Banks boost profits despite lagging revenue

Banks boost profits despite lagging revenue

July 20th, 2013 by Ellis Smith in Business Around the Region

First Tennessee Bank

Photo by Staff File Photo /Times Free Press.

Chattanooga's biggest banks posted solid earnings in the second quarter, even as overall revenue continued to lag. Banks were forced to set aside less cash to cover potential loan losses than usual, and continued to slash expenses to keep shareholders happy.

First Horizon Corp., the parent company of First Tennessee Bank, reported earnings of 17 cents per share, missing Wall Street predictions by two cents, but beating last year's second-quarter loss of 50 cents, the company reported.

Net income increased to $45.2 million from $121.9 million in the second quarter of 2012, though revenue of $302.6 million missed projections by $20 million, and dropped 9 percent from 2012's second quarter.

Suntrust fared little better. Though the Atlanta-based bank posted earnings of 68 cents per share, beating analysts' guesses by a penny, total revenue fell 6.5 percent to $2.1 billion. Net income increased 35.2 percent to $365 million, driven primarily by lower expenses.

The first half of the year was much the same at Synovus, which owns Cohutta Banking Co. While total interest income fell 10 percent during the first half of the year to $461 million, total net income remained available to shareholders remained flat at $45.5 million, according to the bank's income statement.

BJ Losch, chief financial officer for First Tennessee, attributed much of his bank's revenue decline to Federal Reserve chairman Ben Bernanke.

"Virtually all of that decline was related to some significant market interst rate volatility that you would have seen because of Ben Bernanke's comments about when he'll start to change monetary policy," Losch said.

And yet, there's no denying that the repeated sales declines at all banks are part of a long-term trend related to economic stagnation, Losch said.

"A lot of us are treading water or slightly moving forward in the water, but if you could see underneath the water, our legs are moving really really quickly," He said. "At some point when this economy does turn, we're really gonna get moving."

Chattanooga continues to lead the pack in terms of bank health, with residential lending activity rising sharply during the quarter, said Keith Sanford, market president of First Tennessee.

"We've had really strong consumer growth this year as housing has recovered and people are buying houses," Sanford said.

Lending volume is still down from its peaks in 2006 and 2007, but that's not necessarily a bad thing, Sanford said.

"To be honest, lenders got a little too relaxed 10 to 15 years ago and made probably a lot of loans they shouldn't have made," he said. "It's tougher now. We've got to have a proven repayment ability, we're not collateral lenders."

First Tennessee also completed its first acquisition in several years this spring, buying the troubled Mountain National bank in Sevier County.

"We haven't done one of these in quite some time," Losch said. "Hopefully that bodes well for the future."

Contact staff writer Ellis Smith at esmith@timesfree or 423-757-6315.