Shares of U.S. regional banks rose on Friday after SunTrust Banks Inc
SunTrust shares rose almost 6 percent by midday to $29.50, after the Atlanta-based bank said it earned $114 million, or 23 cents per share, in the fourth quarter. Analysts on average had expected the bank to earn 7 cents per share, according to Thomson Reuters I/B/E/S.
The bank's second straight profit, driven by lower loan losses and lower expenses, cheered regional bank investors who are seeing the sector's recovery from the financial crisis finally gain momentum.
SunTrust put up great results. They showed loan growth, they showed improvement in loan quality, they showed slight (net interest margin) expansion - they hit the trifecta, said Alan Villalon, a Minneapolis-based analyst at Nuveen Asset Management, which owns shares of regional banks including SunTrust and BB&T.
You look at those three metrics and they're holding up ... you're confident that they can do organic capital growth, he said, adding that the bank's results have added to already-strong investor confidence about possible regional bank consolidation.
Regional banks have struggled with lingering losses from soured real estate loans, and have been slower than their larger rivals to repay U.S. government assistance.
But several regional banks, including Huntington Bancshares Inc
Shares of BB&T shares were up 4.2 percent by midday at $28.23. It reported net quarterly profit of $208 million, or 30 cents per share, beating analyst estimates of 26 cents per share.
The regional bank rally included shares of other regional banks, including Fifth Third, Huntington and KeyCorp
(Reporting by Maria Aspan in New York and Joe Rauch in Charlotte, editing by Dave Zimmerman)