Synovus Financial Corp. ( SNV )
reported second-quarter 2012 net income of 3 cents per share,
beating the Zacks Consensus Estimate by a penny. Moreover, the
quarter's results marked a significant improvement from the loss of
7 cents per share reported in the year-ago quarter.
The robust performance was buoyed by improved credit trends with a
significant decline in credit costs along with continued expense
control. Yet, lower revenue aided by reduced net interest income
was a dampener.
Net income was $24.8 million against a net loss of $53.5 million
in the prior-year quarter.Performance in Detail
Total revenue dropped 7.2% to $330.3 million from $355.9 million
in the year-ago period. The decrease mainly resulted from lower
interest income. However, revenue surpassed the Zacks Consensus
Estimate of $286.0 million.
Net interest income decreased 7.6% to $213.4 million from $231.0
million in the year-ago period, primarily due to lower interest
income. Net interest margin was 3.48%, down 3 basis points (bps)
year over year.
However, non-interest income increased 12.7% to $76.5 million in
the quarter from $67.8 million in the year-ago period, boosted by
increased mortgage revenue and higher other non-interest revenue.
These increases were partially offset by lower bankcard fees and
reduced service charges on deposit accounts.
Total non-interest expenses dropped 6.4% year over year to $208.3
million. The drop in expenses was mainly due to lower FDIC
insurance and other regulatory fees, reduced foreclosed real estate
expenses, decreased net occupancy and equipment expense coupled
with low restructuring charges. Yet, these decreases were partially
offset by higher salaries and other personnel expenses. Total
credit costs substantially dropped 55.5% to $70.3 million from
$157.9 million in the prior-year quarter.Credit Quality
For Synovus, credit quality improved significantly during the
quarter. Net charge-offs were $98.7 million, down 41.0% from $167.2
million in the prior-year quarter. Moreover, the annualized net
charge-off ratio was 1.99%, down from 3.22% in the prior-year
Non-performing loan inflows were $124.3 million, reflecting a
46.2% plunge from $231.1 million in the comparable quarter last
year. Additionally, non-performing loans, excluding loans held for
sale, were $755.2 million as of June 30, 2012, down 14.7% from the
prior-year quarter. The non-performing loan ratio was 3.84%, down
from 4.32% as of June 30, 2011.
As of June 30, 2012, total non-performing assets were $961.4
million, down 21.1% year over year. The non-performing asset ratio
was 4.83% compared with 5.85% in the year-ago quarter. Total
delinquencies (consisting of loans 30 or more days past due and
still accruing) were 0.47% of total loans, down from 0.97% as of
June 30, 2011.Capital Position
As of June 30, 2012, Tier 1 capital ratio and Tier 1 common equity
ratio decreased to 13.36% and 8.81%, respectively, compared with
prior-year quarter's ratios of 12.84% and 8.41%, respectively.
Moreover, Tier 1 leverage ratio improved to 10.66% from 9.70% in
the prior-year quarter.
Total deposits were $21.6 billion, down from $22.9 billion in the
prior-year quarter, mainly due to planned reductions in national
market brokered deposits and time deposits. However, total core
deposits increased 1% year over year to $20.4 billion.
The effective cost of core deposits continued to decline, with an
effective cost of 41 basis points, down from 67 basis points in the
prior-year quarter.Our Viewpoint
We believe Synovus is in a recovery phase, driven by lower
non-performing assets and improving operating efficiencies, which
should make the company more profitable in the upcoming quarters.
Furthermore, the company's planned expenses savings will act as a
positive catalyst. However, repayment of funds generated through
Troubled Asset Relief Program (TARP) is still not visible in the
Shares of Synovus currently retain a Zacks #3 Rank, which
translates to a short-term Hold rating.
Among its peers, Monarch Financial Holdings, Inc.
) is expected to release its second-quarter
earnings on August 3, 2012.
MONARCH FINANCL (MNRK): Free Stock Analysis
SYNOVUS FINL CP (SNV): Free Stock Analysis
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