Fitch has upgraded its rating outlook on Synovus
Financial Corporation ( SNV ) and its
subsidiaries from 'Negative' to 'Positive.' Moreover, the rating
agency has affirmed the Issuer Default Ratings (IDRs) - long-term
as well as short-term - for the company.
The rating agency reviewed Synovus under a peer review that
included 16 mid-tier regional banks including Associated
Banc-Corp ( ASBC ), BOK
Financial Corporation ( BOKF ) and
TCF Financial Corporation ( TCB ).
Rationale Behind Upgrade
The rating revision came on the back of constantly improving
asset quality metrics of the company. Fitch stated that the credit
risk of the company has stabilized and the company is persistently
looking to trim down the high levels of problem credits in the near
term. Further, Fitch believes that the company's strong capital
base is adequate to absorb credit losses in the future.
Further, the affirmation of ratings reflected the company's
elevated levels of non-performing assets (inclusive of accruing
TDRs) as well as a future outlook of weak earnings.
Fitch commented that the company's initiatives to lower the high
risk profile and stabilize its balance sheet by loan sales, loan
workouts and raising of equity have made modest progress. These are
anticipated to lead to improved operating results in the upcoming
quarters. Further, deferred tax asset (DTA) reversal of $800
million considerably enhanced core capital levels at the end of
However, Fitch warned that compared with other higher credit
rated banks in the peer group, Synovus' credit quality was
distinctly inferior. Therefore, core earnings will be substandard
compared with peer companies due to higher credit costs
pressurizing the bottom line.
This rating outlook revision depicts creditworthiness of the
company and will instill investors' confidence. Further, lower
non-performing assets and improving operating efficiencies will
help the stock sustain investors' interest.
However, we are concerned about the impacts of the prevailing
low interest rate environment, sluggish economic growth and
stringent regulatory landscape on the company's financials in the
Synovus carries a Zacks Rank #3 (Hold).ASSOC BANC CORP (ASBC): Free Stock Analysis
ReportBOK FINL CORP (BOKF): Free Stock Analysis
ReportSYNOVUS FINL CP (SNV): Free Stock Analysis
ReportTCF FINL CORP (TCB): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment