Following Synovus Financial’s (SNV - Free Report) first-quarter 2019 results, shares have climbed 3.62%. Driven by top-line strength, the company reported a positive earnings surprise of 8.9%. Adjusted earnings of 98 cents per share beat the Zacks Consensus Estimate of 90 cents. Also, the reported figure comes in 15.1% higher than the prior-year quarter tally.
Higher revenues, backed by strong loans & deposit balances, stoked organic growth. Notably, lower efficiency ratio and rising fee income were tailwinds. Moreover, positive impact of rising rates was witnessed. However, escalating expenses and deteriorating credit metrics were undermining factors.
Including certain non-recurring items, net income available to common shareholders came in at $117 million or 72 cents per share compared with $100.6 million or 84 cents per share recorded in the prior-year quarter.
Top Line Robust, Expenses Flare Up
Total revenues in the first quarter came in at $476.5 million, up 39.6% year over year. Further, the top line outpaced the Zacks Consensus Estimate of $460.6 million.
Net interest income surged 44.8% year over year to $397.2 million. Further, net interest margin remained flat at 3.78%.
Non-interest income climbed 18.4% on a year-over-year basis to $79.4 million, including a favorable adjustment in the fair value of private equity investments. Rise in almost all components of income drove this upside. Adjusted non-interest income was $78.4 million.
Non-interest expenses came in at $292.4 million, flaring up 49.8% year over year. Notably, rise in almost all components of expenses resulted in this upswing, partially offset by lower FDIC insurance and other regulatory fees. Adjusted non-interest expenses came in at $242.7 million, up 22.5% from the prior-year quarter.
Adjusted efficiency ratio came in at 50.24% as compared with 57.42% reported in the year-earlier quarter. A decline in ratio indicates improvement in profitability.
Total deposits came in at $38.1 billion, soaring 42.5% sequentially. Total loans climbed 37.3% sequentially to $35.6 billion. Results include FCB-acquired balances.
Credit Quality: A Mixed Bag
Credit quality was a mixed a bag for Synovus in the reported quarter.
Non-performing loans were up 19.9% year over year to $144 million. The non-performing loan ratio came in at 0.40%, contracting 8 bps year over year.
Total non-performing assets amounted to $155.3 million, underlining a rise of 18.4% year over year. The non-performing asset ratio shrunk 9 bps year over year to 0.44%.
Net charge-offs more than doubled on a year-over-year basis to $17.1 million. The annualized net charge-off ratio was 0.19%, up 12 bps from the year-earlier quarter. Provision for loan losses soared 84.5% year over year to $23.6 million.
Strong Capital Position
Tier 1 capital ratio and total risk based capital ratio were 9.93% and 11.98%, respectively, compared with 10.53% and 12.39% as of Mar 31, 2018.
Also, as of Mar 31, 2019, Common Equity Tier 1 Ratio (fully phased-in) was 9.41% compared with 10.03% witnessed in the year-ago quarter. Tier 1 Leverage ratio was 8.77% compared with 9.37% in the comparable period last year.
Capital Deployment Update
During the first quarter, the company repurchased common stock worth $320 million.
Synovus’ results were quite decent in the Mar-end quarter. We believe the company’s focus on both organic and inorganic growth, together with cost-containment efforts, will pay off and aid bottom-line expansion in subsequent years. Though escalating expenses raise concerns, lower efficiency ratio indicates optimism.
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 Banks
Reflecting top-line strength, Northern Trust Corporation’s (NTRS - Free Report) first-quarter 2019 earnings per share of $1.48 outpaced the Zacks Consensus Estimate of $1.46. However, the earnings figure compared unfavorably with the year-ago quarter’s tally of $1.58.
Riding on higher revenues, Citizens Financial Group, Inc. (CFG - Free Report) recorded a positive earnings surprise of 4.5% in the first quarter. Adjusted earnings per share came in at 93 cents, beating the Zacks Consensus Estimate of 89 cents. Also, the reported figure improved 19.2% year over year. Results excluded one-time items of $4 million or 1 cent per share.
PNC Financial (PNC - Free Report) reported positive earnings surprise of 0.8% in the Jan-Mar quarter. Earnings per share of $2.61 surpassed the Zacks Consensus Estimate of $2.59. Further, the bottom line reflected a 7.4% jump from the prior-year quarter. Higher revenues, driven by easing margin pressure and escalating fee income, aided the results. However, rise in costs and provisions were headwinds.
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