The Wall Street Journal-20080124-Loans Gone Bad Hit SunTrust
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Loans Gone Bad Hit SunTrust
SunTrust Banks Inc. reported a 98% drop in quarterly net income and an increase in failing loans. The Atlanta bank, the eighth-largest in the U.S. by market value, joined rivals in writing down investments and bulking up reserves.
SunTrust recorded $555 million in write-downs and reported soaring credit costs. The results included a $510 million write-down on the purchase of securities issued by structured investment vehicles -- from two of its money-market funds -- more than double the high end of its previous estimate.
In December, SunTrust said it planned to purchase $1.4 billion in securities issued by structured investment vehicles from its funds to prevent investor losses. Many SIVs have run into trouble amid the liquidity crunch.
The company's provision for loan losses more than tripled to $356.8 million from $115.8 million a year earlier. Nonperforming loans -- ones in danger of going bad -- rose to 1.19% of total loans from 0.44%.
SunTrust's shares rose $4.72, or 7.7%, to $65.73 in 4 p.m. New York Stock Exchange composite trading amid a rise in financial-services stocks.
Separately, Capital One Financial Corp. after the close of regular trading said its fourth-quarter net income dropped 42% on higher loan- loss provisions. The McLean, Va., company reported net income of $226.6 million, or 60 cents a share, compared with $390.7 million, or $1.14 a share, a year earlier.
