Synovus Financial Corporation (SNV - Free Report) is benefiting from interest income growth, pruning of assets and improving credit quality. Also, a strong capital position is a major driving factor. Further, the company’s focus to grow through strategic opportunities indicates its upside potential.
Notably, continued loan growth and expansions aided the company to gain 3.9% over the past year compared with 10.6% growth recorded by the industry it belongs to.
Further, its earnings estimates have been revised slightly upward for the current year, in the past 60 days. As a result, it carries a Zacks Rank #2 (Buy).
Synovus is focused on its organic growth strategy. This is reflected by consistent loan growth over the past few years, along with net interest income (NII), partly driven by the acquisitions completed during this period. Further, the company is well poised to enhance its NII in the quarters ahead, driven by steady growth in loan demand and improving economic backdrop. Notably, the rising interest-rate environment is likely to continue supporting its top line.
Synovus remains committed to enhancing shareholders’ value through dividend hikes, share buybacks and acquisitions, thereby reflecting a strong balance-sheet position. In March 2018, a 67% hike in its quarterly dividend was announced. Further, in July 2018, Synovus announced that it is acquiring FCB Financial Holdings (FCB - Free Report) . On completion of the merger, Synovus will become one of the top five regional banks by deposits in the Southeast region with around $36 billion in deposits and $44 billion in assets. Moreover, the deal is expected to be around 6.5% accretive to earnings per share in 2020 and to deliver strong returns on capital.
Synovus has been substantially reducing the percentage of loans in its residential construction and development, and land acquisition portfolios. Also, credit quality trends though volatile, are expected to display broad-based improvement. This is likely to continue with relatively flat non-performing assets and net charge-offs expected within the 15-20 basis point range in 2018.
Nevertheless, Synovus has been witnessing a rise in expenses. Also, management expects expenses to rise (0-3% in 2018) further with continued investments in technology, talent and customer experience. Thus, consistently rising expenses are likely to limit bottom-line expansion.
Other Stocks to Consider
A couple of other top-ranked stocks in the same space are Popular, Inc. (BPOP - Free Report) and National Bank Holdings Corporation (NBHC - Free Report) . Both these stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Popular has been revised 4.2% upward for the current year, in the past 60 days. The company’s share price has jumped 47.2% in the past year.
National Bank has witnessed 2.4% upward earnings estimates revision for 2018, in the past 60 days. Its share price has risen 6.5% in the past year.
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