Synovus Financial Corporation
) reported its fourth-quarter 2012 adjusted net loss of 10 cents
per share, in line with the Zacks Consensus Estimate. However,
results compares unfavorably with earnings of 2 cents per share
in the prior quarter.
Including an income tax benefit of roughly $800 million from
the recapture of substantially all of the deferred tax asset
valuation allowance, net income available to common shareholders
came in at $712.8 million. This compared favorably with net
income of $16.0 million in the last quarter or 2 cents per share
recorded in the last quarter.
For 2012, the company reported a net loss of 3 cents, in line
with the Zacks Consensus Estimate. However, this compares
favorably with a loss of 15 cents in 2011.
The company's performance was buoyed by strong capital ratios
and improved non-interest income. Yet, lower revenue and elevated
expenses were the downsides.
Performance in Detail
Total revenue declined marginally to $320.1 million from
$320.9 million in the preceding quarter. The decrease resulted
from lower interest income, partly offset by higher non-interest
income. However, revenue surpassed the Zacks Consensus Estimate
of $280.0 million.
For the year 2012, Synovus recorded total revenue of $1.3
billion, down from $1.5 billion in 2011. However, it surpassed
the Zacks Consensus Estimate of $1.1 billion.
Net interest income decreased 2.3% to $207.5 million from
$212.3 million in the prior quarter, primarily due to lower
Moreover, net interest margin was 3.45%, down 6 basis points
(bps) sequentially, due to a decline in the yield on earning
assets of ten basis points, partially offset by a 4 basis-point
decline in the effective cost of funds.
Non-interest income climbed 9.4% to $80.1 million in the
quarter from $73.2 million in the prior quarter. The rise was
primarily due to higher bankcard fees, higher investment
securities gains, higher brokerage revenue, elevated other fee
income along with an increase in fair value of private equity
investments. These positives were partially offset by a drop in
mortgage banking income and other non-interest income.
Total non-interest expenses jumped 11.4% sequentially to
$213.3 million. The rise was mainly due to higher salaries and
other personnel expenses along with elevated foreclosed real
For Synovus, credit quality remained mixed during the reported
quarter. Net charge-offs were $193.5 million, substantially up
from $96.5 million in the prior quarter. Moreover, the annualized
net charge-off ratio was 3.94%, up from 1.97% in the prior
Non-performing loan inflows were $262.7 million, up
substantially from $114.8 million in the third quarter of 2012.
Additionally, non-performing loans, excluding loans held for
sale, were $543.3 million as of Dec 31, 2012, down 22.4% from the
prior quarter. The non-performing loan ratio was 2.78%, down from
3.55% as of Sep 30, 2012.
Total non-performing assets were $703.1 million, down 21.8%
sequentially. The non-performing asset ratio was 3.57% compared
with 4.51% in the prior quarter. Total delinquencies (consisting
of loans 30 or more days past due and still accruing) were 0.54%
of total loans, down from 0.55% as of Sep 30, 2012.
Total deposits, as of Dec 31, 2012, were $21.1 billion, up
1.0% from $20.8 billion in the prior quarter. The increase
reflected a hike in Negotiable Order of Withdrawal (NOW) account
balances as well as non-interest bearing demand deposits.
Core deposits, at the end of the quarter were $20.0 billion,
up $37.4 million from the prior quarter. Core deposits, excluding
time deposits, increased $225.2 million compared to the previous
The effective cost of core deposits (includes non-interest
bearing deposits) continued to decline, with an effective cost of
30 basis points for the fourth quarter of 2012, down from 34
basis points for the previous quarter.
Total reported loans inched down 1.0% to $19.2 billion,
attributable to distressed loan sales of roughly $475
As of Dec 31, 2012, Tier 1 capital ratio and Tier 1 common
equity ratio were 13.24% and 8.72%, respectively, compared with
prior quarter's ratios of 13.23% and 8.73%. Moreover, Tier 1
leverage ratio improved to 11.00% from 10.97% in the prior
We believe that Synovus is in a recovery phase, driven by
lower non-performing assets and improving operating efficiencies,
which should make the company profitable in the upcoming
quarters. Furthermore, the company's planned expense-saving
initiatives will act as a positive catalyst. However, repayment
of funds, generated through Troubled Asset Relief Program (TARP),
is unlikely to take place in the near term.
Shares of Synovus currently retain a Zacks Rank #3 (Hold).
However, other South-east banks, which are worth considering,
Pinnacle Financial Partners Inc.
) - each carrying a Zacks Rank #1 (Strong Buy).
FIRST BCP-NC (FBNC): Free Stock Analysis
IBERIABANK CORP (IBKC): Free Stock Analysis
PINNACLE FIN PT (PNFP): Free Stock Analysis
SYNOVUS FINL CP (SNV): Free Stock Analysis
To read this article on Zacks.com click here.