Does Synovus' Improving Credit Quality Indicate Progress? - Analyst Blog

On Sep 18, 2014, we issued an updated research report on Synovus Financial Corporation (SNV). Consistent improvement in credit quality and effective cost control remained strengths while pressurized top line continued to be the undermining aspect.

Synovus reaches out to a wide customer base by providing a diversified array of financial services and remains focused on expansion through acquisitions. Moreover, the bank has been consistently upgrading its position to take advantage of the available opportunities by improving its credit quality. The first half of 2014 recorded a 55% fall in provisions and 42% decline in net-charge offs, reflecting the company's commendable efforts.

Moreover, the bank has implemented certain strategies to keep expenses under control, which includes streamlining of operations as well as specific cost saving initiatives. Though the benefits of these approaches have not been realized efficiently as yet, these are likely to boost the bank's bottom-line growth in the upcoming quarters. Also, the company continues to attract investors' interest through its steady dividend policy.

On the flip side, the persistent unfavorable economic conditions have been impacting Synovus' top-line growth. The strain on revenue generation was evident from 38% decrease in mortgage banking income in the first half of 2014. Also, the declining trend visible in the bank's interest income is expected to further weigh on the financials going forward.

Though the repayment of Troubled Asset Relief Program (TARP) dues indicate Synovus' recovery from the financial stress, the constant low interest environment, absence of credible development in the mortgage market and stringent regulatory issues are bound to keep profitability under pressure. Moreover, investors' apprehension regarding the company's future growth was evident from the 2.7% year-to-date drop in share price.

This can also be observed in the Zacks Consensus Estimate for 2014 and 2015, which remained flat over the last 30 days.

Currently, Synovus carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked Southeast banks include Cardinal Financial Corp. (CFNL), First Community Bancshares, Inc. (FCBC) and Park Sterling Corporation (PSTB). All these stocks sport a Zacks Rank #1 (Strong Buy).

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SYNOVUS FINL CP (SNV): Free Stock Analysis Report
 
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