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Synovus' (SNV) Organic Expansion Drives Growth, High Costs Ail
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Synovus Financial Corp.’s (SNV - Free Report) emphasis on expanding its corporate, investment and middle-market commercial banking verticals is set to support its financials in the upcoming quarters. Balance sheet strength and strong liquidity position are other positives. However, escalating expenses due to investments in technology and a steady decline in mortgage banking income are near-term headwinds.
SNV is committed to its organic growth strategy. The bank is focused on expanding its corporate and investment banking, along with middle-market commercial banking verticals. The company’s relationship banking model has driven steady loan and deposit growth over the past few years. Additionally, its deposits are well-diversified across several industries and geographic locations within the strong growth markets of the Southeast.
The company benefits from high interest rates. Its net interest income (NII) has seen a steady uptrend in the past few years. Management expects NII to improve in the second half of 2024, backed by fixed-rate investment securities portfolio repositioning, high asset yields and a decline in funding costs. Decent loan demand will also offer support to NII, thus driving top-line growth.
The company has an impressive capital distribution plan. In January 2024, the bank was authorized to repurchase shares up to $300 million of common stock. As of Mar 31, 2024, approximately $299.2 million worth of buyback authorization remained available. In March 2023, the company announced a 12% hike in its quarterly dividend to 38 cents per share.
As of Mar 31, 2024, SNV’s total debt was $2.03 billion while cash and cash equivalents were $2.42 billion. Thus, given the company’s decent liquidity, its capital deployment activities seem sustainable and will drive investors’ confidence in the stock.
Shares of Synovus have gained 1.6% in the past six months against the industry’s decline of 4.7%.
Image Source: Zacks Investment Research
SNV currently carries a Zacks Rank #3 (Hold).
However, the bank has seen a rise in its cost base in the past few years, despite having certain cost-saving initiatives, including headcount reductions. Going forward, investments in talent, new initiatives and infrastructure are expected to inflate expenses and limit its bottom-line expansion.
Discouraging the performance of Synovus’ mortgage banking business is another major concern. The company has witnessed a decline in its mortgage banking income since 2021. High mortgage rates have been affecting mortgage origination volumes and refinancing activities. Thus, the company’s mortgage banking business performance is expected to get hurt in the quarters ahead.
Stocks to Consider
Some better-ranked bank stocks are First Community Bankshares, Inc. (FCBC - Free Report) and Third Coast Bancshares, Inc. (TCBX - Free Report) .
First Community Bankshares’s earnings estimates for the current year have moved north by 8.8% in the past 60 days. The company’s shares have gained 18.6% over the past year. At present, FCBC sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Third Coast Bancshares’s 2024 earnings estimates have been revised upward by 10.1% in the past 60 days. The stock has gained 22.3% over the past year. Currently, TCBX also sports a Zacks Rank #1.
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Synovus' (SNV) Organic Expansion Drives Growth, High Costs Ail
Synovus Financial Corp.’s (SNV - Free Report) emphasis on expanding its corporate, investment and middle-market commercial banking verticals is set to support its financials in the upcoming quarters. Balance sheet strength and strong liquidity position are other positives. However, escalating expenses due to investments in technology and a steady decline in mortgage banking income are near-term headwinds.
SNV is committed to its organic growth strategy. The bank is focused on expanding its corporate and investment banking, along with middle-market commercial banking verticals. The company’s relationship banking model has driven steady loan and deposit growth over the past few years. Additionally, its deposits are well-diversified across several industries and geographic locations within the strong growth markets of the Southeast.
The company benefits from high interest rates. Its net interest income (NII) has seen a steady uptrend in the past few years. Management expects NII to improve in the second half of 2024, backed by fixed-rate investment securities portfolio repositioning, high asset yields and a decline in funding costs. Decent loan demand will also offer support to NII, thus driving top-line growth.
The company has an impressive capital distribution plan. In January 2024, the bank was authorized to repurchase shares up to $300 million of common stock. As of Mar 31, 2024, approximately $299.2 million worth of buyback authorization remained available. In March 2023, the company announced a 12% hike in its quarterly dividend to 38 cents per share.
As of Mar 31, 2024, SNV’s total debt was $2.03 billion while cash and cash equivalents were $2.42 billion. Thus, given the company’s decent liquidity, its capital deployment activities seem sustainable and will drive investors’ confidence in the stock.
Shares of Synovus have gained 1.6% in the past six months against the industry’s decline of 4.7%.
Image Source: Zacks Investment Research
SNV currently carries a Zacks Rank #3 (Hold).
However, the bank has seen a rise in its cost base in the past few years, despite having certain cost-saving initiatives, including headcount reductions. Going forward, investments in talent, new initiatives and infrastructure are expected to inflate expenses and limit its bottom-line expansion.
Discouraging the performance of Synovus’ mortgage banking business is another major concern. The company has witnessed a decline in its mortgage banking income since 2021. High mortgage rates have been affecting mortgage origination volumes and refinancing activities. Thus, the company’s mortgage banking business performance is expected to get hurt in the quarters ahead.
Stocks to Consider
Some better-ranked bank stocks are First Community Bankshares, Inc. (FCBC - Free Report) and Third Coast Bancshares, Inc. (TCBX - Free Report) .
First Community Bankshares’s earnings estimates for the current year have moved north by 8.8% in the past 60 days. The company’s shares have gained 18.6% over the past year. At present, FCBC sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Third Coast Bancshares’s 2024 earnings estimates have been revised upward by 10.1% in the past 60 days. The stock has gained 22.3% over the past year. Currently, TCBX also sports a Zacks Rank #1.