On Oct 4, 2013, we upgraded our recommendation on
Synovus Financial Corporation
) to Outperform from Neutral, based on its cost-curtailment
initiatives and strong capital position. However, regulatory
issues, a low interest environment and significant exposure to
residential real estate markets remain matters of concern.
SIMMONS FIRST A (SFNC): Free Stock Analysis
SYNOVUS FINL CP (SNV): Free Stock Analysis
S Y BANCORP INC (SYBT): Free Stock Analysis
WESBANCO INC (WSBC): Free Stock Analysis
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In the current competitive banking environment, Synovus continues
to reduce operating costs, implement strategies to broaden its
loan portfolio and increase non-interest income. Since 2010, the
company has ushered strategic initiatives to reduce expenses and
streamline its processes. Notably, the expense reduction measure
has led to a non-interest expense fall of 10.5% in 2011 and 9.7%
in 2012 and 11.6% year-over-year fall in first-half 2013.
Synovus is well positioned from a balance sheet perspective. As
of Jun 30, 2013, its capital ratios were at a well-capitalized
level. Notably, about $675 million of net deferred tax assets
(DTAs) continue to be excluded from regulatory capital as of Jun
30, 2013. The prohibited DTAs are expected to decrease over time,
and thereby create additional regulatory capital in the future.
In Jul 2013, Synovus repurchased $968 million of its Series A
Preferred Stock, which was issued to the U.S. Department of the
Treasury as part of the company's participation in the TARP.
After settling the TARP obligation, we expect Synovus to deploy
its capital through dividend hike and share repurchase, which
will further enhance investors' confidence in the stock.
Despite the macro pressure, Synovus' credit quality continues to
normalize. Credit metrics have been gradually improving since
2009 through first-half 2013. Further, we are impressed with the
overall improvement in delinquencies and net charge-offs. This is
expected to continue, thereby boosting future earnings.
For Synovus, over the last 60 days, the Zacks Consensus Estimate
for 2013 and 2014 remained stable at 14 cents and 20 cents per
share, respectively. Hence, Synovus currently carries a Zacks
Rank #3 (Hold).
Other Stocks to Consider
Some well performing Southeast banks include
SY Bancorp Inc.
Simmons First National Corporation
) with a Zacks Rank #1 (Strong Buy), while
) carries a Zacks Rank #2 (Buy).