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Shares of Synovus Financial (SNV - Free Report) gained 13.6%, following the release of second-quarter 2020. Quarterly adjusted earnings of 23 cents per share beat the Zacks Consensus Estimate of 15 cents. Also, the reported figure was 77% lower than the prior-year quarter number.
Results reflected higher fee income on strength in mortgage banking in the quarter. Moreover, strong loan and deposit balances stoked organic growth. However, lower net interest income and higher provisions on the coronavirus scare were key concerns.
Including certain non-recurring items, net income available to common shareholders was $84.9 million or 57 cents per share compared with $153 million or 96 cents per share recorded in the prior-year quarter.
Net Interest Income Falls, Fee Income Grows, Expenses Rise
Total revenues in the second quarter were $550.9 million, up 12.9% from the prior-year quarter. Also, the top-line figure outpaced the Zacks Consensus Estimate of $441.1 million.
Net interest income declined 6% year over year to $376.6 million. Also, net interest margin shrunk 56 basis points (bps) year over year to 3.13%.
Non-interest income climbed 93.2% on a year-over-year basis to $173.5 million. A substantial rise in mortgage banking revenues drove the upside.
Non-interest expenses were $284.1 million, up 7.6% year over year. The increase mainly resulted from higher salaries and other personnel expenses, net occupancy and equipment expenses, third-party processing, and other services and professional fees.
Adjusted efficiency ratio came in at 57.91% as compared with 52.08% reported in the year-earlier quarter. A rise in ratio indicates deterioration in profitability.
Total deposits were $44.2 billion, up 11% sequentially. Total loans climbed 4.3% sequentially to $39.9 billion.
Credit Quality: A Concern
Credit metrics deteriorated for Synovus in the June-end quarter.
Non-performing loans were up 18.8% year over year to $147.4 million. The non-performing loan ratio came in at 0.37%, up 3 bps year over year.
Total non-performing assets amounted to $177.7 million, underlining a rise of 27.3% year over year. The non-performing asset ratio expanded 5 bps year over year to 0.44%.
Net charge-offs climbed significantly on a year-over-year basis to $24 million. The annualized net charge-off ratio was 0.24%, up 11 bps from the year-earlier quarter. Provision for loan losses was $141.9 million compared with $12.1 million in the prior-year quarter. The substantial rise resulted from the coronavirus concerns.
Capital Position Strong
Tier 1 capital ratio and total risk-based capital ratio were 10.15% and 12.7%, respectively, compared with 10.09% and 12.11% as of Jun 30, 2019.
Also, as of Jun 30, 2020, Common Equity Tier 1 ratio (fully phased-in) was 8.9% compared with the 9.61% witnessed in the year-ago quarter. Tier 1 Leverage ratio was 8.38% compared with 8.89% recorded in the year-earlier period.
Our Take
Synovus’ results were decent in the June-end quarter. We believe the company’s focus on both organic and inorganic growth together with cost-containment efforts will pay off and aid bottom-line expansion in subsequent years. Though elevated fee income and lower expenses indicate optimism, lower net interest income and higher provisions raise concerns.
Synovus Financial Corp. Price, Consensus and EPS Surprise
Regions Financial (RF - Free Report) reported second-quarter 2020 adjusted loss of 23 cents per share as against earnings of 39 cents per share recorded in the prior-year period. Notably, the Zacks Consensus Estimate was pegged at 7 cents.
First Horizon National Corporation (FHN - Free Report) reported second-quarter 2020 adjusted earnings per share of 20 cents, missing the Zacks Consensus Estimate of 21 cents. Further, the bottom line was 52.4% lower than the year-ago figure.
Citizens Financial Group (CFG - Free Report) reported second-quarter 2020 earnings per share of 53 cents, which surpassed the Zacks Consensus Estimate of 9 cents. The bottom line, however, compares unfavorably with 96 cents in the year-ago quarter.
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Synovus (SNV) Q2 Earnings Beat Estimates, Provisions Rise
Shares of Synovus Financial (SNV - Free Report) gained 13.6%, following the release of second-quarter 2020. Quarterly adjusted earnings of 23 cents per share beat the Zacks Consensus Estimate of 15 cents. Also, the reported figure was 77% lower than the prior-year quarter number.
Results reflected higher fee income on strength in mortgage banking in the quarter. Moreover, strong loan and deposit balances stoked organic growth. However, lower net interest income and higher provisions on the coronavirus scare were key concerns.
Including certain non-recurring items, net income available to common shareholders was $84.9 million or 57 cents per share compared with $153 million or 96 cents per share recorded in the prior-year quarter.
Net Interest Income Falls, Fee Income Grows, Expenses Rise
Total revenues in the second quarter were $550.9 million, up 12.9% from the prior-year quarter. Also, the top-line figure outpaced the Zacks Consensus Estimate of $441.1 million.
Net interest income declined 6% year over year to $376.6 million. Also, net interest margin shrunk 56 basis points (bps) year over year to 3.13%.
Non-interest income climbed 93.2% on a year-over-year basis to $173.5 million. A substantial rise in mortgage banking revenues drove the upside.
Non-interest expenses were $284.1 million, up 7.6% year over year. The increase mainly resulted from higher salaries and other personnel expenses, net occupancy and equipment expenses, third-party processing, and other services and professional fees.
Adjusted efficiency ratio came in at 57.91% as compared with 52.08% reported in the year-earlier quarter. A rise in ratio indicates deterioration in profitability.
Total deposits were $44.2 billion, up 11% sequentially. Total loans climbed 4.3% sequentially to $39.9 billion.
Credit Quality: A Concern
Credit metrics deteriorated for Synovus in the June-end quarter.
Non-performing loans were up 18.8% year over year to $147.4 million. The non-performing loan ratio came in at 0.37%, up 3 bps year over year.
Total non-performing assets amounted to $177.7 million, underlining a rise of 27.3% year over year. The non-performing asset ratio expanded 5 bps year over year to 0.44%.
Net charge-offs climbed significantly on a year-over-year basis to $24 million. The annualized net charge-off ratio was 0.24%, up 11 bps from the year-earlier quarter. Provision for loan losses was $141.9 million compared with $12.1 million in the prior-year quarter. The substantial rise resulted from the coronavirus concerns.
Capital Position Strong
Tier 1 capital ratio and total risk-based capital ratio were 10.15% and 12.7%, respectively, compared with 10.09% and 12.11% as of Jun 30, 2019.
Also, as of Jun 30, 2020, Common Equity Tier 1 ratio (fully phased-in) was 8.9% compared with the 9.61% witnessed in the year-ago quarter. Tier 1 Leverage ratio was 8.38% compared with 8.89% recorded in the year-earlier period.
Our Take
Synovus’ results were decent in the June-end quarter. We believe the company’s focus on both organic and inorganic growth together with cost-containment efforts will pay off and aid bottom-line expansion in subsequent years. Though elevated fee income and lower expenses indicate optimism, lower net interest income and higher provisions raise concerns.
Synovus Financial Corp. Price, Consensus and EPS Surprise
Synovus Financial Corp. price-consensus-eps-surprise-chart | Synovus Financial Corp. Quote
Currently, Synovus carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Regions Financial (RF - Free Report) reported second-quarter 2020 adjusted loss of 23 cents per share as against earnings of 39 cents per share recorded in the prior-year period. Notably, the Zacks Consensus Estimate was pegged at 7 cents.
First Horizon National Corporation (FHN - Free Report) reported second-quarter 2020 adjusted earnings per share of 20 cents, missing the Zacks Consensus Estimate of 21 cents. Further, the bottom line was 52.4% lower than the year-ago figure.
Citizens Financial Group (CFG - Free Report) reported second-quarter 2020 earnings per share of 53 cents, which surpassed the Zacks Consensus Estimate of 9 cents. The bottom line, however, compares unfavorably with 96 cents in the year-ago quarter.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
These 7 were selected because of their superior potential for immediate breakout.
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