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Synovus' (SNV) Balance Sheet Profile Aids Amid High Costs
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Synovus Financial Corp. (SNV - Free Report) is benefiting from the rise in revenues and balance sheet strength. However, escalating expenses due to investments in technology and talents, and a lack of diversification in the loan portfolio are major near-term headwinds.
SNV’s loans witnessed a compound annual growth rate (CAGR) of 7.2% in the last three years (2020-2022). In addition, total deposits have seen a CAGR of 2.3% over the same time frame, backed by continued growth in core transaction deposit accounts. With the rising trend continuing in the first-quarter of 2023, the company’s balance sheet remained strong.
Synovus is focused on improving revenues. Its primary source of revenues, net interest income (NII) saw a CAGR of 4% in the last four years ended 2022, with the rising trend continuing in first-quarter 2023. While management expects the metric to decline in second-quarter 2023 due to unfavorable deposit mix shifts, NII is likely to stabilize in the second half of 2023.
SNV is expected to continue enhancing shareholder value through meaningful capital deployments. It pays out regular dividends on a quarterly basis, with the last sequential hike of 12% made in March 2023. Also, the company was authorized with a $300-million share repurchase program in January 2023, although no buybacks were executed in the first quarter of 2023. Given it’s strong balance sheet and liquidity positions, the continuation of its capital deployment activities will drive investors’ confidence in the stock.
However, rising costs despite certain cost-saving efforts can be a near-term concern. Synovus’ expenses saw a CAGR of 1.7% over the last four years ended 2022 with the rising trend continuing in the first quarter of 2023. Moreover, management expects adjusted expenses to grow 4-6% year over year in 2023. As the bank intends to invest in technology refinements and talent to improve user experience, such costs are likely to weigh on its bottom-line expansion.
The loan portfolio of Synovus primarily comprises commercial and industrial, as well as commercial real-estate loans (80.8% as of Mar 31, 2023). Such a high exposure can be risky for SNV, especially if the same and the overall real estate sector weaken. Moreover, in case of any economic downturn, the asset quality of the credit category might deteriorate.
Uncertainty about the performance of Synovus’ mortgage banking business is another concern. While the company’s mortgage income increased in 2019 and 2020, supported by low mortgage rates, the same witnessed a decline in 2021 and 2022, with the downtrend persisting in first-quarter 2023. Thus, the company’s mortgage banking business performance is expected to get hurt in the quarters ahead, thereby impeding fee income.
Further, analysts are bearish on the stock’s earnings prospects. The Zacks Consensus Estimate for SNV's current-year earnings has been revised 8.3% downward over the last 60 days. The company currently carries a Zacks Rank #3 (Hold).
In the past six months, shares of SNV have fallen 24.2% compared with the industry's 13.3% decline.
Image Source: Zacks Investment Research
Bank Stocks Worth a Look
A couple of better-ranked stocks from the finance space are Pathward Financial, Inc. (CASH - Free Report) and First Citizens BancShares (FCNCA - Free Report) .
The Zacks Consensus Estimate for Pathward Financial’s current-year earnings has been revised 1.8% upward over the past 60 days. Its shares have gained 14.8% in the past six months. Currently, CASH carries a Zacks Rank #2 (Buy).
First Citizens BancShares currently sports a Zacks Rank #1 (Strong Buy). Its earnings estimates for 2023 have been revised 67% upward over the past 30 days. In the past six months, FCNCA’s shares have rallied 65.9%. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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Synovus' (SNV) Balance Sheet Profile Aids Amid High Costs
Synovus Financial Corp. (SNV - Free Report) is benefiting from the rise in revenues and balance sheet strength. However, escalating expenses due to investments in technology and talents, and a lack of diversification in the loan portfolio are major near-term headwinds.
SNV’s loans witnessed a compound annual growth rate (CAGR) of 7.2% in the last three years (2020-2022). In addition, total deposits have seen a CAGR of 2.3% over the same time frame, backed by continued growth in core transaction deposit accounts. With the rising trend continuing in the first-quarter of 2023, the company’s balance sheet remained strong.
Synovus is focused on improving revenues. Its primary source of revenues, net interest income (NII) saw a CAGR of 4% in the last four years ended 2022, with the rising trend continuing in first-quarter 2023. While management expects the metric to decline in second-quarter 2023 due to unfavorable deposit mix shifts, NII is likely to stabilize in the second half of 2023.
SNV is expected to continue enhancing shareholder value through meaningful capital deployments. It pays out regular dividends on a quarterly basis, with the last sequential hike of 12% made in March 2023. Also, the company was authorized with a $300-million share repurchase program in January 2023, although no buybacks were executed in the first quarter of 2023. Given it’s strong balance sheet and liquidity positions, the continuation of its capital deployment activities will drive investors’ confidence in the stock.
However, rising costs despite certain cost-saving efforts can be a near-term concern. Synovus’ expenses saw a CAGR of 1.7% over the last four years ended 2022 with the rising trend continuing in the first quarter of 2023. Moreover, management expects adjusted expenses to grow 4-6% year over year in 2023. As the bank intends to invest in technology refinements and talent to improve user experience, such costs are likely to weigh on its bottom-line expansion.
The loan portfolio of Synovus primarily comprises commercial and industrial, as well as commercial real-estate loans (80.8% as of Mar 31, 2023). Such a high exposure can be risky for SNV, especially if the same and the overall real estate sector weaken. Moreover, in case of any economic downturn, the asset quality of the credit category might deteriorate.
Uncertainty about the performance of Synovus’ mortgage banking business is another concern. While the company’s mortgage income increased in 2019 and 2020, supported by low mortgage rates, the same witnessed a decline in 2021 and 2022, with the downtrend persisting in first-quarter 2023. Thus, the company’s mortgage banking business performance is expected to get hurt in the quarters ahead, thereby impeding fee income.
Further, analysts are bearish on the stock’s earnings prospects. The Zacks Consensus Estimate for SNV's current-year earnings has been revised 8.3% downward over the last 60 days. The company currently carries a Zacks Rank #3 (Hold).
In the past six months, shares of SNV have fallen 24.2% compared with the industry's 13.3% decline.
Image Source: Zacks Investment Research
Bank Stocks Worth a Look
A couple of better-ranked stocks from the finance space are Pathward Financial, Inc. (CASH - Free Report) and First Citizens BancShares (FCNCA - Free Report) .
The Zacks Consensus Estimate for Pathward Financial’s current-year earnings has been revised 1.8% upward over the past 60 days. Its shares have gained 14.8% in the past six months. Currently, CASH carries a Zacks Rank #2 (Buy).
First Citizens BancShares currently sports a Zacks Rank #1 (Strong Buy). Its earnings estimates for 2023 have been revised 67% upward over the past 30 days. In the past six months, FCNCA’s shares have rallied 65.9%. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.