Synovus Financial Corp (NYSE: SNV ) reported its third quarter 2024 results with GAAP earnings per share of $1.18 and adjusted diluted EPS up 6% sequentially to $1.23. The increase is attributed to higher net interest income and lower provisions for credit losses.
Key points:
- Net interest margin of 3.22%
- Net interest income increased 1% to $441 million
- Adjusted non-interest income increased 15% year-over-year
- Loans at the end of the period increased by $27 million
- Core deposits increased by 1%
- The Tier 1 capital ratio reached 10.65%, the highest level in nine years
- Approximately $100 million in stock repurchases completed during the quarter
Company Outlook
- Projects stable end-of-year loans in the 4th quarter
- Expect core deposit growth between 1% and 3% in Q4
- Q4 adjusted revenue forecast between $560 million and $575 million
- Adjusted Q4 non-interest expense forecast between $305 million and $310 million
- Expected tax rate between 21% and 22%
- Expect more typical loan growth in 2025
Bearish point
- The loan utilization rate stabilized at 47% compared to 53% the previous year
- Non-performing loans rose to 0.73 per cent.
- Continued decline in non-interest-bearing deposits
Bullish points
- Net credit losses improved to 25 basis points
- Strong performance in asset management
- Growth in core deposits has outpaced loan growth for five consecutive quarters
- Additional growth potential of $1 billion if loan utilization normalizes
Missing
- Capital markets revenues fell from previous highs
Highlights from the Q&A session
- Management expects loan growth to exceed GDP growth by 100 to 200 basis points
- Expect higher spending growth in 2025 as we pursue growth opportunities
- Focuses on organic growth rather than acquisitions in the current market environment
- Expect a 15 basis point impact on margin due to the revision of fixed-rate loan rates in 2025
Synovus Financial Corp reported a stable quarter with improvements in key financial indicators. The company’s CEO, Kevin Blair, highlighted the community’s resilience after recent hurricanes and expressed confidence in the bank’s growth strategy for 2025. Despite macroeconomic uncertainty, Synovus remains committed to strategic balance sheet management and improving shareholder value.
The bank’s lending portfolio showed modest growth, with loan production rising 8% sequentially. Core deposits rose 1%, while brokered deposits fell for the fifth consecutive quarter. Synovus maintained a strong capital position, with the Tier 1 capital ratio reaching its highest level in nine years at 10.65%.
For the fourth quarter, Synovus expects stable lending at the end of the period and core deposit growth of between 1% and 3%. The company provided adjusted revenue guidance of $560 million to $575 million for the 4th quarter with an expected stable net interest margin.
Management cited the potential for normalized loan growth in 2025, citing factors such as increased transaction activity and business expansion in the Southeast. They also noted a slight stabilization of commercial bank balances despite the continued decline in non-interest bearing deposits.
Synovus executives emphasized their focus on organic growth and improving customer service rather than pursuing acquisitions in the current market environment. They forecast that loan growth will outpace GDP growth by 100 to 200 basis points and aim for loan growth of 4% to 5% if GDP stabilizes around 2% to 3%.
The Company’s strategy for managing deposits and lending rate assessments aims to maintain stability for customers as they navigate market conditions. Synovus expects to review deposit rates in the second and third quarters of 2025 with an expected margin impact of 15 basis points due to the review of the fixed rate.
In conclusion, Synovus Financial Corp demonstrated its resilience in its third quarter performance and outlined a cautiously optimistic outlook for the coming quarters, balancing growth opportunities with prudent risk management in an uncertain economic environment.
InvestingPro Insights
Synovus Financial Corp’s (NYSE: SNV ) recent performance and outlook can be further contextualized with additional data from InvestingPro. The company’s market cap is $6.87 billion, reflecting its significant presence in the financial sector.
Leading consultancy InvestingPro highlights that Synovus has maintained dividend payments for 51 consecutive years, underscoring the company’s commitment to shareholder returns even in challenging economic environments. This is consistent with the $100 million in share repurchases reported by the company during the quarter and supports management’s focus on improving shareholder value.
The current yield is 2.99%, which may be attractive to income-oriented investors, especially given the company’s long history of consistent payouts. This return, combined with the company’s strong capital position – as evidenced by the highest core capital ratio in nine years – suggests a balance between growth and shareholder returns.
InvestingPro data shows that Synovus has experienced a remarkable total price return of 95.62% over the past year, significantly outperforming the broader market. This performance is consistent with reported improvements in the company’s key financial indicators and may reflect investor confidence in the bank’s strategy and execution.
However, it is worth noting that the stock trades at a P/E ratio of 30.96, which is considered high for the banking industry. This valuation can be attributed to recent strong results and positive outlook, but it also suggests that investors expect continued growth and improved profitability.
Trailing 12 month revenue through Q2 2024 was $1.69 billion, with an operating income margin of 29.97%. These numbers provide context to the company’s Q3 performance and its Q4 adjusted revenue guidance of between $560 million and $575 million.
For investors seeking a deeper understanding of Synovus Financial Corp’s potential, InvestingPro offers 12 additional tips that can provide valuable insight into the company’s financial health and market position.
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