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Why Is Synovus (SNV) Down 4.7% 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 4.7% 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 Beat Estimates, Revenues Fall Y/Y
Synovus Financial reported second-quarter 2024 adjusted earnings per share of $1.16, which surpassed the Zacks Consensus Estimate of 96 cents. Adjusted earnings were the same as that reported in the year-ago quarter.
Results benefited from a fall in expenses and provisions for credit losses, along with strong capital ratios. However, a decline in net interest income (NII) and lower loan and deposit balances were major headwinds.
Net loss available to common shareholders was $23.7 million against net income available to common shareholders of $165.8 million in the prior-year quarter.
Revenues & Expenses Decline
Total revenues in the second quarter were $306.1 million, plunging 46.1% from the prior-year quarter. Also, the top line missed the Zacks Consensus Estimate of $496.6 million.
NII fell 4.5% year over year to $435 million, while the net interest margin (NIM) remained flat at 3.2% year over year.
Non-interest revenues were a negative $128.9 million. The figure includes a loss of $256.7 million from investment securities. Excluding this loss, adjusted non-interest revenues were $127.8 million, up 15% year over year. The increase was primarily due to a rise in treasury and payment solutions and capital markets fees as well as greater commercial sponsorship income.
Non-interest expenses were $301.8 million, down 1.8% year over year. The fall was mainly due to the company’s expense control and a headcount reduction.
The adjusted tangible efficiency ratio was 98.15%, up from 53.99% reported in the year-earlier quarter. A rise in the efficiency ratio indicates a decrease in profitability.
As of Jun 30, 2024, total loans of $43.1 billion decreased slightly from the previous quarter. Total deposits were $50.2 billion, which decreased nearly 1% from the previous quarter.
Credit Quality: Mixed Bag
Non-performing loans were $256.1 million, down 2.1% from the year-ago quarter. Total non-performing assets amounted to $256.9 million, which declined 1.8% year over year.
Provision for credit losses was $26.4 million, which decreased 32.1% year over year.
The non-performing assets ratio was 0.6%, up from 0.59% in the year-ago period.
Net charge-offs increased 30.6% to $34.5 million from the prior-year quarter.
The net charge-off ratio was 0.32%, up from 0.24% in the prior-year quarter.
Capital Ratios & Profitability Ratios Improve
As of Jun 30, 2024, the Tier 1 capital ratio and total risk-based capital ratio were 11.74% and 13.59%, respectively, compared with 10.89% and 12.80% in the year-ago quarter. As of the same date, the Common Equity Tier 1 capital ratio was 10.62%, up from 9.86% in the year-ago quarter.
Adjusted return on average assets was 1.21%, up from 1.18% in the prior-year quarter. Adjusted return on average common equity was 15.3%, down from 15.8% in the year-earlier quarter.
2024 Outlook
Management expects loan growth of 0-2%
Core deposit (excluding brokered accounts) growth is anticipated to be 2-4% (down from previous guided growth of 2-6%).
Adjusted revenues are now expected to be down 3% to flat (up from the previously provided guidance range of down 3% to up 1%). The adjusted revenue guidance now assumes one 25 basis point rate cut in December 2024, compared to the prior assumption of stable rates, as well as the realization of a robust capital markets pipeline in the second half of 2024.
Management expects more net interest income improvement in the second half of 2024.
Adjusted non-interest revenue is now forecasted to grow in the mid-single digit range versus previous guidance of low to mid-single digit growth.
Adjusted non-interest expenses are expected to be up 1-3% (excluding FDIC special assessment).
The CET 1 ratio is now expected to be in the range of 10%-10.5%. The company expects repurchases throughout the remainder of 2024.
Given current credit migration trends, assuming a relatively stable economic environment and considering the impact of certain significant individual losses in late 2023 and early 2024, management expects net charge-offs (NCOs) to be flat to down in the second half of 2024 compared to 36 basis points in the first half of 2024.
The effective income tax rate is now anticipated to be 21% versus previous guidance of 21-22%, supported by tax credit investments and further diversification of revenue sources.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 9.77% due to these changes.
VGM Scores
Currently, Synovus has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Synovus has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Synovus (SNV) Down 4.7% Since Last Earnings Report?
A month has gone by since the last earnings report for Synovus Financial (SNV - Free Report) . Shares have lost about 4.7% 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 Beat Estimates, Revenues Fall Y/Y
Synovus Financial reported second-quarter 2024 adjusted earnings per share of $1.16, which surpassed the Zacks Consensus Estimate of 96 cents. Adjusted earnings were the same as that reported in the year-ago quarter.
Results benefited from a fall in expenses and provisions for credit losses, along with strong capital ratios. However, a decline in net interest income (NII) and lower loan and deposit balances were major headwinds.
Net loss available to common shareholders was $23.7 million against net income available to common shareholders of $165.8 million in the prior-year quarter.
Revenues & Expenses Decline
Total revenues in the second quarter were $306.1 million, plunging 46.1% from the prior-year quarter. Also, the top line missed the Zacks Consensus Estimate of $496.6 million.
NII fell 4.5% year over year to $435 million, while the net interest margin (NIM) remained flat at 3.2% year over year.
Non-interest revenues were a negative $128.9 million. The figure includes a loss of $256.7 million from investment securities. Excluding this loss, adjusted non-interest revenues were $127.8 million, up 15% year over year. The increase was primarily due to a rise in treasury and payment solutions and capital markets fees as well as greater commercial sponsorship income.
Non-interest expenses were $301.8 million, down 1.8% year over year. The fall was mainly due to the company’s expense control and a headcount reduction.
The adjusted tangible efficiency ratio was 98.15%, up from 53.99% reported in the year-earlier quarter. A rise in the efficiency ratio indicates a decrease in profitability.
As of Jun 30, 2024, total loans of $43.1 billion decreased slightly from the previous quarter. Total deposits were $50.2 billion, which decreased nearly 1% from the previous quarter.
Credit Quality: Mixed Bag
Non-performing loans were $256.1 million, down 2.1% from the year-ago quarter. Total non-performing assets amounted to $256.9 million, which declined 1.8% year over year.
Provision for credit losses was $26.4 million, which decreased 32.1% year over year.
The non-performing assets ratio was 0.6%, up from 0.59% in the year-ago period.
Net charge-offs increased 30.6% to $34.5 million from the prior-year quarter.
The net charge-off ratio was 0.32%, up from 0.24% in the prior-year quarter.
Capital Ratios & Profitability Ratios Improve
As of Jun 30, 2024, the Tier 1 capital ratio and total risk-based capital ratio were 11.74% and 13.59%, respectively, compared with 10.89% and 12.80% in the year-ago quarter. As of the same date, the Common Equity Tier 1 capital ratio was 10.62%, up from 9.86% in the year-ago quarter.
Adjusted return on average assets was 1.21%, up from 1.18% in the prior-year quarter. Adjusted return on average common equity was 15.3%, down from 15.8% in the year-earlier quarter.
2024 Outlook
Management expects loan growth of 0-2%
Core deposit (excluding brokered accounts) growth is anticipated to be 2-4% (down from previous guided growth of 2-6%).
Adjusted revenues are now expected to be down 3% to flat (up from the previously provided guidance range of down 3% to up 1%). The adjusted revenue guidance now assumes one 25 basis point rate cut in December 2024, compared to the prior assumption of stable rates, as well as the realization of a robust capital markets pipeline in the second half of 2024.
Management expects more net interest income improvement in the second half of 2024.
Adjusted non-interest revenue is now forecasted to grow in the mid-single digit range versus previous guidance of low to mid-single digit growth.
Adjusted non-interest expenses are expected to be up 1-3% (excluding FDIC special assessment).
The CET 1 ratio is now expected to be in the range of 10%-10.5%. The company expects repurchases throughout the remainder of 2024.
Given current credit migration trends, assuming a relatively stable economic environment and considering the impact of certain significant individual losses in late 2023 and early 2024, management expects net charge-offs (NCOs) to be flat to down in the second half of 2024 compared to 36 basis points in the first half of 2024.
The effective income tax rate is now anticipated to be 21% versus previous guidance of 21-22%, supported by tax credit investments and further diversification of revenue sources.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 9.77% due to these changes.
VGM Scores
Currently, Synovus has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Synovus has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.