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Synovus (SNV) Q1 Earnings Beat, Revenues Miss, Stock Down 3.7%

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Synovus Financial SNV reported first-quarter 2022 adjusted earnings of $1.08 per share, which beat the Zacks Consensus Estimate of $1.03. The bottom line compares unfavorably with earnings of $1.21 per share recorded in the year-ago quarter.

Results were supported by higher revenues, driven by rising net interest income (“NII”). Solid loan balances stoked organic growth. Shrinking net interest margin ("NIM"), deposits balance, and rising expenses were the undermining factors. Reflecting these factors, shares of SNV were down 3.7% on the announcement of earnings.

Net income available to common shareholders came in at $162.7 million or $1.11 per share, down from $178.8 million or $1.19 per share recorded in the prior-year quarter.

Revenues & Expenses Rise

Total revenues in the first quarter came in at $497.5 million, up 2.6% from the prior-year quarter. The top line missed the Zacks Consensus Estimate of $499.8 million.

NII improved 5% year over year to $392.2 million. NIM shrunk 4 basis points to 3%.

Non-interest revenues decreased 5% on a year-over-year basis to $105.3 million. Fall in mortgage banking income, resulting from increasing mortgage rates and lower refinancing volumes, primarily led to this downside.

Non-interest expenses were $272.5 million, up 2% year on year. This upside mainly resulted from rise in incentives and costs associated with elevated performance.

Adjusted tangible efficiency ratio came in at 55.5% compared with 54.12% reported in the year-earlier quarter. A rise in this ratio indicates a decrease in profitability.

Total loans showed a 2% improvement sequentially, coming in at $40.17 billion. Total deposits came in at $48.66 billion, down 2% sequentially.

Credit Quality Improved

Synovus’ credit metrics were strong during the March-end quarter.

Non-performing loans fell 15% year over year to $132.1 million. Net charge-offs decreased 8% to $18.6 million. The net charge-off ratio was 0.19% compared with the year-ago quarter’s 0.21%.

Total non-performing assets amounted to $158.9 million, underlining 19% year-over-year fall. Non-performing asset ratio came in at 0.4%, shrinking 10 bps from the prior-year quarter.

However, provision for credit losses of $11.4 million was recorded in the first quarter against the reversal of $18.6 million in the prior-year quarter.

Weak Capital Position & Profitability Ratios

Tier 1 capital ratio and total risk-based capital ratio were 10.60% and 12.53%, respectively, down from 10.99% and 13.34% as of Mar 31, 2021. Moreover, as of Mar 31, 2022, Common Equity Tier 1 capital ratio was 9.47%, declining from 9.74% witnessed in the year-ago quarter.

Tier 1 leverage ratio was 8.87%, improving from 8.80% recorded in the year-earlier period.

Return on average assets was 1.22%, down from the prior-year quarter’s 1.40%. Return on average common equity was 14.20%, down from the prior-year quarter’s 15.77%.

Our Take

Though there has been a reduction in SNV’s net interest margin while its expenses have increased in the reported quarter, the company has grown organically with rising revenues and loan balances. Improving credit quality will also bode well for the company.

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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

The PNC Financial Services Group, Inc. PNC pulled off a first-quarter 2022 earnings surprise of 18.4% on substantial recapturing of credit losses. Earnings per share of $3.29, on an as-adjusted basis (excluding pre-tax integration costs related to the BBVA USA acquisition), surpassed the Zacks Consensus Estimate of $2.78. The bottom line decreased 20% year over year.

Higher NII, driven by interest-earning assets and loan growth, were tailwinds for PNC Financial while higher expenses and a decline in deposits dragged results.

U.S. Bancorp USB reported first-quarter 2022 earnings per share of 99 cents, which beat the Zacks Consensus Estimate of 93 cents. However, results do not compare favorably with the prior-year quarter’s figure of $1.45.

U.S. Bancorp’s results were supported by an increase in revenues, loan growth and lower non-performing assets. USB’s capital position was decent in the quarter while higher expenses and elevated provision for credit losses were the offsetting factors.

First Republic Bank’s FRC first-quarter 2022 earnings per share of $2 have surpassed the Zacks Consensus Estimate of $1.90. Additionally, the bottom line improved 11.7% from the year-ago quarter.

FRC’s results were supported by an increase in NII and non-interest income. The company’s capital position was strong in the quarter. Higher expenses and elevated provision for credit losses were the offsetting factors.


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