Suntrust 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Probably no more reserve releases

“Going forward, we would expect continued, but modest improvements in non-performing loans, primarily driven by the residential portfolio. We would also expect net charge-offs in the residential portfolio to drift modestly lower in the near term. However, commercial and consumer net charge-offs are already at or below normal levels and will at some point revert to the mean. Over the near term, we would expect the allowance to remain generally stable as any asset quality improvements may be counterbalanced by loan growth. And as a result, the loan loss provision should roughly approximate net charge-offs.”

Low cost deposits replacing time deposits

“as solid growth in low-cost deposits was partially offset by timed deposit run-off, in particular maturities of our higher-cost CDs. This continued favorable shift in deposit mix helped move interest-bearing deposit costs down by 2 basis points and 6 basis points respectively compared to the prior quarter and prior year.”

Deposit rates could lag interest rate increases because there’s so much liquidity in the system

“it seems to me that we’re going to see deposit betas mostly for the industry in that sort of 40% to 70%. To your 60% number I think is dead on. But I would also say that given the enormous amount of liquidity there is in the system that deposits rates probably lag somewhat as overall rates go up, that there’s probably no need for deposit rates to move up quickly as overall rates move up. And so I think this time could be a little bit different as we think about what betas look like, just because there is so much more liquidity overall in the system this time.’

This was a very, very good quarter for loan growth

“this was a very good loan growth quarter. We indicated that we’re optimistic about pipeline and things that we see. But I want to be careful about sort of taking this quarter and extrapolating it long term, because it was a very, very particularly good quarter.”

Could see NIM stabilization next year

“I think there is a continued drip in the NIM for now. But if you assume that rates don’t fall anymore from where they are today, I do think NIMs will start to stabilize in 2015. They will grind down between now and then. But assuming overall rates don’t fall anymore between now and then, I think we will see stabilization next year.”

We’ve been diversifying our loan mix

“our overall portfolio mix is changing. You’ll recall that going into the financial crisis, we were very much oriented toward residential mortgage, but perhaps overly concentrated in that product line. And over the last several years, we’ve been working hard to optimize the mix within our balance sheet, become more diversified.”

There’s so much competition in C&I space

“he other thing is just the sheer amount of competition in the C&I space overall. And as overall margins decline in that space, that’s affecting us too.”

BBB Spreads are a good approximation of loan spreads

“One thing you might want to look at that might help you is if you look for example that BBB bond spreads and look at how they’ve changed over time, you’ll see that quarter-over-quarter, BBB bond spreads dropped 18 basis points Q1 to Q2. That’s kind of the space in which a lot of regional banks play in when it comes to meeting corporate client needs.’

Florida doing great

“All the data we see on Florida and the time I spent there is positive. Tourism industry is sort of going gang busters. Net in migration back in to the state at a pretty high clip. Very good business environment, you’ve seen some corporate headquarters move to Florida. So I think we’re actually seeing the other side of that beta right now.”