Zacks_Analysts' Blog : Synovus Trims Losses but Lags Ests - Analyst Blog

Synovus Financial Corp. (SNV) reported third quarter 2010 loss of 25 cents per share, a significant improvement from the loss of $1.32 per share reported in the prior-year quarter. However, the quarter’s earnings missed the Zacks Consensus Estimate of a loss of 22 cents.



Net loss decreased to $195.8 million from $453.8 million in the prior year quarter. The recovery is attributed to improved credit trends with a significant decline in credit costs and stable core performance.

Quarter in Detail



Net interest income decreased 3.6% to $245.5 million from $254.6 million in the year-ago period and also declined 1.8% from $250.0 million in the prior quarter. Net interest margin was 3.33%, approximately in line with 3.34% in the prior quarter.

Synovus’ interest expenses also decreased 7.6% sequentially and 33.6% year over year to $81.0 million.

Non-interest income declined 5.2% to $81.8 million from $86.2 million in the year-ago period. The decline was attributed to a decrease in fee income, brokerage and investment banking income, fiduciary and asset management fees and service charges on deposit accounts, partially offset by an upswing in mortgage banking income, bankcard income and other non-interest income.

Total revenue decreased 4% to $327.3 million from $340.8 million in the year-ago period. However, revenue surpassed the Zacks Consensus Estimate of $322.0 million.



Total non-interest expenses decreased 15.1% year over year to $269.0 million. The decline was primarily attributable to lower foreclosed real estate expense, data processing expense and other operating expenses, partially offset by higher salaries and other personnel expense, professional fees, FDIC insurance and other regulatory fees, and net occupancy and equipment expense.

Total credit costs decreased 15% to $301.0 million from $353.0 million in the previous quarter.

Capital Position

As of September 30, 2010, Tier 1 capital ratio, Tier 1 common equity ratio and tangible common equity/tangible assets ratio decreased to 13.1%, 9.1% and 7.3% from 13.3%, 9.5% and 7.6% in the second quarter of 2010.

At the end of the reported quarter, total nonperforming assets were down 1% sequentially and 11% year over year to $1.6 billion, impacted by lower inflows, asset dispositions and charge-offs. Net charge-offs decreased $196 million sequentially to $237 million.

Synovus’ closest competitor, SunTrust Banks Inc. (STI), reported an income of $84 million for the third quarter of 2010.

Our Take

We believe Synovus is in a recovery phase, reflected by lower nonperforming assets and improving operating efficiencies, which should render the company profitable in the upcoming quarters.

Synovus currently retains its Zacks #3 Rank, which translates to a short-term Hold rating. Considering the fundamentals, we are maintaining a Neutral recommendation on the stock.