Lenders searching for borrowers are finally finding success, albeit with asterisks attached.
The national megabanks and large regional banks that do business in Savannah noted upticks in loans in recent second quarter earnings reports. Leaders of those institutions remain cautious, however, as much of the commercial loan activity can be attributed to pent-up demand while much of the mortgage business involved refinancing.
Loan demand remains well below pre-recession levels for these big banks, which together do business with approximately 55 percent of local banking customers.
The loans, and the fees generated from them, helped lift Wells Fargo, Bank of America, SunTrust, BB&T and Regions to net profits in the second quarter, which ended June 30. Wells Fargo and BB&T posted record returns: Wells saw its earnings grow for the 10th consecutive quarter, with an $8.7 billion jump in total loans nationally; while BB&T posted what CEO Kelly King called “the strongest net income of any quarter in our history.”
BB&T, based in North Carolina, boasted a 7 percent gain in commercial loans. The bank was also boosted by a 42 percent drop in costs associated with repossessed properties.
SunTrust, Savannah’s largest bank in terms of deposits, continued its surge behind a 13 percent jump in commercial loans and a renaissance in the bank’s mortgage department. New mortgages increased from $4 million in the second quarter of 2011 to $103 million in the same quarter of 2012.
Much of the growth took place outside the Savannah market, however. SunTrust does business in 12 states, including a few on the leading edge of the economic recovery like Virginia, Maryland and North Carolina.
The large regional bank that does business locally, Regions, reported loan growth of 4 percent. Regions, based in Birmingham, Ala., repaid the U.S. Treasury what it borrowed as part of the Troubled Asset Relief Program during the quarter. The bank operates one branch locally.
“The first half of 2012 has been transformational for Regions, and with several quarters of solid results and continued successful execution against our plans, we believe Regions is better positioned for ultimate out-performance,” CEO Grayson Hall said in a conference call.
Much-maligned Bank of America also expressed optimism coming out of the second quarter. The loan portfolio continues to shrink, but the bank reported commercial loans increased for the sixth straight quarter. Bank of America has lent $4 billion to small businesses in the year’s first six months.
The mortgage crisis continued to put pressure on Bank of America, however. The bank is holding $16 billion in reserve for the repurchase of bad loans sold to secondary buyers like Fannie Mae and Freddie Mac.
Wells Fargo is on the other end of the mortgage spectrum. The bank’s amount of mortgage originations and applications more than doubled in the quarter. Warren Buffet endorsed the bank, telling Bloomberg News the bank has a “sensational mortgage operation.”
Still, analysts peppered CEO John Stumpf with questions about the impact of diminishing mortgage returns once interest rates rise and demand drops.
“We have such strong capital, such strong cash flows and earnings here, it puts us in a position where we can grow organically, do strategic and value-adding portfolio acquisitions or whatever,” Stumpf said in a conference call. “So it really puts us in a great position. Capital simply is a not an issue here.”