SunTrust Banks Earnings Call Insights: Operating Losses and Broad-based C&I Lending
Kevin St. Pierre – Sanford Bernstein: Question on the credit related expenses, Slide 25 and the appendix. If I look at those, you had – if we look at operating losses, excluding your settlement charge, seem to be down significantly to say $45 million, a big decline in OREO expenses in the quarter. Can we use that just for the settlement charge and make that a new base and expect a continued decline or how do we think about those expenses going forward?
Aleem Gillani – CFO: Yes. I think take a look at this number and we do expect to see continued improvement in this quarter as we get improvement over the year as go through 2013. If you look at the total, you’ll recall, what we’ve been saying for a while is that we think 2011 was the peak in these costs at about $800 million per year and prior to going into the financial crisis, we were running more like $200 million or $250 million a year. After peaking at $800 million this year, we are now down to $650 million. I don’t think we’ll actually go back to that run-rate of $200 million to $250 million before the financial crisis, but we are headed down toward a much lower number from $650 million and we think we’ll see some of those benefits in ’13 again.
Kevin St. Pierre – Sanford Bernstein: Then the actual net charge-offs have been bouncing around a bit based on NPL sales and change in policy. Your guidance or outlook for stable to down net charge-offs next quarter kind of sticking in his 90 basis point to 1% range, any reason we shouldn’t expect that those trend down significantly over 2013?
Aleem Gillani – CFO: Well, that depends a little bit on the economy and how the economy goes in 2013, but if you think about net charge-offs as sort of an adjusted number of about $280 million last quarter and this quarter (three and four), I think if you take that 280 as the base and look into Q1, you’d expect that number to be stable to down some.
Thomas E. Freeman – CRO: It’s Tom Freeman. I think as you continue to see delinquencies improve and the overall credit quality organization improve, I think, you’re establishing a base now at the number Aleem was talking about. And as long as delinquencies continue to improve, I think you will see charge-offs continue to improve over an extended period of time.
Broad-based C&I Lending
Paul Miller – FBR Capital Markets: We saw a lot of your competitors have released on a national basis, more so on a regional basis, see some very strong broad-based C&I lending. Just wondering, are you seeing more activity in your markets on that front?
William H. Rogers, Jr. – Chairman and CEO: This is Bill. I think Aleem also pointed out, what we really started seeing is actually that building up a little bit towards the end of the quarter. If you look at sort of our core commercial, November was a lot better than October and December was a lot better than November. So we started seeing some build there towards the end of the quarter. So I’m pretty bullish on C&I, again, sort of seeing the trends that we’re looking at, looking at the pipelines. All that being said, there is a little (pull) of uncertainty and so while the pipelines continue to be strong, our pull through rates continue to be a little bit better, our draw-down rates actually have been a little bit improved this quarter, and that’s actually different than actually the several prior eight quarters. I think, if we can get a little relief of the safety valves, we’ll see C&I take off for a little while.
Paul Miller – FBR Capital Markets: And just very quick follow-up, on your mortgage banking side, do you disclose how much of your HARP is on – your production is HARP related?
Aleem Gillani – CFO: 15% in the fourth quarter. We have been running on HARP of the 75% of refi about 25% 25% of the 75% has been HARP.
Paul Miller – FBR Capital Markets: And is that declining or staying relatively stable, I know some people have mentioned that they burned through most of their HARP eligible loans?
William H. Rogers, Jr. – Chairman and CEO: On the every cloud has a silver lining, I mean we have a HARP eligible environment in which we operate. So, ours has been fairly stable and that sort of 15% to 17% range here in the last couple of quarters. And if you look at I mean we talked about this at the end of the quarter. I mean we got five times our quarter run rate in terms of eligibility and that back in change, housing prices increased, eligibility changes and those kinds of things, but we see a multiple quarter run rate still for us in HARP. And we are intensifying our efforts on HARP.
A Closer Look: SunTrust Banks Earnings Cheat Sheet>>