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Synovus (SNV) Thrives on Organic Growth Amid High Costs
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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 focused on its organic growth strategy. The company aims to expand its corporate and investment banking and middle-market commercial banking verticals. Its continued loan and deposit growth in the past few years has been supported by its relationship banking model. Net loans witnessed a compound annual growth rate (CAGR) of 4% in the last four years (2019-2023). Although the trend reversed in the first half of 2024, the company’s consistent loan growth in its high-priority commercial business lines and specialty lending portfolio will aid its financials in the upcoming period.
Further total deposits saw a CAGR of 7.2% over the same time frame, with the uptrend persisting in the first half of 2024, backed by continued growth in core transaction deposit accounts. Management expects the second half of 2024 core deposits to be supported by seasonal benefits and Core C&I business line expansion. Thus, rising loan and deposit balances will continue to support its financials.
Synovus’ total debt (comprising long-term debt and other short-term borrowings) was $2.28 billion as of Jun 30, 2024, and cash and cash equivalents were $2.29 billion. The company enjoys long-term issuer credit ratings of BBB- and BBB from Standard & Poor’s and Fitch, respectively. This will likely enable the company to access the debt market at favorable rates. Given the company’s decent cash levels and access to debt markets, it is expected to continue meeting debt obligations, even if the economic situation worsens.
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 Jun 30, 2024, approximately $179.3 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 after a 3% increase in 2022 and a 10% hike in 2020. Given the company’s strong balance sheet and liquidity position, the continuation of its sustainable capital distribution activities will drive investors’ confidence in the stock.
Synovus' trailing 12-month return on equity (ROE) reflects its superior utilization of shareholders' funds. The company's ROE of 12.76% compares favorably with the industry's 9.32%.
Synovus’ shares have inched up 32.1% in the past year compared with the industry’s rise of 21.9%.
Image Source: Zacks Investment Research
SNV currently carries a Zacks Rank #2 (Buy).
In spite of cost-saving initiatives, including headcount reductions, Synovus witnessed higher expenses. The metric witnessed a CAGR of 5% over the last four years (ended 2023). Although the trend reversed in the first half of 2024, continued investments in talent, new initiatives and infrastructure are expected to inflate expenses in the near term and limit its bottom-line expansion.
Discouraging performance of SNV’s mortgage banking business is another major concern. The company 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.
Image: Bigstock
Synovus (SNV) Thrives on Organic Growth Amid High Costs
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 focused on its organic growth strategy. The company aims to expand its corporate and investment banking and middle-market commercial banking verticals. Its continued loan and deposit growth in the past few years has been supported by its relationship banking model. Net loans witnessed a compound annual growth rate (CAGR) of 4% in the last four years (2019-2023). Although the trend reversed in the first half of 2024, the company’s consistent loan growth in its high-priority commercial business lines and specialty lending portfolio will aid its financials in the upcoming period.
Further total deposits saw a CAGR of 7.2% over the same time frame, with the uptrend persisting in the first half of 2024, backed by continued growth in core transaction deposit accounts. Management expects the second half of 2024 core deposits to be supported by seasonal benefits and Core C&I business line expansion. Thus, rising loan and deposit balances will continue to support its financials.
Synovus’ total debt (comprising long-term debt and other short-term borrowings) was $2.28 billion as of Jun 30, 2024, and cash and cash equivalents were $2.29 billion. The company enjoys long-term issuer credit ratings of BBB- and BBB from Standard & Poor’s and Fitch, respectively. This will likely enable the company to access the debt market at favorable rates. Given the company’s decent cash levels and access to debt markets, it is expected to continue meeting debt obligations, even if the economic situation worsens.
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 Jun 30, 2024, approximately $179.3 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 after a 3% increase in 2022 and a 10% hike in 2020. Given the company’s strong balance sheet and liquidity position, the continuation of its sustainable capital distribution activities will drive investors’ confidence in the stock.
Synovus' trailing 12-month return on equity (ROE) reflects its superior utilization of shareholders' funds. The company's ROE of 12.76% compares favorably with the industry's 9.32%.
Synovus’ shares have inched up 32.1% in the past year compared with the industry’s rise of 21.9%.
SNV currently carries a Zacks Rank #2 (Buy).
In spite of cost-saving initiatives, including headcount reductions, Synovus witnessed higher expenses. The metric witnessed a CAGR of 5% over the last four years (ended 2023). Although the trend reversed in the first half of 2024, continued investments in talent, new initiatives and infrastructure are expected to inflate expenses in the near term and limit its bottom-line expansion.
Discouraging performance of SNV’s mortgage banking business is another major concern. The company 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 other top-ranked finance stocks are NatWest Group plc (NWG - Free Report) and BNP Paribas SA (BNPQY - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NatWest Group’s earnings estimates for 2024 have been revised 7.1% upward in the past 30 days. NWG’s shares have surged 49.6% in the past six months.
BNP Paribas’s 2024 earnings estimates have revised by 1% in the past 30 days. BNPQY’s shares have moved up 8.2% in the past six months.