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Synovus (SNV) Q1 Earnings Top Estimates on Fee Income Growth

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Synovus Financial SNV reported first-quarter 2021 adjusted earnings of $1.21 per share, which handily beat the Zacks Consensus Estimate of 93 cents, aided by solid mortgage banking income. Also, the bottom line increased 17.4% from the prior-year quarter figure.

Results were driven by rising fee income and reversal of provisions. Moreover, strong deposit and loan balances stoked organic growth. However, lower net interest income was an undermining factor, raising investors’ pessimism, which resulted in a price decline of 4.9%, post release.

Including certain non-recurring items, net income available to common shareholders came in at $178.8 million or $1.19 per share compared with the $30.2 million or 20 cents recorded in the prior-year quarter.

Revenues Climb on Higher Non-Interest Income, Expenses Down

Total revenues (fully tax-equivalent) in the first quarter came in at $485.6 million, up 1.6% from the prior-year quarter. Also, the top line surpassed the Zacks Consensus Estimate of $481.7 million.

Net interest income increased slightly year over year to $374.6 million. However, net interest margin shrunk 33 basis points (bps) to 3.04%.

Non-interest income climbed 7% on a year-over-year basis to $111 million. Substantial rise in mortgage banking, income from bank-owned life insurance, fiduciary and asset management fees and card fees drove this upside. These were partly offset by lower service charges on deposit accounts and capital markets income.

Non-interest expenses were $267.1 million, down 3% year on year. This downside mainly resulted from lower net occupancy and equipment expense, and professional fees, third-party processing and other services, professional fees, amortization of intangibles and other expenses.

Adjusted efficiency ratio came in at 54.19% compared with the 56.72% reported in the year-earlier quarter. A fall in ratio indicates an improvement in profitability.

Total deposits came in at $47.4 billion, up 1.5% sequentially. Also, total loans grew 1.4% sequentially to $38.8 billion.

Credit Quality Improves

Synovus’ credit metrics witnessed an improvement during the March-ended quarter.

Non-performing loans declined 1% year over year to $155.2 million. Non-performing loan ratio came in at 0.4%, down 1 bp. Net charge-offs increased marginally to $20.2 million. The annualized net charge-off ratio was 0.21%, stable year over year.

Further, reversal of provision for credit losses of $18.6 million was recorded in the first quarter against provision expense of $158.7 in the prior-year quarter.

Total non-performing assets amounted to $195.6 million, underlining a year-over-year jump of 3%. The non-performing asset ratio remained stable at 0.50%.

Robust Capital Position

Tier 1 capital ratio and total risk based capital ratio were 10.99% and 13.34%, respectively, compared with 9.95% and 12.29% as of Mar 31, 2020.

Moreover, as of Mar 31, 2021, Common Equity Tier 1 Ratio (fully phased-in) was 9.74% compared with the 8.70% witnessed in the year-ago quarter. Tier 1 Leverage ratio was 8.80% compared with the 8.92% recorded in the year-earlier period.

Return on average assets was 1.40% compared with the prior-year quarter’s 0.32%. Return on average common equity was 15.77%, up from the 2.75%.

Our Take

Synovus reported decent results for the January-March quarter. We believe the company’s focus on both organic and inorganic growth, together with its cost-containment efforts, will pay off and aid bottom-line expansion in the subsequent years. Though reduction in net interest income amid low rates raises concerns, higher fee income is encouraging.

Synovus Financial Corp. Price, Consensus and EPS Surprise

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

Synovus Financial Corp. price-consensus-eps-surprise-chart | Synovus Financial Corp. Quote

Currently, Synovus carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Fifth Third Bancorp FITB delivered a positive earnings surprise of 34.7% in first-quarter 2021. Earnings of 93 cents per share, surpassed the Zacks Consensus Estimate of 69 cents. Results also compare favorably with the prior-year quarter’s earnings of 13 cents.

Comerica CMA delivered a first-quarter 2021 positive earnings surprise of 76.1%. Earnings per share of $2.43 easily surpassed the Zacks Consensus Estimate of $1.38. Also, the bottom line compared favorably with a loss of 46 cents reported in the prior-year quarter.

M&T Bank Corporation MTB reported first-quarter 2021 positive earnings surprise of 15%. Net operating earnings per share of $3.41 beat the Zacks Consensus Estimate of $2.96. Also, the bottom line compared favorably with the $1.95 per share reported in the year-ago quarter.

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Comerica Incorporated (CMA) : Free Stock Analysis Report

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