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Synovus Financial Corp. (SNV - Free Report) reported second-quarter 2023 adjusted earnings per share of $1.16, which surpassed the Zacks Consensus Estimate of $1.14. However, the bottom line declined marginally from the prior-year quarter’s reported number.
Higher interest rates and decent loan growth supported net interest income (NII) while fee income increased. However, results were adversely impacted by the rise in provisions on a challenging operating backdrop and higher expenses.
Net income available to common shareholders was $165.8 million, down 2.3% from the prior-year quarter.
Revenues & Expenses Rise
Total revenues in the first quarter were $567.8 million, up 8.6% from the prior-year quarter. The top line missed the Zacks Consensus Estimate of $570.8 million.
NII improved 7.1% year over year to $455.5 million. The rise was driven by loan growth and interest rate increases, offset by higher deposit pricing. Net interest margin, on the other hand, declined 2 basis points (bps) to 3.20%.
Non-interest revenues increased 15% to $112.3 million. The main reasons behind the increase were higher brokerage revenues, card fees and mortgage banking income.
Non-interest expenses were $307.2 million, up 8.9% year over year. The rise mainly resulted from an increase in salaries and other personnel expenses, and FDIC insurance and other regulatory fees.
The adjusted tangible efficiency ratio was 52.57% compared with 53.43% in the year-earlier quarter. A decrease in this ratio indicates a rise in profitability.
Total loans of $44.35 billion showed a 1% improvement sequentially. Total deposits were $50.08 billion, which increased marginally from the previous quarter.
Credit Quality Worsens
Non-performing loans increased significantly year over year to $261.5 million. Total non-performing assets amounted to $261.5 million, up 92.6% from the year-ago period. Provision for credit losses was $38.9 million, which increased significantly from the prior-year quarter.
Net charge-offs increased 59.3% to $26.4 million. Non-performing asset ratio was at 0.59%, up 26 bps from the prior-year quarter. The net charge-offs ratio was 0.24% compared with the previous-year quarter’s 0.16%.
Capital Ratios Improve & Profitability Ratios Down
As of Jun 30, 2023, the Tier 1 capital ratio and total risk-based capital ratio were 10.88% and 12.79%, respectively, compared with 10.56% and 12.43% in the year-ago quarter. Moreover, as of the same date, the Common Equity Tier 1 capital ratio was 9.85%, up from 9.46% in the year-ago quarter.
The Tier 1 leverage ratio was 9.23%, improving from 9.03% in the year-earlier period.
Return on average assets was 1.15%, down from the prior-year quarter’s 1.26%. Return on average common equity was 15.5%, down from 16.5% in the year-earlier quarter.
Our Take
Higher interest rates will likely continue to support NII in the upcoming period. However, the rising provision for credit losses on account of the challenging operating backdrop is concerning. Also, rising operating expenses can impede the bottom line going forward.
Synovus Financial Corp. Price, Consensus and EPS Surprise
Wells Fargo & Company’s (WFC - Free Report) second-quarter 2023 earnings per share of $1.25 has outpaced the Zacks Consensus Estimate of $1.15. The figure improved 66.7% year over year.
Results of WFC have benefited from higher NII and non-interest income. Improvements in capital and profitability ratios were other positives. However, higher provisions for credit losses and a rise in expenses were the undermining factors.
Citigroup Inc.’s (C - Free Report) second-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.37 have outpaced the Zacks Consensus Estimate of $1.31.
In the second quarter, C witnessed a decline in the top line due to lower revenues in the Institutional Clients Group. Also, the higher cost of credit was a spoilsport. Nonetheless, higher revenues in Personal Banking and Wealth Management segments were bright spots.
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Synovus (SNV) Q2 Earnings Beat Estimates, Revenues Rise Y/Y
Synovus Financial Corp. (SNV - Free Report) reported second-quarter 2023 adjusted earnings per share of $1.16, which surpassed the Zacks Consensus Estimate of $1.14. However, the bottom line declined marginally from the prior-year quarter’s reported number.
Higher interest rates and decent loan growth supported net interest income (NII) while fee income increased. However, results were adversely impacted by the rise in provisions on a challenging operating backdrop and higher expenses.
Net income available to common shareholders was $165.8 million, down 2.3% from the prior-year quarter.
Revenues & Expenses Rise
Total revenues in the first quarter were $567.8 million, up 8.6% from the prior-year quarter. The top line missed the Zacks Consensus Estimate of $570.8 million.
NII improved 7.1% year over year to $455.5 million. The rise was driven by loan growth and interest rate increases, offset by higher deposit pricing. Net interest margin, on the other hand, declined 2 basis points (bps) to 3.20%.
Non-interest revenues increased 15% to $112.3 million. The main reasons behind the increase were higher brokerage revenues, card fees and mortgage banking income.
Non-interest expenses were $307.2 million, up 8.9% year over year. The rise mainly resulted from an increase in salaries and other personnel expenses, and FDIC insurance and other regulatory fees.
The adjusted tangible efficiency ratio was 52.57% compared with 53.43% in the year-earlier quarter. A decrease in this ratio indicates a rise in profitability.
Total loans of $44.35 billion showed a 1% improvement sequentially. Total deposits were $50.08 billion, which increased marginally from the previous quarter.
Credit Quality Worsens
Non-performing loans increased significantly year over year to $261.5 million. Total non-performing assets amounted to $261.5 million, up 92.6% from the year-ago period. Provision for credit losses was $38.9 million, which increased significantly from the prior-year quarter.
Net charge-offs increased 59.3% to $26.4 million. Non-performing asset ratio was at 0.59%, up 26 bps from the prior-year quarter. The net charge-offs ratio was 0.24% compared with the previous-year quarter’s 0.16%.
Capital Ratios Improve & Profitability Ratios Down
As of Jun 30, 2023, the Tier 1 capital ratio and total risk-based capital ratio were 10.88% and 12.79%, respectively, compared with 10.56% and 12.43% in the year-ago quarter. Moreover, as of the same date, the Common Equity Tier 1 capital ratio was 9.85%, up from 9.46% in the year-ago quarter.
The Tier 1 leverage ratio was 9.23%, improving from 9.03% in the year-earlier period.
Return on average assets was 1.15%, down from the prior-year quarter’s 1.26%. Return on average common equity was 15.5%, down from 16.5% in the year-earlier quarter.
Our Take
Higher interest rates will likely continue to support NII in the upcoming period. However, the rising provision for credit losses on account of the challenging operating backdrop is concerning. Also, rising operating expenses can impede the bottom line going forward.
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 Major Banks
Wells Fargo & Company’s (WFC - Free Report) second-quarter 2023 earnings per share of $1.25 has outpaced the Zacks Consensus Estimate of $1.15. The figure improved 66.7% year over year.
Results of WFC have benefited from higher NII and non-interest income. Improvements in capital and profitability ratios were other positives. However, higher provisions for credit losses and a rise in expenses were the undermining factors.
Citigroup Inc.’s (C - Free Report) second-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.37 have outpaced the Zacks Consensus Estimate of $1.31.
In the second quarter, C witnessed a decline in the top line due to lower revenues in the Institutional Clients Group. Also, the higher cost of credit was a spoilsport. Nonetheless, higher revenues in Personal Banking and Wealth Management segments were bright spots.