NEW YORK – Bank of America Corp. (BAC) and SunTrust Banks Inc. (STI), two of the largest U.S. banks, on Monday reported big increases in quarterly profit, fueled by increased borrowing, cost controls and acquisitions.
Bank of America, the No. 3 bank, said profit surged 75 percent to a record, while SunTrust, the seventh-largest, reported a 36 percent increase. Earnings of both companies topped Wall Street estimates, and their shares rose. Bank of America shares were up 0.8 percent, and SunTrust shares gained 0.4 percent in morning trade.
Five of the 10 largest U.S. banks have reported an average 33 percent increase in first-quarter profits, helped by mergers. Four of the five beat Wall Street forecasts, including Citigroup Inc. (C) and Wachovia Corp. (WB).
Wells Fargo & Co. (WFC), U.S. Bancorp (USB) and National City Corp. (NCC) report on Tuesday, and J.P. Morgan Chase & Co. (JPM) and Bank of New York Co. (BK) on Wednesday.
Charlotte, N.C.-based Bank of America said net income rose to $4.7 billion, or $1.14 per share, from $2.68 billion, or 91 cents per share, a year earlier.
Excluding merger charges, profit was $1.16 per share. Results included $659 million of gains on the sale of debt securities. Trading profit more than doubled to $704 million.
Analysts polled by Reuters Estimates on average expected a profit of 97 cents per share.
"It was an excellent quarter," said Stephen Berman, a portfolio manager at Stein Roe Investment Counsel in New York. "They had respectable growth in revenue and net interest income, and had very good trading results."
Revenue increased 47 percent to $14.22 billion, topping analyst forecasts for $13.79 billion.
Lending income increased 35 percent and fee income jumped 65 percent, while expenses rose just 30 percent. Compared with the fourth quarter, lending and fee income increased, and expenses fell.
"We saw the strongest commercial loan growth in many quarters across our company and deposit growth continues to be robust," Chief Executive Kenneth Lewis said in a statement.
Bank of America added a net 759,000 savings and 610,000 checking accounts, both records, and 1.34 million credit card accounts. It ended the quarter with $1.21 trillion of assets.
The quarter was the last when year-earlier comparisons won't include results from FleetBoston Financial Corp., which Bank of America bought in April 2004 for $48 billion.
Merger-related savings totaled $437 million, and Bank of America eliminated about 1,000 jobs in the quarter.
Atlanta-based SunTrust said net income increased to $492.3 million, or $1.36 per share, from $361.8 million, or $1.28.
Year-earlier results were previously restated to fix accounting for bad loans. SunTrust is cooperating with a formal Securities and Exchange Commission (search) probe into the matter.
Profit excluding merger costs and a one-time gain was $1.37 per share. Analysts expected $1.32.
Revenue rose 29 percent to $1.88 billion, while expenses rose 27 percent. Lending income rose 31 percent, and fee income rose 27 percent.
Chief Executive L. Phillip Humann on a conference call said SunTrust benefited from "healthy loan growth across the board and a stable net interest margin."
Humann said big companies are borrowing more, after several quarters of sluggishness, as mergers and capital spending have increased. "We don't think it is a head fake," he said.
Bad loans fell 80 percent to $10.6 million, and net chargeoffs fell 37 percent to $36.8 million.
SunTrust expects this month to finish most of its integration of National Commerce Financial Corp. The $7.4 billion purchase of the Memphis, Tennessee-based bank last October filled holes in SunTrust's Southeast retail footprint.
In morning trading on the New York Stock Exchange, Bank of America shares rose 36 cents to $44.64, and SunTrust rose 26 cents to $70.42. The Philadelphia KBW Bank Index rose 1.2 percent.
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