Synovus' (SNV) Q4 Earnings Top Estimates on Solid Fee Income

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Synovus Financial SNV delivered fourth-quarter 2020 adjusted earnings of $1.08 per share, handily beating the Zacks Consensus Estimate of 82 cents, aided by solid fee income. Also, the reported figure comes in 15% higher than the prior-year quarter tally.

Results were driven by rising fee income and lower provisions, raising investors’ optimism which resulted in a price rally of 3.14%, post release. Moreover, strong deposit and loan balances stoked organic growth. However, upswing in expenses and lower net interest income were undermining factors.

Including certain non-recurring items, net income available to common shareholders came in at $142.1 million or 96 cents per share compared with the $143.4 million or 97 cents recorded in the prior-year quarter.

For full-year 2020, net income available to common shareholders was $340.5 million or $2.30 per share, significantly down from the prior year’s $540.9 million or $3.47. Results, however, outpaced the Zacks Consensus Estimate of $2.14.

Net Interest Income Down, Non-Interest Income Up, Expenses Escalate

For full-year 2020, total revenues (fully tax-equivalent) were $2.02 billion, up 3.6% from the year-ago period. Revenues also outpaced the Zacks Consensus Estimate of $1.97 billion.

Total revenues (fully tax-equivalent) in the fourth quarter came in at $501.5 million, up marginally from the prior-year quarter. Also, the top-line figure surpassed the Zacks Consensus Estimate of $482 million.

Net interest income declined 3.3% year on year to $386.8 million. Additionally, net interest margin shrunk 53 basis points (bps) year over year to 3.12%.

Non-interest income climbed 17% on a year-over-year basis to $114.8 million. Substantial rise in mortgage banking, income from bank-owned life insurance and other income drove this upside. These were partly offset by lower service charges on deposit accounts and capital markets income.

Non-interest expenses came in at $302.5 million, up 14% year on year. This upswing mainly resulted from higher salaries and other personnel expense, net occupancy and equipment expense, and professional fees, partly offset by lower FDIC insurance and other regulatory fees, third-party processing and other services, amortization of intangibles and other expenses.

Adjusted efficiency ratio came in at 60.32% as compared with the 53.44% reported in the year-earlier quarter. A rise in ratio indicates a deterioration in profitability.

Total deposits came in at $46.7 billion, up 4.5% sequentially. Yet, total loans slid 3% sequentially to $38.3 billion.

Credit Quality: A Mixed Bag

Credit metrics were a mixed bag for Synovus during the December-end quarter.

Non-performing loans surged 49% year over year to $151.1 million. The non-performing loan ratio came in at 0.39%, up 12 bps year over year.

Total non-performing assets amounted to $192.1 million, underlining a year-on-year jump of 40%. The non-performing asset ratio expanded 13 bps year over year to 0.50%.

Net charge-offs more than doubled on a year-over-year basis to $22.1 million. The annualized net charge-off ratio was 0.23%, up 13 bps from the year-earlier quarter. However, provision for loan losses plummeted 55% from the prior-year quarter to $11.1 million.

Robust Capital Position

Tier 1 capital ratio and total risk based capital ratio were 10.95% and 13.43%, respectively, compared with 10.23% and 12.25% as of Dec 31, 2019.

Moreover, as of Dec 31, 2020, Common Equity Tier 1 Ratio (fully phased-in) was 9.67% compared with the 8.95% witnessed in the year-ago quarter. Tier 1 Leverage ratio was 8.50% compared with the 9.16% recorded in the year-earlier period.

Return on average assets was 1.11% compared with the prior-year quarter’s 1.27%. Return on average common equity was 12.31%, down from the 13.08% seen in the prior-year quarter.

Capital Deployment Update

The bank’s board of directors authorized a share-repurchase program of up to $200 million of the company’s common stock in 2021.

Our Take

Synovus reported decent results for the October-December quarter. We believe the company’s focus on both organic and inorganic growth, together with its cost-containment efforts, will pay off and aid its bottom-line expansion in subsequent years. Though reduction in net interest income amid low rates raises concerns, a 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 sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance of Other Banks

TCF Financial Corporation TCF reported fourth-quarter 2020 adjusted earnings per share of 75 cents, beating the Zacks Consensus Estimate by 4 cents. The figure, however, decreased 16.7% from the prior-year quarter. Disciplined cost management aided the bank’s quarterly performance. Also, the company witnessed decent loans and deposits balance. Moreover, lower provisions were on the upside. However, margin pressure and lower fee income were undermining factors.

Texas Capital Bancshares TCBI reported adjusted earnings per share of $1.14 in the fourth quarter, inching past the Zacks Consensus Estimate of $1.13. Nevertheless, results compared unfavorably with the prior-year quarter’s $1.23. Rise in fee income and lower expenses were driving factors. Yet, fall in net interest income along with pressure on margin were deterrents. Further, results reflect decline in both loans and deposit balances. In addition, provision for credit losses escalated.

First Republic Bank FRC delivered an earnings surprise of 5.3% for the October-December period on solid top-line strength. Earnings per share of $1.60 exceeded the Zacks Consensus Estimate of $1.52. Additionally, the bottom line climbed 15.1% from the year-ago quarter. Results were supported by an increase in net interest income and fee income. Furthermore, the company’s balance-sheet position was strong during the quarter. Nonetheless, higher expenses and elevated provisions were offsetting factors.

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