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Synovus (SNV) Q3 Earnings Miss Estimates, Provisions Rise
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Synovus Financial Corp. (SNV - Free Report) reported third-quarter 2023 adjusted earnings per share of 84 cents, which lagged the Zacks Consensus Estimate of 86 cents. The bottom line also declined 37.3% from the prior-year quarter’s reported number.
Results were adversely impacted by the rise in provisions on challenging operating outlook, a decline in net interest income (NII) and higher expenses. On the other hand, a rise in non-interest revenues and higher rates offered some support.
Net income available to common shareholders was $87.4 million, down 55.1% from the prior-year quarter.
Revenues Fall & Expenses Rise
Total revenues in the third quarter were $550.3 million, down 5.5% from the prior-year quarter. The top line surpassed the Zacks Consensus Estimate of $542.5 million.
NII decreased 7.3% year over year to $443.2 million. The fall was driven by higher deposit costs, offset by higher asset yields. Net interest margin, on the other hand, declined 36 basis points (bps) to 3.11%.
Non-interest revenues increased 2.7% to $107.1 million. The main reasons behind the increase were higher fiduciary and asset management fees, brokerage revenue, card fees and income from bank-owned life insurance.
Non-interest expenses were $353.5 million, up 20.2% year over year. An increase in almost all components of expenses resulted in this upsurge, except third-party processing and other services charges and other operating expenses.
The adjusted tangible efficiency ratio was 55.01% compared with 49.98% in the year-earlier quarter. A rise in the efficiency ratio indicates a decrease in profitability.
As of Sep 30, 2023, total loans of $43.68 billion showed a 1.5% fall sequentially. Total deposits were $50.2 billion, which increased marginally from the previous quarter.
Credit Quality Worsens
Non-performing loans increased significantly year over year to $280.5 million. Total non-performing assets amounted to $280.5 million, which rose substantially from the year-ago period. The non-performing assets ratio was 0.64%, up 32 bps from the prior-year quarter.
Net charge-offs increased significantly to $66.8 million. The net charge-off ratio was 0.61% compared with the previous-year quarter’s 0.04%. Provision for credit losses was $72.6 million, which increased significantly from the prior-year quarter.
Capital Ratios Improve & Profitability Ratios Down
As of Sep 30, 2023, the Tier 1 capital ratio and total risk-based capital ratio were 11.18% and 13.12%, respectively, compared with 10.59% and 12.45% in the year-ago quarter. Moreover, as of the same date, the Common Equity Tier 1 capital ratio was 10.13%, up from 9.52% in the year-ago quarter.
The Tier 1 leverage ratio was 9.38%, improving from 9.04% in the year-earlier period.
Return on average assets was 0.64%, down from the prior-year quarter’s 1.39%. Return on average common equity was 8.2%, down from 18.7% in the year-earlier quarter.
Our Take
The rise in non-interest revenues is likely to continue supporting the company’s finances 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) third-quarter 2023 adjusted earnings per share of $1.39 outpaced the Zacks Consensus Estimate of $1.25. The figure improved 6.9% year over year. The adjusted figure excludes the impacts of discrete tax benefits related to the resolution of the prior-year period’s tax matters.
WFC’s results benefited from higher NII and non-interest income. An improvement in capital ratios and a decline in expenses were other positives. However, the worsening credit quality and a dip in loan balances were the undermining factors.
Citigroup Inc.’s (C - Free Report) third-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.52 outpaced the Zacks Consensus Estimate of $1.26.
In the third quarter, C witnessed a rise in revenues due to higher revenues in the Institutional Clients Group, as well as the Personal Banking and Wealth Management segments. The higher cost of credit was another spoilsport.
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Synovus (SNV) Q3 Earnings Miss Estimates, Provisions Rise
Synovus Financial Corp. (SNV - Free Report) reported third-quarter 2023 adjusted earnings per share of 84 cents, which lagged the Zacks Consensus Estimate of 86 cents. The bottom line also declined 37.3% from the prior-year quarter’s reported number.
Results were adversely impacted by the rise in provisions on challenging operating outlook, a decline in net interest income (NII) and higher expenses. On the other hand, a rise in non-interest revenues and higher rates offered some support.
Net income available to common shareholders was $87.4 million, down 55.1% from the prior-year quarter.
Revenues Fall & Expenses Rise
Total revenues in the third quarter were $550.3 million, down 5.5% from the prior-year quarter. The top line surpassed the Zacks Consensus Estimate of $542.5 million.
NII decreased 7.3% year over year to $443.2 million. The fall was driven by higher deposit costs, offset by higher asset yields. Net interest margin, on the other hand, declined 36 basis points (bps) to 3.11%.
Non-interest revenues increased 2.7% to $107.1 million. The main reasons behind the increase were higher fiduciary and asset management fees, brokerage revenue, card fees and income from bank-owned life insurance.
Non-interest expenses were $353.5 million, up 20.2% year over year. An increase in almost all components of expenses resulted in this upsurge, except third-party processing and other services charges and other operating expenses.
The adjusted tangible efficiency ratio was 55.01% compared with 49.98% in the year-earlier quarter. A rise in the efficiency ratio indicates a decrease in profitability.
As of Sep 30, 2023, total loans of $43.68 billion showed a 1.5% fall sequentially. Total deposits were $50.2 billion, which increased marginally from the previous quarter.
Credit Quality Worsens
Non-performing loans increased significantly year over year to $280.5 million. Total non-performing assets amounted to $280.5 million, which rose substantially from the year-ago period. The non-performing assets ratio was 0.64%, up 32 bps from the prior-year quarter.
Net charge-offs increased significantly to $66.8 million. The net charge-off ratio was 0.61% compared with the previous-year quarter’s 0.04%. Provision for credit losses was $72.6 million, which increased significantly from the prior-year quarter.
Capital Ratios Improve & Profitability Ratios Down
As of Sep 30, 2023, the Tier 1 capital ratio and total risk-based capital ratio were 11.18% and 13.12%, respectively, compared with 10.59% and 12.45% in the year-ago quarter. Moreover, as of the same date, the Common Equity Tier 1 capital ratio was 10.13%, up from 9.52% in the year-ago quarter.
The Tier 1 leverage ratio was 9.38%, improving from 9.04% in the year-earlier period.
Return on average assets was 0.64%, down from the prior-year quarter’s 1.39%. Return on average common equity was 8.2%, down from 18.7% in the year-earlier quarter.
Our Take
The rise in non-interest revenues is likely to continue supporting the company’s finances 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) third-quarter 2023 adjusted earnings per share of $1.39 outpaced the Zacks Consensus Estimate of $1.25. The figure improved 6.9% year over year. The adjusted figure excludes the impacts of discrete tax benefits related to the resolution of the prior-year period’s tax matters.
WFC’s results benefited from higher NII and non-interest income. An improvement in capital ratios and a decline in expenses were other positives. However, the worsening credit quality and a dip in loan balances were the undermining factors.
Citigroup Inc.’s (C - Free Report) third-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.52 outpaced the Zacks Consensus Estimate of $1.26.
In the third quarter, C witnessed a rise in revenues due to higher revenues in the Institutional Clients Group, as well as the Personal Banking and Wealth Management segments. The higher cost of credit was another spoilsport.