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Synovus' (SNV) Q2 Earnings Beat on High Revenues, Costs Rise
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Driven by revenue growth, Synovus Financial Corporation (SNV - Free Report) recorded a positive earnings surprise of 1.7% in second-quarter 2017. Earnings of 60 cents per share beat the Zacks Consensus Estimate by a penny. Also, the reported figure came in 30.4% higher than the prior-year quarter tally.
Higher revenues backed by strong loans & deposits balances drove organic growth. However, escalating expenses and provisions remain a concern. Notably, lower efficiency ratio was a tailwind.
Net income available to common shareholders came in at $73.4 million compared with $57.9 million recorded in the prior-year quarter.
Top-Line Growth Recorded, Expenses Moved Up
Total revenue in the second quarter was $319.8 million, up 10.5% year over year. In addition, the top line outpaced the Zacks Consensus Estimate of $317.6 million.
Net interest income increased 13.4% year over year to $251.1 million. Further, net interest margin expanded 24 basis points (bps) year over year to 3.51%.
Non-interest income inched up 1.2% year over year to $68.7 million, primarily on rise in fiduciary and asset management fees, other non-interest income and other fee income. These increases were partially offset by lower brokerage revenue, mortgage banking income and bankcard fees. Adjusted non-interest income was $70.1 million, up 3.4% year over year.
On the other hand, total non-interest expenses were $191.7 million, up 1.7% year over year, while adjusted non-interest expenses came in at $191.4 million, up 5.0% from the prior-year quarter. Notably, higher net occupancy and equipment expense, third-party processing expense, salaries and other personnel expense, along with professional fees, led to the rise.
Adjusted efficiency ratio was 59.56%, as compared with 63.00% in the year-earlier quarter. A decline in ratio indicates improvement in profitability.
Total deposits came in at $25.2 billion, up 5.4% year over year. Total net loans climbed 6.1% year over year to $24.2 billion.
Credit Quality: A Concern?
Credit quality metrics for Synovus was a mixed bag in the quarter.
Net charge-offs more than doubled to $15.7 million on a year-over-year basis. The annualized net charge-off ratio was 0.26%, up 15 bps from the prior-year quarter. Provision for loan losses jumped 53.3% year over year to $10.3 million.
Non-performing loans, excluding loans held for sale, were up 3.4% year over year to $159.3 million. The non-performing loan ratio was 0.65%, down 2 bps year over year.
Additionally, total non-performing assets amounted to $178.9 million, underlining a decline of 4.5% year over year. The non-performing asset ratio contracted 8 bps year over year to 0.73%.
Capital Position: A Mixed Bag
Tier 1 capital ratio and total risk based capital ratio were 10.36% and 12.24%, respectively, compared with 10.06% and 12.05% as of Jun 30, 2016.
Further, as of Jun 30, 2017, Common Equity Tier 1 Ratio (fully phased-in) was 9.81% compared with 9.49% in the year-ago quarter. Tier 1 Leverage ratio was 9.29% compared with 9.10% in the year-ago quarter.
Capital Deployment Update
During the reported quarter, the company repurchased common stock worth $30.2 million.
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 pay off and aid bottom-line expansion in the subsequent years. Though escalating expenses and provisions raise concerns, lower efficiency ratio indicates optimism.
Synovus Financial Corp. Price, Consensus and EPS Surprise
Higher interest income drove Wells Fargo & Company’s (WFC - Free Report) second-quarter 2017 earnings which recorded a positive surprise of about 4.9%. Earnings of $1.07 per share outpaced the Zacks Consensus Estimate of $1.02. Moreover, the figure compared favorably with the prior-year quarter’s earnings of $1.01 per share.
Citigroup Inc. (C - Free Report) delivered a positive earnings surprise of 5.0% in second-quarter 2017, riding on higher revenues. The company’s income from continuing operations per share of $1.27 for the quarter outpaced the Zacks Consensus Estimate of $1.21. Also, earnings compared favorably with the year-ago figure of $1.25 per share.
Rising interest rates and loan growth drove JPMorgan Chase & Co.’s (JPM - Free Report) second-quarter 2017 earnings of $1.82 per share, which easily surpassed the Zacks Consensus Estimate of $1.57. Also, the figure reflects a 17% rise from the year-ago period. Notably, the results included a legal benefit of $406 million.
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Synovus' (SNV) Q2 Earnings Beat on High Revenues, Costs Rise
Driven by revenue growth, Synovus Financial Corporation (SNV - Free Report) recorded a positive earnings surprise of 1.7% in second-quarter 2017. Earnings of 60 cents per share beat the Zacks Consensus Estimate by a penny. Also, the reported figure came in 30.4% higher than the prior-year quarter tally.
Higher revenues backed by strong loans & deposits balances drove organic growth. However, escalating expenses and provisions remain a concern. Notably, lower efficiency ratio was a tailwind.
Net income available to common shareholders came in at $73.4 million compared with $57.9 million recorded in the prior-year quarter.
Top-Line Growth Recorded, Expenses Moved Up
Total revenue in the second quarter was $319.8 million, up 10.5% year over year. In addition, the top line outpaced the Zacks Consensus Estimate of $317.6 million.
Net interest income increased 13.4% year over year to $251.1 million. Further, net interest margin expanded 24 basis points (bps) year over year to 3.51%.
Non-interest income inched up 1.2% year over year to $68.7 million, primarily on rise in fiduciary and asset management fees, other non-interest income and other fee income. These increases were partially offset by lower brokerage revenue, mortgage banking income and bankcard fees. Adjusted non-interest income was $70.1 million, up 3.4% year over year.
On the other hand, total non-interest expenses were $191.7 million, up 1.7% year over year, while adjusted non-interest expenses came in at $191.4 million, up 5.0% from the prior-year quarter. Notably, higher net occupancy and equipment expense, third-party processing expense, salaries and other personnel expense, along with professional fees, led to the rise.
Adjusted efficiency ratio was 59.56%, as compared with 63.00% in the year-earlier quarter. A decline in ratio indicates improvement in profitability.
Total deposits came in at $25.2 billion, up 5.4% year over year. Total net loans climbed 6.1% year over year to $24.2 billion.
Credit Quality: A Concern?
Credit quality metrics for Synovus was a mixed bag in the quarter.
Net charge-offs more than doubled to $15.7 million on a year-over-year basis. The annualized net charge-off ratio was 0.26%, up 15 bps from the prior-year quarter. Provision for loan losses jumped 53.3% year over year to $10.3 million.
Non-performing loans, excluding loans held for sale, were up 3.4% year over year to $159.3 million. The non-performing loan ratio was 0.65%, down 2 bps year over year.
Additionally, total non-performing assets amounted to $178.9 million, underlining a decline of 4.5% year over year. The non-performing asset ratio contracted 8 bps year over year to 0.73%.
Capital Position: A Mixed Bag
Tier 1 capital ratio and total risk based capital ratio were 10.36% and 12.24%, respectively, compared with 10.06% and 12.05% as of Jun 30, 2016.
Further, as of Jun 30, 2017, Common Equity Tier 1 Ratio (fully phased-in) was 9.81% compared with 9.49% in the year-ago quarter. Tier 1 Leverage ratio was 9.29% compared with 9.10% in the year-ago quarter.
Capital Deployment Update
During the reported quarter, the company repurchased common stock worth $30.2 million.
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 pay off and aid bottom-line expansion in the subsequent years. Though escalating expenses and provisions raise concerns, lower efficiency ratio indicates optimism.
Synovus Financial Corp. Price, Consensus and EPS Surprise
Synovus Financial Corp. Price, Consensus and EPS Surprise | Synovus Financial Corp. Quote
Currently, Synovus carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Higher interest income drove Wells Fargo & Company’s (WFC - Free Report) second-quarter 2017 earnings which recorded a positive surprise of about 4.9%. Earnings of $1.07 per share outpaced the Zacks Consensus Estimate of $1.02. Moreover, the figure compared favorably with the prior-year quarter’s earnings of $1.01 per share.
Citigroup Inc. (C - Free Report) delivered a positive earnings surprise of 5.0% in second-quarter 2017, riding on higher revenues. The company’s income from continuing operations per share of $1.27 for the quarter outpaced the Zacks Consensus Estimate of $1.21. Also, earnings compared favorably with the year-ago figure of $1.25 per share.
Rising interest rates and loan growth drove JPMorgan Chase & Co.’s (JPM - Free Report) second-quarter 2017 earnings of $1.82 per share, which easily surpassed the Zacks Consensus Estimate of $1.57. Also, the figure reflects a 17% rise from the year-ago period. Notably, the results included a legal benefit of $406 million.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>