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Synovus (SNV) Stock Up 3.56% on Q3 Earnings & Revenue Beat

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Synovus Financial SNV reported third-quarter 2021 adjusted earnings of $1.20 per share, which beat the Zacks Consensus Estimate of $1.07 per share, aided by solid revenues. Also, the bottom line compares favorably with the earnings of 89 cents per share recorded in the year-ago quarter.

Results were driven by rising net interest and fee income, lower expenses, as well as reversal of provisions, raising investors’ optimism. This resulted in a price rally of 3.6% post release. Solid loan and deposit balances stoked organic growth. However, shrinking net interest margin was the undermining factor.

Including certain non-recurring items, net income available to common shareholders came in at $178.5 million or $1.21 per share compared with the $83.3 million or 56 cents per share recorded in the prior-year quarter.

Revenues Rise, Expenses Down, Loans and Deposits Up

Total revenues in the third quarter came in at $499.87 million, up 1.7% from the prior-year quarter. Also, the top line outpaced the Zacks Consensus Estimate of $488.03 million.

Net interest income inched up 2% year over year to $384.9 million. However, net interest margin shrunk 11 basis points (bps) to 3.02%.

Non-interest income increased marginally on a year-over-year basis to $114.9 million. Rise in all components, except mortgage banking income, capital markets income and net investment securities losses, led to this upside.

Non-interest expenses were $267 million, down 16% year on year. This downside mainly resulted from all components other than a rise in net occupancy, equipment, and software expenses.

Adjusted tangible efficiency ratio came in at 52.96% compared with 53.83% reported in the year-earlier quarter. A fall in this ratio indicates an improvement in profitability.

Total deposits came in at $47 billion, up 1.1% sequentially. Moreover, total loans showed a marginal improvement sequentially, coming in at $38.3 billion.

Improved Credit Quality

Synovus’ credit metrics witnessed a robust performance during the September-end quarter.

Non-performing loans fell 8% year over year to $155.5 million. Net charge-offs decreased 28% to $20.5 million. The annualized net charge-off ratio was 0.22% compared with the year-ago quarter’s 0.29%.

Further, reversal of provision for credit losses of $7.9 million was recorded in the third quarter against provision expenses of $43.4 million in the prior-year quarter.

Total non-performing assets amounted to $172.4 million, underlining a 10.3% year-over-year fall. Non-performing loan ratio came in at 0.45%, shrinking 4 bps sequentially.

Mixed Capital Position

Tier 1 capital ratio and total risk-based capital ratio were 10.83% and 12.96%, respectively, compared with 10.57% and 13.16% as of Sep 30, 2020.

Moreover, as of Sep 30, 2021, Common Equity Tier 1 Ratio (fully phased-in) was 9.63% compared with 9.3% witnessed in the year-ago quarter. Tier 1 Leverage ratio was 8.82% compared with 8.48% recorded in the year-earlier period.

Return on average assets was 1.34% compared with the prior-year quarter’s 0.69%. Return on average common equity was 14.96%, up from the prior-year quarter’s 7.28%.

Our Take

Synovus put up a decent show in the July-September 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 subsequent years. Though there has been a reduction in net interest margin, improving expenses are 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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Bank of America’s BAC third-quarter 2021 earnings of 85 cents per share beat the Zacks Consensus Estimate of 71 cents. The bottom line compared favorably with 51 cents earned in the prior-year quarter. Results in the quarter included a reserve release of $1.1 billion.

Robust advisory business, reserve release and a modest rise in demand for loans drove JPMorgan’s JPM third-quarter 2021 earnings of $3.74 per share. The bottom line outpaced the Zacks Consensus Estimate of $3.00.

First Republic Bank FRC delivered an earnings surprise of 4.4% in third-quarter 2021 on solid top-line strength. Earnings per share of $1.91 surpassed the Zacks Consensus Estimate of $1.83. The bottom line improved 18.6% from the year-ago quarter’s figure.


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