SunTrust Restates Profit, Postpones Earnings Report

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

SunTrust Banks Inc., the seventh largest American bank, said it will restate results for the first and second quarters of this year because the company mistakenly inflated its reserve for loan losses.


SunTrust placed Sandra Jansky, its chief credit officer, and Controller Jorge Arrieta on paid leave pending an accounting review, the Atlanta-based bank said in a statement.


Net income will rise by $17.4 million, or 7 cents a share, for the first quarter and by $4.8 million, or 1 cent, for the second.


It’s the second time in six years that SunTrust’s chief executive officer, Phillip Humann, has been forced to restate earnings because of errors in determining how much to set aside for bad loans. The mistakes stemmed from data the bank used to calculate a loss allowance in a portfolio of auto loans.


“You prefer not to see errors like that,” said Mark Batty, who helps manage $51 billion, including SunTrust shares, at PNC Financial Services Group Inc. in Philadelphia. “You just question how something like this could slip through the cracks. The controls in this reporting area seem to be lacking.”


SunTrust found the errors while preparing third-quarter results, which had been scheduled for today and will now be delayed pending an audit committee review.


Mr. Humann, 58, told investors on a conference call that the company would “take whatever steps are necessary to make sure” errors don’t happen again. He said no determination of any improper conduct on the part of the two executives has been made.


“While this is clearly not a positive development for SunTrust, neither is it the end of the world,” Mr. Humann said. “It has essentially no customer impact. Nor do I think it will have any lingering implications for our strategic priorities or business plans.”


Shares of SunTrust fell 78 cents to $69 in New York Stock Exchange composite trading.


SunTrust said the audit committee’s review could result in additional restatements, including further adjustments to results from the first two quarters of 2004.SunTrust’s accounting firm is PricewaterhouseCoopers LLP.


“It creates a black eye regarding its reputation,” Prudential Equity Group analyst Michael Mayo, who rates Sun-Trust shares “underweight,” wrote in a report. SunTrust will have less reserves for future loan losses and the restatement may potentially bring probes by the Securities and Exchange Commission and the Federal Reserve, he said.


A SunTrust spokesman, Barry Koling, declined to comment on whether the bank had been contacted by regulators. John Nester, an SEC spokesman, declined to comment, as did Federal Reserve spokesman David Skidmore.


The bank set aside $917.7 million for bad loans in the first quarter, instead of $942.5 million, and $912.1 million in the second quarter rather than $943.7 million, according to SunTrust.


The bank previously said it earned $358.5 million, or $1.26 a share, in the first quarter this year. Second-quarter earnings were earlier reported at $364.8 million, or $1.29 a share. The bank was expected to report third quarter earnings of $1.31 a share, according to the average estimate of 20 analysts polled by Thomson Financial.


In the bank’s 1998 restatement, Sun-Trust boosted net income by $61 million for 1994, 1995, and 1996 to correct accounting for loan losses. After discus sions with the SEC at the time, the bank reduced the money it set aside for bad loans by $100 million over the three-year period.


“It’s never a good thing when you restate earnings, even upwards,” said


Kevin Fitzsimmons, an analyst at Sandler O’Neill & Partners LP who has a “hold” recommendation on the stock, and doesn’t own any. “It’s severe enough that they are putting two senior executives on paid administrative leave and they are postponing earnings.”


The New York Sun

© 2025 The New York Sun Company, LLC. All rights reserved.

Use of this site constitutes acceptance of our Terms of Use and Privacy Policy. The material on this site is protected by copyright law and may not be reproduced, distributed, transmitted, cached or otherwise used.

The New York Sun

Sign in or  Create a free account

or
By continuing you agree to our Privacy Policy and Terms of Use