Brokerage revenue slides at SunTrust as it transitions to fee-based business

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SunTrust Bank's wealth management businesses endured a rocky end to 2016, according to the bank's earnings results released on Friday.

Fourth-quarter revenue from trust and investment management services slipped 8% to $73 million from $79 million a year ago. Revenue was also off from the prior quarter, falling 9%.
The 8% year-over-year decline was primarily due to a decline in trust and institutional assets under management, the bank's parent explained in the earnings release. At the end of 2016, assets under management stood at $40.4 billion, down 4% from 2015.

For the full year, trust and investment management posted $304 million in revenue, a 9% drop from $334 million from a year earlier.

The performance of the retail brokerage unit was equally disappointing with fourth-quarter revenue slipping 3% to $69 million from $71 million a year ago. Revenue was also down 3% from the prior quarter.

For the full year, the retail brokerage business generated $281 million in revenue, down 6% year-over-year.

The "strategic shift" from transaction-oriented business to managed money solutions is the reason for the decline in brokerage revenue, the bank's CFO Aleem Gillani said during the earnings call. "While this is a negative for near-term retail investment income growth, it is positive for clients and the long-term health of our business," he said.

On a positive note, the retail brokerage unit's assets under management surged to $12.9 billion at the end of 2016, up a notable 22% from 2015.

Overall, SunTrust earned $448 million, or 90 cents per common diluted share, in the fourth quarter, compared with $467 million, or 91 cents per common diluted share, in the same quarter the prior year.

"I'd characterize this quarter as a solid conclusion to a strong year for SunTrust," William Rogers, Jr., the bank's chairman and CEO, said during the earnings call. "We grew earnings per share, delivered further improvement and efficiency and grew capital returns for the fifth consecutive year."

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Earnings William Rogers, Jr SunTrust