Synovus Financial Corp.
) completed the bulk sale of its distressed assets. The selling
process was initiated on Dec 10 with an aim to reduce balance
Inclusive of the aforementioned sale, the company anticipates
vending distressed assets worth roughly $530 million in the
fourth quarter of 2012. This will involve roughly $400 million of
non-performing assets, $110 million in accruing substandard rated
loans, along with $20 million of loans rated special
The company anticipates incurring a pre-tax charge of $155
million in the fourth quarter as a result of these sales. The
Georgia-based lender also anticipates that its deferred tax asset
valuation allowance of $787 million will be reversed anytime
between the end of the fourth quarter of 2012 and the second
quarter of 2013.
Subsequent to the reversal, Synovus will be allowed to make
the repayment of bailout funds it received under the Troubled
Asset Relief Program (TARP). The company was burdened with
approximately $1 billion of bailout since it was having
difficulties with bad loans, which plagued it during the housing
crisis. The company anticipates repaying of the TARP funds
anytime as early as the second quarter of 2013 and not after the
fourth quarter of 2013.
Many banks sell their distressed and troubled real estate
mortgages in order to get rid of these loss-making investments.
Investors try to purchase these loans at a discount and often
foreclose principal properties for sale or
Management at Synovus believes that the sale of distressed
assets is a pivotal and tactical step in its efforts to further
reinforce the balance sheet, enhance credit quality, and improve
earnings in the future.
We believe that the restructuring initiatives taken by Synovus
will be a key growth driver over time. Moreover, lower
non-performing assets and improving operating efficiencies should
make the company more profitable in the upcoming quarters.
Nevertheless, the sluggish macroeconomic environment and
stringent regulations make us cautious.
Synovus currently retains a Zacks #3 Rank, which translates to
a short-term Hold rating. However, one of its peers,
Cardinal Financial Corp.
), retains a Zacks #1 Rank (a short-term Strong Buy rating).
CARDINAL FINL (CFNL): Free Stock Analysis
SYNOVUS FINL CP (SNV): Free Stock Analysis
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