Synovus Reports In-Line Q3 Earnings, Hikes Dividend By 20%

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Synovus Financial Corporation 's SNV third-quarter 2015 earnings of 42 cents per share came in line with the Zacks Consensus Estimate. The figure, however, compared favorably with the prior-year quarter earnings of 32 cents.

Synovus Financial Corporation - Earnings Surprise | FindTheBest

Results reflected improved top-line performance driven by higher mortgage banking revenues. Moreover, fall in provisions acted as a tailwind. However, increase in adjusted expenses was the undermining factor. Nonetheless, loan and deposit balances were on an upswing with improvement in credit metrics.

Net income available to common shareholders increased 25.2% year over year to $55.4 million.

Performance in Detail

Total revenue (net of interest expense) for the quarter was $274.8 million, up 1.7% from $270.2 million in the prior-year quarter. However, the figure was almost in line with the Zacks Consensus Estimate.

Net interest income inched up 0.7% year over year to $207.8 million. However, net interest margin declined 23 basis points year over year to 3.14%.

Non-interest income climbed 4.8% year over year to $67.1 million. The increase was primarily due to elevated mortgage-banking revenues, which was up nearly 28% year over year. Further, all other categories, excluding brokerage revenues, witnessed a year-over-year improvement.

Total non-interest expenses were $177.9 million, down 8.2% year over year; while adjusted non-interest expenses were $170.3 million, up 2% year over year. Non-interest expenses mainly reflected higher professional fees, salaries and other personnel expense, third-party processing expense and other operating expenses.

Total deposits came in at $22.8 billion, up 8.5% year over year. Total net loans climbed 6.4% year over year to $21.6 billion.

Credit Quality

Credit quality metrics for Synovus reflected improvement in the quarter.

Net charge-offs totaled $6.8 million, down 44.8% year over year. The annualized net charge-off ratio was 0.12%, down 12 basis points (bps) year over year. Provision for loan losses declined 23.1% year over year to $3 million.

Nonperforming loans, excluding loans held for sale, dropped 35% year over year to $157.6 million. The nonperforming loan ratio was 0.72%, down 46 bps year over year.

Additionally, total nonperforming assets amounted to $222 million, down 31.6% year over year. The nonperforming asset ratio dipped 56 bps to 1.01% year over year.

Capital Position

Synovus' capital position remained strong. The company provided capital ratios under Basel III transitional, as of Sep 30, 2015; while the prior-year quarter ratios are under Basel I rules.

Tier 1 capital ratio and total risk-based capital ratio were 10.62% and 12.04%, respectively, compared with 11.19% and 13.17% as of Sep 30, 2014.

As of Sep 30, 2015 Common Equity Tier 1 Ratio (fully phased-in) stood at 10.00%. Tier 1 Leverage ratio was 9.44% compared with 9.85% in the prior-year quarter.

Capital Deployment

Synovus completed the repurchase of shares worth $250 million (program initiated in fourth-quarter 2014) during the quarter.

Concurrent with the earnings release, the company announced a new $300-million share buyback program, which will be executed in the following 15 months.

Additionally, the company hiked its quarterly common stock dividend by 20% to 12 cents per share. The dividend is payable in Jan 2016.

Our Viewpoint

We believe the company's efforts toward reducing expenses and streamlining business will gradually pay off and aid bottom-line expansion in the subsequent years. Moreover, the company exhibits a healthy capital position and strong credit metrics, which we believe, will support its future performance.

However, a low rate environment and stringent regulations continue to keep us apprehensive.

Synovus' shares soared 2.6% after the company announced results on Oct 20. We believe a surge in profits as well as encouraging capital deployment news cheered investors. However, the stock was down 2.1% to $30.34 on Oct 21.

Currently, Synovus carries a Zacks Rank #3 (Hold).

Performance of Other Banks

Among other Southeast banks, Regions Financial Corporation's RF third-quarter 2015 earnings from continuing operations came in at 19 cents per share, missing the Zacks Consensus Estimate by a penny. Moreover, earnings declined from the prior-year quarter figure of 21 cents per share. Higher expenses primarily led to lower-than-expected results.

BancorpSouth, Inc. BXS delivered a negative earnings surprise for the third quarter as operating earnings of 36 cents per share lagged the Zacks Consensus Estimate of 37 cents. The figure was, however, up 12.5% year over year.

Results were adversely impacted by negative Mortgage Servicing Rights ("MSR") adjustment of $5.3 million, which led to a slight decline in net revenue. However, it was partly mitigated by a fall in expenses as well as negative provisions. Credit quality metrics and capital ratios depicted a mixed picture.

First Horizon National Corp. FHN came out with third-quarter earnings per share of 29 cents, which beat the Zacks Consensus Estimate by 31.8%. Moreover, the bottom line improved 52.6% year over year.

Results reflected lower revenues, which were more than offset by a steeper fall in expenses as well as provisions. Further, the quarter witnessed double-digit loan growth in its regional banking franchise, First Tennessee Bank, and a rise in the fixed-income sales revenues. Increase in deposits and improved credit quality were among the other major positives.

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BANCORPSOUTH (BXS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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