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Why Is Synovus (SNV) Down 7.7% Since Last Earnings Report?
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A month has gone by since the last earnings report for Synovus Financial (SNV - Free Report) . Shares have lost about 7.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Synovus due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Synovus reported second-quarter 2023 adjusted earnings per share of $1.16, which surpassed the Zacks Consensus Estimate of $1.14. However, the bottom line declined marginally from the prior-year quarter’s reported number.
Higher interest rates and decent loan growth supported NII while fee income increased. However, results were adversely impacted by the rise in provisions on a challenging operating backdrop and higher expenses.
Net income available to common shareholders was $165.8 million, down 2.3% from the prior-year quarter.
Revenues & Expenses Rise
Total revenues in the second quarter were $567.8 million, up 8.6% from the prior-year quarter. The top line missed the Zacks Consensus Estimate of $570.8 million.
NII improved 7.1% year over year to $455.5 million. The rise was driven by loan growth and interest rate increases, offset by higher deposit pricing. Net interest margin, on the other hand, declined 2 basis points (bps) to 3.20%.
Non-interest revenues increased 15% to $112.3 million. The main reasons behind the increase were higher brokerage revenues, card fees and mortgage banking income.
Non-interest expenses were $307.2 million, up 8.9% year over year. The rise mainly resulted from an increase in salaries and other personnel expenses, and FDIC insurance and other regulatory fees.
The adjusted tangible efficiency ratio was 52.57% compared with 53.43% in the year-earlier quarter. A decrease in this ratio indicates a rise in profitability.
Total loans of $44.35 billion showed a 1% improvement sequentially. Total deposits were $50.08 billion, which increased marginally.
Credit Quality Worsens
Non-performing loans increased significantly year over year to $261.5 million. Total non-performing assets amounted to $261.5 million, up 92.6% from the year-ago period. Provision for credit losses was $38.9 million, which increased significantly from the prior-year quarter.
Net charge-offs increased 59.3% to $26.4 million. Non-performing asset ratio was 0.59%, up 26 bps from the year-earlier quarter. The net charge-offs ratio was 0.24% compared with the previous-year quarter’s 0.16%.
Capital Ratios Improve & Profitability Ratios Down
As of Jun 30, 2023, the Tier 1 capital ratio and total risk-based capital ratio were 10.88% and 12.79% compared with 10.56% and 12.43%, respectively, in the year-ago quarter. Moreover, as of the same date, the Common Equity Tier 1 capital ratio was 9.85%, up from 9.46% in the prior-year quarter.
The Tier 1 leverage ratio was 9.23%, improving from 9.03% in the year-earlier period.
Return on average assets was 1.15%, down from the prior-year quarter’s 1.26%. Return on average common equity was 15.5%, down from 16.5% in the year-earlier quarter.
2023 Outlook
Management expects total loan balances to be stable to up 2% given the negative impact of the tough operating backdrop and pending $1.3 billion sale of its loan portfolio.
Core deposits (excluding brokered accounts) growth is anticipated in the range of 1-4% driven by the new deposit initiatives and seasonal benefits
Adjusted revenue growth is suggested to be stable to up 3%.
Adjusted expenses are estimated to grow 4-6%.
The CET 1 ratio is expected to be more than 10%.
The effective tax rate is anticipated to be around 22%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -13.31% due to these changes.
VGM Scores
Currently, Synovus has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Synovus has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is Synovus (SNV) Down 7.7% Since Last Earnings Report?
A month has gone by since the last earnings report for Synovus Financial (SNV - Free Report) . Shares have lost about 7.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Synovus due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Synovus Q2 Earnings Surpass Estimates, Revenues Rise Y/Y
Synovus reported second-quarter 2023 adjusted earnings per share of $1.16, which surpassed the Zacks Consensus Estimate of $1.14. However, the bottom line declined marginally from the prior-year quarter’s reported number.
Higher interest rates and decent loan growth supported NII while fee income increased. However, results were adversely impacted by the rise in provisions on a challenging operating backdrop and higher expenses.
Net income available to common shareholders was $165.8 million, down 2.3% from the prior-year quarter.
Revenues & Expenses Rise
Total revenues in the second quarter were $567.8 million, up 8.6% from the prior-year quarter. The top line missed the Zacks Consensus Estimate of $570.8 million.
NII improved 7.1% year over year to $455.5 million. The rise was driven by loan growth and interest rate increases, offset by higher deposit pricing. Net interest margin, on the other hand, declined 2 basis points (bps) to 3.20%.
Non-interest revenues increased 15% to $112.3 million. The main reasons behind the increase were higher brokerage revenues, card fees and mortgage banking income.
Non-interest expenses were $307.2 million, up 8.9% year over year. The rise mainly resulted from an increase in salaries and other personnel expenses, and FDIC insurance and other regulatory fees.
The adjusted tangible efficiency ratio was 52.57% compared with 53.43% in the year-earlier quarter. A decrease in this ratio indicates a rise in profitability.
Total loans of $44.35 billion showed a 1% improvement sequentially. Total deposits were $50.08 billion, which increased marginally.
Credit Quality Worsens
Non-performing loans increased significantly year over year to $261.5 million. Total non-performing assets amounted to $261.5 million, up 92.6% from the year-ago period. Provision for credit losses was $38.9 million, which increased significantly from the prior-year quarter.
Net charge-offs increased 59.3% to $26.4 million. Non-performing asset ratio was 0.59%, up 26 bps from the year-earlier quarter. The net charge-offs ratio was 0.24% compared with the previous-year quarter’s 0.16%.
Capital Ratios Improve & Profitability Ratios Down
As of Jun 30, 2023, the Tier 1 capital ratio and total risk-based capital ratio were 10.88% and 12.79% compared with 10.56% and 12.43%, respectively, in the year-ago quarter. Moreover, as of the same date, the Common Equity Tier 1 capital ratio was 9.85%, up from 9.46% in the prior-year quarter.
The Tier 1 leverage ratio was 9.23%, improving from 9.03% in the year-earlier period.
Return on average assets was 1.15%, down from the prior-year quarter’s 1.26%. Return on average common equity was 15.5%, down from 16.5% in the year-earlier quarter.
2023 Outlook
Management expects total loan balances to be stable to up 2% given the negative impact of the tough operating backdrop and pending $1.3 billion sale of its loan portfolio.
Core deposits (excluding brokered accounts) growth is anticipated in the range of 1-4% driven by the new deposit initiatives and seasonal benefits
Adjusted revenue growth is suggested to be stable to up 3%.
Adjusted expenses are estimated to grow 4-6%.
The CET 1 ratio is expected to be more than 10%.
The effective tax rate is anticipated to be around 22%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -13.31% due to these changes.
VGM Scores
Currently, Synovus has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Synovus has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.