Regional Banks Show Some Loan Growth; PNC Tops Expectations

Regional banks reported improved profits Thursday, again largely boosted by the improving credit quality of their loans, but also showing some glimmers of loan demand from businesses.

PNC Financial Services Group Inc. (PNC), Fifth Third Bancorp (FITB), BB&T Corp. (BBT) and SunTrust Banks Inc. (STI) all had higher earnings than a year earlier, with PNC's bottom line up 24%, Fifth Third and SunTrust swinging to profits, and BB&T adding 20%. All four beat Wall Street's expectations for the per-share earnings, though to varying degrees.

But while each reported some growth in commercial and industrial loans, revenues remained pressured by weak consumers and mortgages and by regulations that reduced fee income in retail businesses.

PNC shares rose 2.5% to $62.25 premarket, while Fifth Third slipped 1% to $13.19 and BB&T slid 1.5% to $26.20. SunTrust inched up 0.6% to $27.79.

At Pittsburgh-based PNC, profit rose to $832 million, or $1.57 a share, topping the $1.37 analysts polled by Thomson Reuters expected. Revenue fell 3.5% to $3.63 billion, topping the $3.59 billion analysts expected.

The bulk of the bank's strength came from its corporate and institutional bank, which benefited from a 3.5% increase in commercial loans. The profit in that unit was also boosted because the bank decided to reduce its loan loss reserve, funds set aside to handle future loan losses, by $30 million while in the prior year it had added $236 million to the reserve.

The bank's retail unit swung to an $18 million loss, however, which the bank said was the result of regulations on overdraft fees they can charge consumers. There was also a higher provision than the fourth quarter because home-equity loans deteriorated.

PNC said the overdraft fee regulations, as well as looming debit-card rules, could reduce the retail bank's fees by $400 million this year.

Cincinnati's Fifth Third swung to a profit of $265 million, or 10 cents a share. Excluding charges related to the bank's accelerated repayment of its Troubled Asset Relief Program funds, earnings would have hit 27 cents a share and beaten analysts' expectation of 26 cents a share.

Revenue fell to $1.47 billion and missed analysts forecast for $1.51 billion.

Fifth Third said average loans slipped slightly from the prior year because of large reductions in some loans the bank no longer plans to originate. But commercial and industrial loans rose 4%, residential mortgages were up 16% and auto loans rose 9%.

Still, mortgage banking revenue plunged 33% and the charges made on deposits dropped 12% due to regulations.

Meanwhile, further south, BB&T, based in North Carolina, reported net income of $234 million, or 32 cents a share, just above analysts' forecast for 31 cents.

Revenue slid 7% to $2.04 billion, missing the $2.19 billion analysts expected.

The bank did manage to report a 1.8% gain in average loan balances, with a 6.1% rise in commercial and industrial loans and a 16% gain in residential mortgages. But it also reported regulation took out nearly 18% of deposit services revenue.

It reported no loan-loss provision, versus putting aside $19 million a year earlier for souring loans.

Atlanta's SunTrust reported a profit of $180 million, or 8 cents a share. Excluding a charge for an accelerated TARP repayment, earnings would have been 22 cents a share, topping the 14 cents analysts expected.

Revenue jumped 14% to $2.16 billion, and excluding some securities gains was $2.1 billion, which beat analysts' expectation for $2.08 billion.

SunTrust said average loan balances were relatively flat, but commercial and industrial loans grew modestly. Offsetting some growth was a decline in mortgage production and lower capital markets fees.

SunTrust also announced Chief Executive James Wells III will retire at the end of the year and that Chief Operating Officer William H. Rogers Jr. will take over.

-By David Benoit, Dow Jones Newswires; 212-416-2458; david.benoit@dowjones.com

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