Synovus (SNV) Rises on Cost Control; Should We Hold? - Analyst Blog

On Dec 17, 2014, we issued an updated research report on Synovus Financial Corporation (SNV). Shares of this commercial banking services provider have recorded a year-to-date return of 9.5%. Consistent improvement in credit quality and effective cost control remained strengths while a pressurized top line continued to be the undermining aspect.

Synovus 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. Notably, in Jan 2014, Synovus announced the planned implementation of new expense savings initiatives, which are expected to result in annualized cost savings of $30 million. Also, the company continues to attract investors' interest through its steady dividend policy.

Moreover, the bank 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 nine months of 2014 recorded a 53.9% fall in provisions and 46.5% decline in net-charge offs, reflecting the company's commendable efforts.

On the flip side, the persistent unfavorable economic conditions have been impacting Synovus' top-line growth. The strain on revenue generation was evident from the 31% decrease in mortgage banking income in the first nine months 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.

Over the last 30 days, the Zacks Consensus Estimate for 2014 and 2015 remained stable at $1.31 and $1.63 per share, respectively. Hence, Synovus carries a Zacks Rank #3 (Hold).

Key Picks from the Sector

Some better-ranked finance stocks include HomeTrust Bancshares, Inc. (HTBI), Middleburg Financial Corporation (MBRG) and Investar Holding Corporation (ISTR). All three stocks carry a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
SYNOVUS FINL CP (SNV): Free Stock Analysis Report
 
MIDDLEBURG FINL (MBRG): Free Stock Analysis Report
 
INVESTAR HOLDNG (ISTR): Get Free Report
 
HOMETRUST BNCSH (HTBI): Get Free Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research