Synovus Depicts Rise In Interest Income; High Costs Linger

On Dec 6, 2016, we issued an updated research report on Synovus Financial Corporation (NYSE:SNV) . Interest income growth, pruning of assets, improving credit quality and a strong capital position are major driving factors. However, escalating expenses and a stringent regulatory landscape remain key concerns.

Synovus’ interest income has been improving since 2015, with the uptrend continuing in the first nine months of 2016 as well. Notably, management expects growth in net interest income in the high-single digits for 2016. Also, assuming no change in interest rates, net interest margin (NIM) is likely to remain stable in fourth-quarter 2016, on a sequential basis. In case of a rate hike in Dec 2016, management projects NIM to increase slightly in the fourth quarter sequentially.

Synovus has been substantially reducing the percentage of loans in the residential construction and development, and land acquisition portfolios. In addition, credit quality trends continue to reflect broad-based improvement. This is anticipated to continue in the near term, with a modest decline in non-performing assets and net charge-offs to be within the 10–20 basis point range in 2016.

Synovus’ strategy to aggressively dispose its distressed assets is supporting its capital base. The company expects to continue with its asset disposition strategy in the near future, which will strengthen its balance sheet, improve asset quality and boost earnings.

Moreover, investors’ optimism was visible over the stock as shares rose over 24%, year to date. For 2016 and 2017, the Zacks Consensus Estimate also increased 1.1% and 2.4% to $1.89 and $2.11, respectively, over the last 60 days.

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

Despite certain cost-saving initiatives, Synovus has been witnessing a rise in expenses, with the trend continuing in the first nine months of 2016. Moreover, management expects expenses to rise further with continued investments in technology, talent and to improve customer experience.

Stocks to Consider

Comerica Incorporated (NYSE:CMA) has been witnessing upward estimate revisions for the last 60 days. Further, the stock has risen over 63.4% so far this year. It currently holds a Zacks Rank #2 (Buy).

Fifth Third Bancorp (NASDAQ:FITB) has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have surged nearly 34.6% so far this year. It currently carries a Zacks Rank #2.

The Bank of New York Mellon Corporation (NYSE:BK) has been witnessing upward estimate revisions for the last 60 days. So far this year, the company’s share price has been up more than 20.1%. It carries a Zacks Rank #2.

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