Following Synovus Financial’s SNV third-quarter 2019 results, its shares have declined 6%. The company reported adjusted earnings of 97 cents per share lagging the Zacks Consensus Estimate of $1. However, the bottom line was 2.9% higher than the prior-year quarter figure.
Escalating expenses and provisions were undermining factors. Also, deterioration of credit quality was a headwind. However, higher revenues, backed by strong loan balances, stoked organic growth. Lower efficiency ratio and rising fee income were other positives.
Including certain non-recurring items, net income available to common shareholders came in at $127.4 million or 83 cents per share compared with $99.3 million or 84 cents per share recorded in the prior-year quarter.
Top Line Robust, Expenses Flare Up
Adjusted total revenues in the third quarter came in at $494.2 million, up 36.2% year over year. Further, the top line outpaced the Zacks Consensus Estimate of $488.1 million.
Net interest income surged 37.9% year over year to $402.1 million. Yet, net interest margin shrunk 20 basis points (bps) to 3.69%.
Non-interest income climbed 23.8% to $88.8 million, including a favorable adjustment in the fair value of private equity investments. Rise in almost all components of income drove this upside.
Non-interest expenses were $276.3 million, flaring up 25.4% year over year. Notably, rise in almost all components of expenses resulted in this increase.
Adjusted efficiency ratio came in at 51.71% compared with 55.55% reported in the year-earlier quarter. A decline in ratio indicates improvement in profitability.
Total deposits totaled $37.4 billion, decreasing 1.4% sequentially. Total loans, however, climbed slightly from the prior quarter to $36.4 billion.
Credit Quality Worsens
Credit quality deteriorated for Synovus in the September quarter.
Non-performing loans were up 6.9% year over year to $115.9 million. Non-performing loan ratio came in at 0.32%, contracting 10 bps.
Total non-performing assets amounted to $151.3 million, rising 29.4% year over year. Non-performing asset ratio shrunk 4 bps to 0.42%.
Net charge-offs rose 30.6% on a year-over-year basis to $19.9 million. The annualized net charge-off ratio was 0.22%, down 2 bps. Provision for loan losses was up 84% to $27.6 million.
Strong Capital Position
Tier 1 capital ratio and total risk-based capital ratio were 10.27% and 12.30%, respectively, compared with 10.57% and 12.36% as of Sep 30, 2018.
Also, as of Sep 30, 2019, Common Equity Tier 1 Ratio (fully phased-in) was 8.96% compared with 9.90% in the year-ago quarter. Tier 1 Leverage ratio was 9.02% compared with 9.58% recorded a year ago.
Capital Deployment Update
During the quarter, the company repurchased $343.5 million in common stock or 9.6 million shares.
Synovus’ results were unimpressive in the September-ended quarter. Also, deteriorating credit quality and escalating expenses remain concerns. However, 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. Nevertheless, decline in rates might impede top-line growth.
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 #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
State Street’s STT third-quarter 2019 adjusted earnings of $1.51 per share beat the Zacks Consensus Estimate of $1.40. However, the figure was 19.3% below the prior-year quarter level.
People's United Financial Inc. PBCT reported third-quarter 2019 operating earnings of 34 cents per share, which surpassed the Zacks Consensus Estimate by a penny. Also, the bottom line increased 3% year over year.
Riding on strong growth in mortgage banking fees, Citizens Financial Group CFG delivered a positive earnings surprise of 2.1% in third-quarter 2019. Adjusted earnings per share came in at 98 cents, beating the Zacks Consensus Estimate of 96 cents. Also, the bottom line jumped 5% year over year.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
State Street Corporation (STT) : Free Stock Analysis Report
Synovus Financial Corp. (SNV) : Free Stock Analysis Report
Citizens Financial Group, Inc. (CFG) : Free Stock Analysis Report
People's United Financial, Inc. (PBCT) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research