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Synovus (SNV) Q4 Earnings Beat, High Expenses Hit Stock
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Buoyed by higher revenues, Synovus Financial Corporation (SNV - Free Report) recorded a positive earnings surprise of 1.9% in fourth-quarter 2016. Adjusted earnings of 54 cents per share beat the Zacks Consensus Estimate by a penny. Also, the reported figure was up 22.2% from the prior-year quarter tally.
Though the company recorded an encouraging quarter, investors were visibly disappointed by the rise in expenses. This is evident from the 3.75% decline of the shares to $40.31 following the release.
Higher revenues backed by strong loans & deposits balances drove organic growth. However, escalating expenses remain a concern. Moreover, significant increase in provision for loan losses added to the woes.
Net income available to common shareholders was $66 million or 54 cents per share compared with $55.8 million or 43 cents in the prior-year quarter.
For full-year 2016, net income available to common shareholders was $236.5 million or $1.89 per share, significantly up from $215.8 million or $1.62 in the prior year. However, results were in line with the Zacks Consensus Estimate.
For full-year 2016, total revenue (excluding gain on investment securities) was $1.16 billion, up 6.8% from the year-ago period. However, revenues lagged the Zacks Consensus Estimate of $1.17 billion.
Total revenue in the fourth quarter was $301.7 million, up 8.2% year over year. Moreover, the top line outpaced the Zacks Consensus Estimate of $300 million.
Net interest income increased 9.8% year over year to $233.5 million. Further, net interest margin expanded 11 basis points (bps) year over year to 3.29%.
Non-interest income increased 11.8% year over year to $74 million, primarily on increased fiduciary and asset management fees, mortgage-banking revenues, brokerage and other non-interest income. However, the increase was partially offset by decrease in fee income.
On the other hand, total non-interest expenses were $193.2 million, up 5.6% year over year while adjusted non-interest expenses came in at $187 million, up 3.8% from a year ago. Notably, non-interest expenses exhibited a rise in almost all components of expenses and also recorded merger-related expenses of $1.1 million.
Total deposits came in at $24.6 billion, up 6.0% year over year. Total net loans climbed 6.3% year over year to $23.6 billion.
Credit Quality: A Motley
Credit quality metrics for Synovus were a mixed bag in the quarter.
Net charge-offs were $8.3 million, significantly up on a year-over-year basis. The annualized net charge-off ratio was 0.12%, down 1 bp from the prior-year quarter. Provision for loan losses increased 24.7% year over year to $6.3 million from $5.0 million in Dec 2015.
Non-performing loans, excluding loans held for sale, were down 8.9% year over year to $153.4 million. The non-performing loan ratio was 0.64%, down 11 bps year over year.
Additionally, total non-performing assets amounted to $175.7 million, reflecting a decline of 18.4% year over year. The non-performing asset ratio contracted 22 bps year over year to 0.74%.
Capital Position: A Mixed Bag
Tier 1 capital ratio and total risk based capital ratio were 10.08% and 12.01%, respectively, compared with 10.37% and 12.70% as of Dec 31, 2015.
Further, as of Dec 31, 2016, Common Equity Tier 1 Ratio (fully phased-in) was 9.52% compared with 9.77% in the prior-year quarter. Tier 1 Leverage ratio was 8.99% compared with 9.43% in the year-ago quarter.
Capital Deployment Update
During 2016, Synovus returned over $322 million to shareholders through common share repurchases and dividends. Notably, during the fourth quarter, the company completed the $300 million common stock buy-back program resulting in the repurchase of 9.9 million shares.
Additionally, the board of directors authorized a share repurchase program of up to $200 million of the company’s common stock in 2017.
The board also announced a 25% increase in the quarterly common stock dividend from 12 cents to 15 cents per share. The new dividend will be paid in Apr 2017.
Our Take
Synovus’ results have been quite decent in the quarter. We believe that the company’s focus on both organic and inorganic growth, together with cost containment efforts will gradually pay off and aid bottom-line expansion in the subsequent years. However, escalating expenses and stringent regulations continue to raise concern.
Synovus Financial Corp. Price, Consensus and EPS Surprise
Bank of America Corporation (BAC - Free Report) – reported fourth-quarter 2016 earnings. Rise in trading revenue as well as mortgage banking fees led to earnings of 40 cents per share, which surpassed the Zacks Consensus Estimate of 38 cents. Further, the figure was 48% higher than the year-ago quarter number.
Driven by interest income, Wells Fargo & Company’s (WFC - Free Report) fourth-quarter 2016 earnings recorded a positive surprise of about 3%. Adjusted earnings of $1.03 per share outpaced the Zacks Consensus Estimate by 3 cents. Moreover, it compared favorably with the prior-year quarter’s earnings of $1.00 per share. Including net hedge ineffectiveness accounting impact of 7 cents, earnings came in at 96 cents per share.
Among other banks, Citizens Financial Group, Inc. (CFG - Free Report) is scheduled to report fourth-quarter 2016 earnings on Jan 20.
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Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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Synovus (SNV) Q4 Earnings Beat, High Expenses Hit Stock
Buoyed by higher revenues, Synovus Financial Corporation (SNV - Free Report) recorded a positive earnings surprise of 1.9% in fourth-quarter 2016. Adjusted earnings of 54 cents per share beat the Zacks Consensus Estimate by a penny. Also, the reported figure was up 22.2% from the prior-year quarter tally.
Though the company recorded an encouraging quarter, investors were visibly disappointed by the rise in expenses. This is evident from the 3.75% decline of the shares to $40.31 following the release.
Higher revenues backed by strong loans & deposits balances drove organic growth. However, escalating expenses remain a concern. Moreover, significant increase in provision for loan losses added to the woes.
Net income available to common shareholders was $66 million or 54 cents per share compared with $55.8 million or 43 cents in the prior-year quarter.
For full-year 2016, net income available to common shareholders was $236.5 million or $1.89 per share, significantly up from $215.8 million or $1.62 in the prior year. However, results were in line with the Zacks Consensus Estimate.
Organic Growth & Expenses Moved Up
For full-year 2016, total revenue (excluding gain on investment securities) was $1.16 billion, up 6.8% from the year-ago period. However, revenues lagged the Zacks Consensus Estimate of $1.17 billion.
Total revenue in the fourth quarter was $301.7 million, up 8.2% year over year. Moreover, the top line outpaced the Zacks Consensus Estimate of $300 million.
Net interest income increased 9.8% year over year to $233.5 million. Further, net interest margin expanded 11 basis points (bps) year over year to 3.29%.
Non-interest income increased 11.8% year over year to $74 million, primarily on increased fiduciary and asset management fees, mortgage-banking revenues, brokerage and other non-interest income. However, the increase was partially offset by decrease in fee income.
On the other hand, total non-interest expenses were $193.2 million, up 5.6% year over year while adjusted non-interest expenses came in at $187 million, up 3.8% from a year ago. Notably, non-interest expenses exhibited a rise in almost all components of expenses and also recorded merger-related expenses of $1.1 million.
Total deposits came in at $24.6 billion, up 6.0% year over year. Total net loans climbed 6.3% year over year to $23.6 billion.
Credit Quality: A Motley
Credit quality metrics for Synovus were a mixed bag in the quarter.
Net charge-offs were $8.3 million, significantly up on a year-over-year basis. The annualized net charge-off ratio was 0.12%, down 1 bp from the prior-year quarter. Provision for loan losses increased 24.7% year over year to $6.3 million from $5.0 million in Dec 2015.
Non-performing loans, excluding loans held for sale, were down 8.9% year over year to $153.4 million. The non-performing loan ratio was 0.64%, down 11 bps year over year.
Additionally, total non-performing assets amounted to $175.7 million, reflecting a decline of 18.4% year over year. The non-performing asset ratio contracted 22 bps year over year to 0.74%.
Capital Position: A Mixed Bag
Tier 1 capital ratio and total risk based capital ratio were 10.08% and 12.01%, respectively, compared with 10.37% and 12.70% as of Dec 31, 2015.
Further, as of Dec 31, 2016, Common Equity Tier 1 Ratio (fully phased-in) was 9.52% compared with 9.77% in the prior-year quarter. Tier 1 Leverage ratio was 8.99% compared with 9.43% in the year-ago quarter.
Capital Deployment Update
During 2016, Synovus returned over $322 million to shareholders through common share repurchases and dividends. Notably, during the fourth quarter, the company completed the $300 million common stock buy-back program resulting in the repurchase of 9.9 million shares.
Additionally, the board of directors authorized a share repurchase program of up to $200 million of the company’s common stock in 2017.
The board also announced a 25% increase in the quarterly common stock dividend from 12 cents to 15 cents per share. The new dividend will be paid in Apr 2017.
Our Take
Synovus’ results have been quite decent in the quarter. We believe that the company’s focus on both organic and inorganic growth, together with cost containment efforts will gradually pay off and aid bottom-line expansion in the subsequent years. However, escalating expenses and stringent regulations continue to raise concern.
Synovus Financial Corp. Price, Consensus and EPS Surprise
Synovus Financial Corp. Price, Consensus and EPS Surprise | Synovus Financial Corp. Quote
Currently, Synovus sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Performance of Other Banks
Bank of America Corporation (BAC - Free Report) – reported fourth-quarter 2016 earnings. Rise in trading revenue as well as mortgage banking fees led to earnings of 40 cents per share, which surpassed the Zacks Consensus Estimate of 38 cents. Further, the figure was 48% higher than the year-ago quarter number.
Driven by interest income, Wells Fargo & Company’s (WFC - Free Report) fourth-quarter 2016 earnings recorded a positive surprise of about 3%. Adjusted earnings of $1.03 per share outpaced the Zacks Consensus Estimate by 3 cents. Moreover, it compared favorably with the prior-year quarter’s earnings of $1.00 per share. Including net hedge ineffectiveness accounting impact of 7 cents, earnings came in at 96 cents per share.
Among other banks, Citizens Financial Group, Inc. (CFG - Free Report) is scheduled to report fourth-quarter 2016 earnings on Jan 20.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>