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Loan Growth and Acquisitions Support Synovus Financial (SNV)

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Zacks Equity Research
·3 min read
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On Mar 12, we issued an updated research report on Synovus Financial Corp. SNV. The company continues to gain from inorganic growth strategies, improving interest income as well as a sound capital position.
While escalating expenses due to investments in technology and a significant exposure to real-estate loans are near-term headwinds, the company’s efforts to trim its exposure to troubled loans remain encouraging.

The Zacks Consensus Estimate for the company’s current-year earnings has been revised 19.2%upward over the past 60 days. The stock currently carries a Zacks Rank #2 (Buy).

Shares of Synovus Financial have appreciated 123.3% in the past six months compared with the industry’s growth of 90.9%.

The company recorded continued organic growth in the last few years. Its loans witnessed a CAGR of 12.5% over the last five years through 2020. Additionally, net interest income saw a CAGR of 13.9% during the same tenure, partially boosted by the acquisitions completed during that period. Thus, with gradual improvement in the economy, loans are expected to increase, thereby supporting Synovus Financial’s top line.

Supported by a strong liquidity position, Synovus Financial has been able to expand via several mergers and acquisitions in the past few years, which opened up new markets and fortified its presence in the existing ones. In May 2019, it completed the transaction of FCB Financial Holdings. Notably, the company looks forward to tapping similar opportunities in the future as well.

Recuperating from the unfavorable impact of the COVID-led financial crisis, Synovus Financial is extensively scaling down the percentage of loans in the residential construction and development, and land acquisition portfolios. Also, credit quality trends though erratic, are expected to continue showing a broad-based improvement.

However, rising costs despite certain cost-saving efforts, can be a near term concern. As the bank intends to make investments in technology refinements and talent to improve user experience, we believe, such costs might weigh on its bottom-line expansion. The company’s expenses saw a CAGR of 11.8% over the last five years (2016-2020).

Other Stocks to Consider

Some other top-ranked stocks in the financial space are Summit Financial Group, Inc. SMMF, which presently flaunts a Zacks Rank #1 (Strong Buy) and United Bankshares, Inc. UBSI and First Community Bancshares, Inc. FCBC, both carrying a Zacks Rank of 2, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Summit Financial has witnessed 24.1% upward earnings estimate revision for the current year in the past 60 days. Moreover, its shares have gained 68.6% in the past six months.

United Bankshares’ current-year earnings estimate has been revised 9.6% upward over the past 60 days. Further, its shares have surged 64.3% in six months’ time.

First Community’s earnings estimate for the ongoing year has moved 10.8% north in the past two months. Also, its share price has appreciated 57.5% over the past six months.

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