Synovus Financial Corp. ( SNV Quick Quote SNV - Free Report) is benefiting from its focus to grow through strategic opportunities and increasing interest income. However, escalating expenses due to investments in technology and a significant exposure to real-estate loans are near-term headwinds.
The Zacks Consensus Estimate for the company’s current-year earnings has been revised 16% upward over the past 60 days. The stock currently carries a Zacks Rank #2 (Buy).
Shares of Synovus have appreciated 54.5% in the past six months compared with the
industry’s growth of 39.8%.
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The company recorded continued organic growth in the last few years. Its loans witnessed a CAGR of 12.5% over the last five years through 2020. Additionally, net interest income saw a CAGR of 13.9% during the same time, partially boosted by the acquisitions completed during that period. Thus, with gradual improvement in the economy, loans are expected to increase, thereby boosting Synovus’ top line.
Supported by a strong liquidity position, Synovus has been able to expand via several mergers and acquisitions in the past few years, which opened up new markets and fortified its presence in the existing ones. In May 2019, it completed the buyout of FCB Financial Holdings. The company looks forward to tapping similar opportunities in the future as well.
Recuperating from the unfavorable impact of the COVID-led financial crisis, Synovus is extensively scaling down the percentage of loans in the residential construction and development, and land acquisition portfolios. Also, credit quality trends, though erratic, are expected to continue showing a broad-based improvement.
However, rising costs, despite certain cost-saving efforts, can be a near-term concern. As the bank intends to make investments in technology refinements and talent to improve user experience, such costs might weigh on its bottom-line expansion. Synovus’ expenses saw a CAGR of 11.8% over the last five years (2016-2020).
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