Synovus (SNV) Stock Dips 1% as Q4 Earnings Miss Estimates
Shares of Synovus Financial Corp. SNV lost 1% in the after-market trading, following the company’s lower-than-expected fourth-quarter 2023 results. SNV reported fourth-quarter adjusted earnings per share of 80 cents, which lagged the Zacks Consensus Estimate of 94 cents. Also, adjusted earnings compared unfavorably with $1.35 earned in the year-ago quarter.
Results were adversely affected by a decline in both net interest income (NII) and non-interest revenues. A slight reduction in loan balances and increased expenses and provisions were other undermining factors. However, a modest increase in deposits provided some support.
After considering non-recurring items, net income available to common shareholders was $60.6 million, plunging 69% from the prior-year quarter.
In 2023, adjusted earnings per share were $4.12, which declined 16% from the previous year and missed the Zacks Consensus Estimate of $4.26. Net income available to common shareholders (GAAP) was $507.8 million, down 30% year over year.
Revenues Fall & Expenses Rise
Total revenues in the fourth quarter were $488.7 million, down 19% from the prior-year quarter. The top line lagged the Zacks Consensus Estimate of $527.6 million.
In 2023, total revenues were $2.22 billion, up marginally from 2022. The top line, however, missed the Zacks Consensus Estimate of $2.25 billion.
NII fell 13% year over year to $437.2 million. This was primarily due to a fall in average earnings assets and higher funding costs. Net interest margin declined 45 basis points (bps) to 3.11%.
Non-interest revenues decreased 50% to $51.5 million. The main reason behind the decline was securities losses of $78 million in the reported quarter.
Non-interest expenses were $352.9 million, up 14% year over year. The rise was mainly due to the FDIC special assessment charge of $51 million.
The adjusted tangible efficiency ratio was 61.97%, up from 50.58% in the year-earlier quarter. A rise in the efficiency ratio indicates a decrease in profitability.
As of Dec 31, 2023, total loans of $43.4 billion decreased 1% from the previous quarter. Total deposits were $50.7 billion, which increased 1% from the previous quarter.
Credit Quality Worsens
Non-performing loans were $288.2 million, increasing significantly from $128.1 million in the year-ago quarter. Total non-performing assets amounted to $288.2 million, which rose substantially from $143.4 million in the year-ago period. The non-performing assets ratio was 0.66%, up 33 bps.
Net charge-offs increased significantly to $41.6 million from $13.3 million in the prior-year quarter. The net charge-off ratio was 0.38%, up 26 bps.
Provision for credit losses was $45.5 million, which increased 30% year over year.
Capital Ratios Improve, Profitability Ratios Deteriorate
As of Dec 31, 2023, the Tier 1 capital ratio and total risk-based capital ratio were 11.28% and 13.01%, respectively, compared with 10.68% and 12.54% in the year-ago quarter. As of the same date, the Common Equity Tier 1 capital ratio was 10.22%, up from 9.63% in the year-ago quarter.
The Tier 1 leverage ratio was 9.49%, which improved from 9.07% in the year-earlier period.
Return on average assets was 0.47%, down from 1.38% in the prior-year quarter. Return on average common equity was 5.9%, down from 20.9% in the year-earlier quarter.
Our Take
Elevated expense levels and rising provisions, along with reduced loan balances, are the major concerns for Synovus Financial. However, decent growth in revenues and a slightly higher deposit balance will continue to support its finances in the upcoming period.
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
Hancock Whitney Corp.’s HWC fourth-quarter 2023 adjusted earnings per share of $1.26 beat the Zacks Consensus Estimate of $1.08. Adjusted earnings per share, however, compared unfavorably with $1.65 earned in the year-ago quarter.
HWC’s results were impacted by a decline in both NII and non-interest income. Further, a slight decrease in loan balances and an increase in expenses and provisions acted as spoilsports.
WaFd, Inc.’s WAFD first-quarter fiscal 2024 (ended Dec 31) earnings of 85 cents per share surpassed the Zacks Consensus Estimate of 72 cents. However, the bottom line declined 26.7% year over year.
WAFD’s results primarily benefited from the rise in other income and steady loan balance. In the reported quarter, the company did not record any provision for credit losses. However, a fall in NII and an increase in other expenses acted as spoilsports.
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