While most of the nation’s largest banks and investment banking firms reported year-over-year declines in net income during the first quarter, some of them substantial, one bank finally reported an increase in earnings for Q1 on Friday.
SunTrust Banks, Inc., reported a net income available to shareholders of $430 million for Q1, or $0.84 per average common diluted share (EPS), which was an increase from Q1 2015’s net income of $411 million (EPS of $0.78). Total revenue was up by 5 percent over-the-year in Q1 from $1.99 billion up to $2.1 billion driven largely by higher net interest income (as a result of loan growth) and net interest margin expansion. Higher mortgage-related and capital markets revenue were also drivers of the bank’s overall increase in revenue, according to SunTrust.
“We delivered solid revenue growth this quarter as we continued to meet more client needs across each of our businesses, benefiting from our diverse business model and consistent strategies,” said William H. Rogers, Jr., chairman and CEO of SunTrust Banks, Inc. “This revenue performance, combined with continued expense discipline, resulted in a good start to the year with 8 percent earnings growth. We remain highly focused on improving the financial well-being of our clients and communities and delivering increased value to our shareholders.”
SunTrust’s mortgage production income for Q1 was reported at $60 million, up by $7 billion over-the-quarter but down by $23 million over-the-year. The over-the-quarter increase was due to higher refinance activity and slightly higher gain-on-sale margins, while the over-the-year decline was due to reduced refinance activity and a drop in gain-on-sale margins.
The bank’s mortgage servicing income, however, spiked both over-the-quarter and over-the-year in Q1. The $62 million servicing income for the first quarter represented an increase from $56 million in Q4 and from $43 million in Q1 2015. The-over-the-year income totaled 44 percent, due to improved net hedge performance and a decline in the servicing asset decay. Other drivers of the growth were higher servicing fees, which were the result of a larger portfolio ($149 billion at the end of Q1 compared to $142 billion at the end of Q1 2015). Drivers of the $6 billion over-the-quarter increase were the combination of improved net hedge performance and a decline in the servicing asset decay—offset by a seasonal reduction in servicing fees, according to SunTrust.
Click here to view the complete Q1 earnings report for SunTrust.