On Jun 19, 2014, we issued an updated research report on Synovus Financial Corporation (SNV). This Southeast bank has consistently exhibited efforts in reducing costs amid a competitive banking environment.
Since 2010, the company has taken a series of strategic initiatives to reduce expenses and streamline its processes. Notably, the expense reduction initiative has led to a decline in non-interest expenses of 10.5% in 2011, 9.7% in 2012 and 9.2% in 2013. Further, in Jan 2014, Synovus announced the planned implementation of new expense savings initiatives, which are expected to result in annualized cost savings of $30 million.
On Apr 22, Synovus came out with its first-quarter 2014 net income of 5 cents per share which more than doubled from 2 cents in the prior-year quarter. However, results were in line with the Zacks Consensus Estimate. While the company’s non-interest expenses rose slightly on a year-over-year basis, loan and deposit balances along with the total revenue witnessed an uptick.
The company is efficiently executing its strategy of aggressively shedding distressed assets, which it announced in 2009. Synovus expects the disposition of distressed assets to continue in the near future as well. We believe such initiatives will help achieve operational efficiency in the long run.
Despite the positives, we remain cautious owing to several issues faced by Synovus. These include declining interest income owing to a still low interest rate environment, absence of significant improvement in asset quality and the prevailing stringent regulatory landscape.
Over the past 60 days, the Zacks Consensus Estimate for 2014 rose 3.6% to $1.43 per share, while for 2015 it increased 3.9% to $1.61 per share. Synovus currently carries a Zacks Rank #3 (Hold).
Stocks That Warrant a Look in the Sector
Some South-east banks worth considering include Capital City Bank Group Inc. (CCBG), Middleburg Financial Corporation (MBRG) and Midsouth Bancorp Inc. (MSL). All these stocks hold a Zacks Rank #1 (Strong Buy).
Read the Full Research Report on MBRG
Read the Full Research Report on MSL
Read the Full Research Report on CCBG
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