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Synovus (SNV) Down 4.3% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Synovus Financial (SNV - Free Report) . Shares have lost about 4.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Synovus due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Synovus Q1 Earnings & Revenues Beat
Driven by top-line strength, Synovus Financial reported a positive earnings surprise of 8.9% in first-quarter 2019. Adjusted earnings of 98 cents per share beat the Zacks Consensus Estimate of 90 cents. Also, the reported figure comes in 15.1% higher than the prior-year quarter tally.
Higher revenues, backed by strong loans & deposit balances, stoked organic growth. Notably, lower efficiency ratio and rising fee income were tailwinds. Moreover, positive impact of rising rates was witnessed. However, escalating expenses and deteriorating credit metrics were undermining factors.
Including certain non-recurring items, net income available to common shareholders came in at $117 million or 72 cents per share compared with $100.6 million or 84 cents per share recorded in the prior-year quarter.
Top Line Robust, Expenses Flare Up
Total revenues in the first quarter came in at $476.5 million, up 39.6% year over year. Further, the top line outpaced the Zacks Consensus Estimate of $460.6 million.
Net interest income surged 44.8% year over year to $397.2 million. Further, net interest margin remained flat at 3.78%.
Non-interest income climbed 18.4% on a year-over-year basis to $79.4 million, including a favorable adjustment in the fair value of private equity investments. Rise in almost all components of income drove this upside. Adjusted non-interest income was $78.4 million.
Non-interest expenses came in at $292.4 million, flaring up 49.8% year over year. Notably, rise in almost all components of expenses resulted in this upswing, partially offset by lower FDIC insurance and other regulatory fees. Adjusted non-interest expenses came in at $242.7 million, up 22.5% from the prior-year quarter.
Adjusted efficiency ratio came in at 50.24% as compared with 57.42% reported in the year-earlier quarter. A decline in ratio indicates improvement in profitability.
Total deposits came in at $38.1 billion, soaring 42.5% sequentially. Total loans climbed 37.3% sequentially to $35.6 billion. Results include FCB-acquired balances.
Credit Quality: A Mixed Bag
Credit quality was a mixed a bag for Synovus in the reported quarter.
Non-performing loans were up 19.9% year over year to $144 million. The non-performing loan ratio came in at 0.40%, contracting 8 bps year over year.
Total non-performing assets amounted to $155.3 million, underlining a rise of 18.4% year over year. The non-performing asset ratio shrunk 9 bps year over year to 0.44%.
Net charge-offs more than doubled on a year-over-year basis to $17.1 million. The annualized net charge-off ratio was 0.19%, up 12 bps from the year-earlier quarter. Provision for loan losses soared 84.5% year over year to $23.6 million.
Strong Capital Position
Tier 1 capital ratio and total risk based capital ratio were 9.93% and 11.98%, respectively, compared with 10.53% and 12.39% as of Mar 31, 2018.
Also, as of Mar 31, 2019, Common Equity Tier 1 Ratio (fully phased-in) was 9.41% compared with 10.03% witnessed in the year-ago quarter. Tier 1 Leverage ratio was 8.77% compared with 9.37% in the comparable period last year.
Capital Deployment Update
During the first quarter, the company repurchased 8.5 million common stock worth $320 million.
Outlook
For 2019, management projects average total deposit and loan growth of around 5.5-7.5%, with deposits growing at a pace that supports loan growth, while maintaining an appropriate loan-to-deposit ratio consistent with earnings operating range of 95% to 97%.
Total revenues are projected to increase 5.5-7.5%, in line with the company’s balance sheet growth expectation. The outlook assumes no short-term rate hikes in 2019, and the post-merger adjusted NIM is likely to compress slightly as a result of the flatness of the current yield curve and the company’s plans to optimize the capital stack.
Adjusted total non-interest expenses are projected to increase 2-4%, net of synergies related to the FCB acquisition. Merger-related cost savings are likely to exceed $30 million, well ahead of original 2019 estimate of $20 million.
The company expects net charge-off ratio of 15-20 bps.
Management expects the tax rate to be at 23-24% in 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Synovus has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Synovus has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Synovus (SNV) Down 4.3% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Synovus Financial (SNV - Free Report) . Shares have lost about 4.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Synovus due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Synovus Q1 Earnings & Revenues Beat
Driven by top-line strength, Synovus Financial reported a positive earnings surprise of 8.9% in first-quarter 2019. Adjusted earnings of 98 cents per share beat the Zacks Consensus Estimate of 90 cents. Also, the reported figure comes in 15.1% higher than the prior-year quarter tally.
Higher revenues, backed by strong loans & deposit balances, stoked organic growth. Notably, lower efficiency ratio and rising fee income were tailwinds. Moreover, positive impact of rising rates was witnessed. However, escalating expenses and deteriorating credit metrics were undermining factors.
Including certain non-recurring items, net income available to common shareholders came in at $117 million or 72 cents per share compared with $100.6 million or 84 cents per share recorded in the prior-year quarter.
Top Line Robust, Expenses Flare Up
Total revenues in the first quarter came in at $476.5 million, up 39.6% year over year. Further, the top line outpaced the Zacks Consensus Estimate of $460.6 million.
Net interest income surged 44.8% year over year to $397.2 million. Further, net interest margin remained flat at 3.78%.
Non-interest income climbed 18.4% on a year-over-year basis to $79.4 million, including a favorable adjustment in the fair value of private equity investments. Rise in almost all components of income drove this upside. Adjusted non-interest income was $78.4 million.
Non-interest expenses came in at $292.4 million, flaring up 49.8% year over year. Notably, rise in almost all components of expenses resulted in this upswing, partially offset by lower FDIC insurance and other regulatory fees. Adjusted non-interest expenses came in at $242.7 million, up 22.5% from the prior-year quarter.
Adjusted efficiency ratio came in at 50.24% as compared with 57.42% reported in the year-earlier quarter. A decline in ratio indicates improvement in profitability.
Total deposits came in at $38.1 billion, soaring 42.5% sequentially. Total loans climbed 37.3% sequentially to $35.6 billion. Results include FCB-acquired balances.
Credit Quality: A Mixed Bag
Credit quality was a mixed a bag for Synovus in the reported quarter.
Non-performing loans were up 19.9% year over year to $144 million. The non-performing loan ratio came in at 0.40%, contracting 8 bps year over year.
Total non-performing assets amounted to $155.3 million, underlining a rise of 18.4% year over year. The non-performing asset ratio shrunk 9 bps year over year to 0.44%.
Net charge-offs more than doubled on a year-over-year basis to $17.1 million. The annualized net charge-off ratio was 0.19%, up 12 bps from the year-earlier quarter. Provision for loan losses soared 84.5% year over year to $23.6 million.
Strong Capital Position
Tier 1 capital ratio and total risk based capital ratio were 9.93% and 11.98%, respectively, compared with 10.53% and 12.39% as of Mar 31, 2018.
Also, as of Mar 31, 2019, Common Equity Tier 1 Ratio (fully phased-in) was 9.41% compared with 10.03% witnessed in the year-ago quarter. Tier 1 Leverage ratio was 8.77% compared with 9.37% in the comparable period last year.
Capital Deployment Update
During the first quarter, the company repurchased 8.5 million common stock worth $320 million.
Outlook
For 2019, management projects average total deposit and loan growth of around 5.5-7.5%, with deposits growing at a pace that supports loan growth, while maintaining an appropriate loan-to-deposit ratio consistent with earnings operating range of 95% to 97%.
Total revenues are projected to increase 5.5-7.5%, in line with the company’s balance sheet growth expectation. The outlook assumes no short-term rate hikes in 2019, and the post-merger adjusted NIM is likely to compress slightly as a result of the flatness of the current yield curve and the company’s plans to optimize the capital stack.
Adjusted total non-interest expenses are projected to increase 2-4%, net of synergies related to the FCB acquisition. Merger-related cost savings are likely to exceed $30 million, well ahead of original 2019 estimate of $20 million.
The company expects net charge-off ratio of 15-20 bps.
Management expects the tax rate to be at 23-24% in 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Synovus has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Synovus has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.