Yahoo Finance Synovus (SNV) Q4 Earnings Miss Estimates as Provisions Rise
Synovus Financial Corp. SNV reported fourth-quarter 2022 adjusted earnings per share of $1.35, which missed the Zacks Consensus Estimate of $1.37. The bottom line matched the prior-year quarter’s reported number.
Results were adversely impacted by the rise in provisions on deteriorating economic expectations, a decline in non-interest income and higher expenses. On the other hand, an increase in interest rates and decent loan growth supported net interest income (NII) and net interest margin (NIM).
Net income available to common shareholders came in at $197.5 million, up 3% from the prior-year quarter.
In 2022, adjusted earnings of $4.93 per share lagged the Zacks Consensus Estimate of $4.95 and declined marginally year over year. Net income available to common shareholders was $724.7 million, down slightly.
Revenues & Expenses Rise
Total revenues in the fourth quarter came in at $603.8 million, up 19% from the prior-year quarter. The top line beat the Zacks Consensus Estimate of $602 million.
In 2022, total revenues grew 11% to $2.21 billion. The top line was on par with the consensus estimate.
NII improved 28% year over year to $501.3 million. The rise was driven by loan growth, interest rate increases and disciplined deposit pricing. NIM rose 64 basis points (bps) to 3.60%.
Non-interest revenues decreased 12% to $102.4 million. The main reasons behind the fall were the continuation of a challenging residential mortgage banking environment and unfavorable valuation adjustments. These were partially offset by an increase in wealth revenues and card fee income.
Non-interest expenses were $309 million, up 5%. This rise mainly resulted from an increase in performance-based incentives, infrastructure spend and investments in new growth initiatives.
Adjusted tangible efficiency ratio was 50.58% compared with 55.64% in the year-earlier quarter. A decrease in this ratio indicates a rise in profitability.
Total loans of $43.7 billion showed a 3% improvement sequentially. Total deposits were $48.9 billion, up 2% from the previous quarter.
Credit Quality: Mixed Bag
Non-performing loans fell 2% year over year to $128.1 million. Total non-performing assets amounted to $143.4 million, down 9%. Non-performing asset ratio came in at 0.33%, down 7 bps from the prior-year quarter.
Net charge-offs increased 26% to $13.3 million. Net charge-offs ratio was 0.12% compared with the previous-year quarter’s 0.11%. Provision for credit losses was $34.9 million against the reversal of credit losses of $55.2 million in the prior-year quarter.
Capital & Profitability Ratios Solid
As of Dec 31, 2022, Tier 1 capital ratio and total risk-based capital ratio were 10.68% and 12.54%, respectively, compared with 10.66% and 12.61% in the year-ago quarter. Moreover, as of the same date, Common Equity Tier 1 capital ratio was 9.63%, up from 9.50% in the year-ago quarter.
Further, Tier 1 leverage ratio was 9.07%, improving from 8.72% in the year-earlier period.
Return on average assets was 1.38%, down from the prior-year quarter’s 1.40%. Return on average common equity was 20.93%, up from 16.11%.
Our Take
With the gradual rising rates, the company’s NII and margins are likely to continue increasing in the upcoming period. However, higher provision for credit losses on account of the worsening macroeconomic outlook is concerning. Also, rising operating expenses could impede bottom-line growth in the near term.
Currently, Synovus carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Signature Bank’s SBNY fourth-quarter 2022 earnings per share of $4.65 lagged the Zacks Consensus Estimate of $4.92. However, the bottom line increased 7.1% from the prior-year quarter. We had projected earnings of $5.42 per share.
Results were hurt by increases in non-interest expenses and provisions. However, higher revenues acted as a tailwind for SBNY.
Citizens Financial Group CFG reported fourth-quarter 2022 underlying earnings per share of $1.32, surpassing the Zacks Consensus Estimate of $1.30. Also, the bottom line rose from $1.26 in the year-ago quarter.
Results reflect NII growth on solid loan and deposit balances. However, an escalation in expenses, lower non-interest income and a rise in provisions were the undermining factors for CFG.
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