Southeast regional bank SunTrust (NYSE: STI ) will report Q1 2007 financial results on Tuesday, April 17. Here's what to expect.
Word on the street:
- Analysts expect Q1 earnings of $1.42 per share, $0.04 below last year.
- The Motley Fool CAPS community awards SunTrust a lowly one-star rating. We'll see whether this quarter's results can turn those bears into bulls.
By the numbers:
In last quarter's conference call, new CEO Jim Wells emphasized efficiency and productivity with fancy-sounding names like S3 (Sell, Serve, and Sustain) and E2 (Excellence in Execution). I doubt that Emily Dickinson herself could have come up with more poetic business jargon. Investors, though, will probably want some tangible results in the form of revenue growth, efficiency ratio improvements, and higher return on equity. Consider that in 2006, net interest income was flat in a tough interest-rate environment, and total revenue growth was a mere 3%.
|
12/03
|
12/04
|
12/05
|
12/06
|
|
|
60.00
|
60.17
|
58.54
|
58.13
|
|
|
14.40
|
12.23
|
12.09
|
12.20
|
TTM ratios (%) provided by Capital IQ.
One Fool says:
Subprime is the topic du jour, and SunTrust will have to convince Wall Street that the effects from the subprime meltdown will be minimal. The well-publicized problems in Alt-A (slightly higher-quality loans than subprime) will also be an issue, although SunTrust claims to have a handle on it. CFO Mark Chancy said:
In 2006 we found, as did others in the industry, that our Alt-A products were not performing as expected. Beginning in the third quarter, we discontinued the retention of new Alt-A first mortgage production to the portfolio. In addition, we made substantial revisions to our Alt-A guidelines which took effect in the fourth quarter.
SunTrust has another challenge: loan loss reserves. Analysts are wondering whether certain banks have enough of a cushion to absorb bad loans as delinquencies rise from historic lows. According to The Wall Street Journal, SunTrust, First Horizon (NYSE: FHN ) , and Washington Mutual (NYSE: WM ) are some of the regional banks with below-average reserves. A SunTrust spokesperson countered that the low reserves are a function of the company's strong credit culture.
With a new CEO, a flat yield curve, and subprime woes, I expect SunTrust's first-quarter report will be a real page-turner.
Further fiscal Foolishness:
Wait! There's more. Be sure to read pre-earnings news and analysis for other Big Banks.
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Fool financial services editor Joey Khattab does not own any of the shares mentioned. The Fool has a disclosure policy.
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