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Synovus Stock Falls 2.1%, Fed Rate Cut to Hurt Q3 NII Growth

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Shares of Synovus Financial Corp. (SNV - Free Report) slid 2.1% after it announced that the third-quarter 2024 net interest income (NII) is likely to be impacted by the muted loan growth environment and the impact of expected Federal Reserve rate cuts.

Other banks like Regions Financial Corporation’s (RF - Free Report) third-quarter 2024 NII is expected to be flat to up 2% from $1.2 billion in the second quarter. PNC Financial (PNC - Free Report) anticipates its NII to rise 1-2% in third-quarter 2024 from $3.3 billion reported in the second quarter of 2024.


SNV Q3 Guidance for Other Metrics

The company expects adjusted non-interest revenues in the band of $115–$120 million. 

Management also expects net interest margin (NIM) to be a relatively flat QoQ as overall average asset yields and deposit costs remain stable.

SNV expects its third-quarter 2024 adjusted revenues to be in the range of $555-$560 million. The guidance assumes a 25 basis points (bps) rate cut this month, while a 50-bps rate cut is expected to lead revenues to the low end of the revenue guidance. 

Period-end loan growth is projected to grow by 1% supported by seasonal benefits and core C&I business line expansion.

Adjusted net interest expenses (NIE) are projected to be in the range of $305 - $310 million. This is relatively flat sequentially, driven by prudent overall cost management.

Period-end core deposit growth is expected to grow by 1% supported by seasonal benefits and core C&I business line expansion.

Net-charge offs (NCOs) are anticipated to be in the range of 0.25% - 0.35%.

CET1 ratio is projected to be 10.6%, relatively stable on a QoQ basis.


How SNV Will Fare in 2024?

For 2024, management anticipates adjusted revenues are expected to be down 3% to flat from the 2023 reported figure of $2.28 billion.

Management expects loan growth of 0-2% in 2024 from $43.4 billion reported in 2023. Likewise, PNC’s average loans are expected to be down less than 1% from $323.5 billion in 2023.  RF expects average loan balances to be stable to down modestly compared with 2023’s reported figure of $98.4 billion.

SNV’s Core deposit (excluding brokered accounts) growth is anticipated to be 2-4% from $50.7 billion reported in 2023.

Adjusted NIE is expected to be up 1-3% range (excluding FDIC special assessment) from $1.26 billion reported in 2023.

SNV continues to expect flat to down NCOs in the second half of 2024 compared with 0.36% annualized in the first half of 2024.


Parting Thoughts on SNV Stock

Though SNV’s NII is expected to be impacted by Fed rate cuts and muted loan demand in the near term. It is likely to witness an upward trend in the long term as funding costs gradually stabilize with interest rate cuts. 

With $60 billion in assets, SNV aims to expand its corporate and investment banking as well as middle-market commercial banking verticals, which is likely to support the company's financials over the longer tenure.

SNV currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past six months, the stock has risen 13% compared with the industry’s growth of 19.1%.

Zacks Investment ResearchImage Source: Zacks Investment Research


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