SunTrust 2006 Annual Report Download - page 70

Corporate and Investment Banking
Corporate and Investment Banking’s net income for the twelve months ended December 31, 2006 was
$213.1 million, a decrease of $57.7 million, or 21.3%. Adjusting net income by $16.6 million for the
March 2005 divestiture of Receivables Capital Management (“RCM”) factoring assets, net income
increased 15.2%. Strong growth in Debt Capital Markets was primarily offset by increased provision for
loan losses, as well as a decrease in loan spreads.
Fully taxable-equivalent net interest income decreased $31.5 million, or 11.9%, primarily due to
narrowing of market spreads on loans to the large corporate sector. Average loans increased $1.2 billion,
or 8.0%, primarily in Financial Institutions, Energy and US Diversified Groups. This increase was due
to stronger corporate demand and revolver usage, as well as strong growth in our leasing products.
Average deposits decreased $172.2 million, or 5.2%, led by a reduction in certain bid-category products
that the line of business elected not to bid on due to their high cost in relation to alternative funding
sources.
Provision for loan losses, which represents net charge-offs for the lines of business, increased $99.1
million to $113.9 million. The increase was primarily due to the charge-off recognized in the fourth
quarter of 2006 associated with the previously disclosed large commercial loan placed on
nonperforming status in the third quarter of 2006.
Total noninterest income increased $30.5 million, or 4.8%. Adjusting for the divestiture of RCM,
noninterest income grew 10.0%. Debt Capital Markets revenue increased $64.2 million, or 27.7%,
mainly related to securitizations, derivatives and structured leasing, as well as strong revenue
performance in merchant banking and leasing.
Total noninterest expense increased $3.4 million, or 0.7%, primarily driven by increased compensation
related to increased capital markets revenue, as well as increased expense related to merchant banking
activities.
Mortgage
Mortgage’s net income for the twelve months ended December 31, 2006 was $248.4 million, an increase
of $76.5 million, or 44.5%. Income from sales of servicing assets, higher income from loans and
deposits, better net secondary marketing performance, and higher origination and servicing fees, net of
increased expense, were partially offset by increased mortgage servicing rights amortization.
Fully taxable-equivalent net interest income increased $55.7 million, or 10.2%, primarily due to loan
and deposit growth partially offset by lower spreads on loans held for sale. Average loans, primarily
residential mortgage and residential construction loans, increased $7.0 billion, or 29.0%, contributing
$85.0 million to the higher net interest income. Average loans held for sale increased $1.7 billion, or
22.6%. However, due to compressed spreads resulting from higher short-term interest rates, net interest
income on loans held for sale declined $43.6 million. Average deposits were up $0.2 billion, or 9.5%,
due to escrow balances associated with higher servicing balances along with a higher credit for funds
rate, and contributed $24.5 million to the overall increase.
Provision for loan losses, which represents net charge-offs for the lines of business, increased $3.1
million, or 55.8%, due to the maturation of the mortgage portfolio.
Total noninterest income increased $140.1 million, or 58.6%. Production income was up $70.5 million
driven by higher volumes. Production of $55.4 billion was up $7.7 billion, or 16.2%. Loan sales to
investors were $40.9 billion, an increase of $13.2 billion, or 47.6%. Servicing income was up
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