
Meanwhile, KeyCorp’s first-quarter loss, its eight consecutive quarter in the red, narrowed significantly. The Cleveland-based parent of KeyBank N.A. attributed the smaller loss to improving revenue and reduced loan-loss provisions.
It reported a loss of $96 million, or 11 cents a share, compared with a year-earlier loss of $536 million, or $1.09 a share. Revenue rose 0.8% to $1.08 billion. Analysts polled by Thomson Reuters had most recently forecast a loss of 30 cents on $1.09 billion in revenue.
The bank put $413 million aside for potential losses in the most recent quarter, compared to $847 million in the first quarter of 2009. Net charge-offs were 3.67% of average loans, compared with 2.6% a year ago and 4.64% in the previous quarter. Nonperforming loans, those near default, were 3.69%, versus 2.48% and 3.72%, respectively.
SunTrust Banks first-quarter loss narrowed following year-earlier write-downs, but the Atlanta-based regional bank said “lingering effects of the recession” continued to hurt its results.
Chairman and Chief Executive James M. Wells III expressed some optimism, saying, “We are increasingly encouraged by current operating trends and our outlook for the future.”
SunTrust reported a loss of $161 million, or 46 cents a share, from a year-earlier loss of $815 million, or $2.49 a share. That loss was also 46 cents, excluding the write-downs. Revenue dropped 14% to $1.9 billion on a 38% slump in noninterest income.
Analysts polled by Thomson Reuters had most recently forecast a loss of 58 cents on $2 billion in revenue.
Credit-loss provisions were $862 million, down from $994 million a year earlier and $973.7 million in the prior quarter. Net charge-offs rose to 2.91% of average loans from 1.97% a year earlier and 2.83% in the previous quarter. Nonperforming loans were 4.55%, up from 3.75% a year ago but down from 4.75% a quarter earlier.
Average consumer and commercial deposits were $115.1 billion, up 7% from a year earlier.
Mr. Wells noted in January that SunTrust had continued to see soft revenue and weakened loan demand from consumer and commercial borrowers because of the recession, though he said he was encouraged by recent improving credit trends. The regional bank serves an area that was hit especially hard by the real-estate crash.
