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Synovus' (SNV) Q4 Earnings Miss on Higher Costs, Revenues Up

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Shares of Synovus Financial (SNV - Free Report) declined 2.7% following the release of fourth-quarter 2018 results. Adjusted earnings of 92 cents per share lagged the Zacks Consensus Estimate of 94 cents. However, the reported figure came in 27.8% higher than the prior-year tally.

Strong loans & deposit balances contributed to higher revenues. Other positives include lower efficiency ratio and improved credit quality. However, these positives were partially offset by elevated expenses.  

Including certain non-recurring items, net income available to common shareholders came in at $102 million or 87 cents per share compared with $27 million or 23 cents per share recorded in the prior-year quarter.  

Adjusted earnings per share for 2018 increased to $3.64, up 43.8% from the prior year. Net income available to common shareholders was $410 million or $3.64 per share compared with $265 million or $2.53 per share recorded in 2017.

Revenues Improve, Adjusted Expenses Rise

Total adjusted revenues in the fourth quarter came in at $365.9 million, up 7.9% year over year. However, the top line lagged the Zacks Consensus Estimate of $370.8 million.

Total adjusted revenues for 2018 came in at $1.43 billion, up 4.4% year over year. Yet, the figure missed the Zacks Consensus Estimate of $1.44 billion.

Net interest income increased 10.5% year over year to $297.9 million. Further, net interest margin expanded 27 basis points (bps) year over year to 3.92%.

Non-interest income dropped 2% on a year-over-year basis to $68 million, mainly due to lower mortgage banking income, net decrease in fair value of private equity investments and other non-interest income. Adjusted non-interest income came in at $70.1 million, up 1.2% year over year.

Non-interest expenses were $209.9 million, down 7.3% year over year. Notably, decrease in almost all components of expenses resulted in this downside, partially offset by higher net occupancy and equipment expense, professional fees, merger-related expenses, and net restructuring charges. However, adjusted non-interest expenses came in at $206.1 million, up 2.5% from the prior-year quarter.

Adjusted efficiency ratio came in at 55.98% compared with 59.29% reported in the year-earlier quarter. A decline in efficiency ratio indicates improvement in profitability.

Total deposits came in at $26.7 billion, up 1.1% sequentially. Net loans climbed 1.5% from the end of the third quarter to $25.7 billion.

Credit Quality: A Mixed Bag

Credit quality remained a mixed bag for Synovus in the quarter under review.

Non-performing loans were down 7.6% year over year to $106.7 million. The non-performing loan ratio came in at 0.41%, shrinking 6 bps year over year.

Also, total non-performing assets amounted to $114.5 million, reflecting a decline of 12.4% year over year. The non-performing asset ratio contracted 9 bps year over year to 0.44%.

However, net charge-offs surged 45.3% year over year to $13 million. The annualized net charge-off ratio was 0.20%, up 5 bps from the year-ago quarter. Provision for loan losses climbed 41.8% year over year to $12.1 million.
 

Strong Capital Position

Synovus’ Tier 1 capital ratio and total risk based capital ratio came in at 10.7% and 12.47%, respectively, compared with 10.38% and 12.23% recorded as of Dec 31, 2017.

Additionally, as of Dec 31, 2018, the bank’s Common Equity Tier 1 Ratio (fully phased-in) was 10.04% compared with 9.99% witnessed in the year-ago quarter. The Tier 1 Leverage ratio was 9.60% compared with 9.19% in the comparable period last year.

Capital Deployment Update

During the quarter under review, the company repurchased common stock worth $40 million.

Further, Synovus board of directors authorized a new share repurchase program of up to $400 million of the company’s common stock, which will be executed during 2019. In addition, the company has approved a 20% hike in its quarterly dividend, effective from April 2019.

Our Take

Synovus remains well positioned for both organic and inorganic growth. Furthermore, increased capital-deployment activities reflect its strong balance-sheet position. Though escalating expenses remains a concern, a lower efficiency ratio indicates optimism.

Synovus Financial Corp. Price, Consensus and EPS Surprise

 

Synovus Financial Corp. Price, Consensus and EPS Surprise | 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.

Earnings Release Schedule of Other Banks

Among other banks, FB Financial Corporation (FBK - Free Report) is scheduled to release its quarterly results on Jan 22, Community Bank System, Inc. (CBU - Free Report) on Jan 23, while Atlantic Capital Bancshares, Inc. (ACBI - Free Report) will report earnings on Jan 31.

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