Synovus Financial SNV reported third-quarter 2021 adjusted earnings of $1.20 per share, which beat the Zacks Consensus Estimate of $1.07 per share, aided by solid revenues. Also, the bottom line compares favorably with the earnings of 89 cents per share recorded in the year-ago quarter.

Results were driven by rising net interest and fee income, lower expenses, as well as reversal of provisions, raising investors’ optimism. This resulted in a price rally of 3.6% post release. Solid loan and deposit balances stoked organic growth. However, shrinking net interest margin was the undermining factor.

Including certain non-recurring items, net income available to common shareholders came in at $178.5 million or $1.21 per share compared with the $83.3 million or 56 cents per share recorded in the prior-year quarter.

Revenues Rise, Expenses Down, Loans and Deposits Up

Total revenues in the third quarter came in at $499.87 million, up 1.7% from the prior-year quarter. Also, the top line outpaced the Zacks Consensus Estimate of $488.03 million.

Net interest income inched up 2% year over year to $384.9 million. However, net interest margin shrunk 11 basis points (bps) to 3.02%.

Non-interest income increased marginally on a year-over-year basis to $114.9 million. Rise in all components, except mortgage banking income, capital markets income and net investment securities losses, led to this upside.

Non-interest expenses were $267 million, down 16% year on year. This downside mainly resulted from all components other than a rise in net occupancy, equipment, and software expenses.

Adjusted tangible efficiency ratio came in at 52.96% compared with 53.83% reported in the year-earlier quarter. A fall in this ratio indicates an improvement in profitability.

Total deposits came in at $47 billion, up 1.1% sequentially. Moreover, total loans showed a marginal improvement sequentially, coming in at $38.3 billion.

Improved Credit Quality

Synovus’ credit metrics witnessed a robust performance during the September-end quarter.

Non-performing loans fell 8% year over year to $155.5 million. Net charge-offs decreased 28% to $20.5 million. The annualized net charge-off ratio was 0.22% compared with the year-ago quarter’s 0.29%.

Further, reversal of provision for credit losses of $7.9 million was recorded in the third quarter against provision expenses of $43.4 million in the prior-year quarter.

Total non-performing assets amounted to $172.4 million, underlining a 10.3% year-over-year fall. Non-performing loan ratio came in at 0.45%, shrinking 4 bps sequentially.

Mixed Capital Position

Tier 1 capital ratio and total risk-based capital ratio were 10.83% and 12.96%, respectively, compared with 10.57% and 13.16% as of Sep 30, 2020.

Moreover, as of Sep 30, 2021, Common Equity Tier 1 Ratio (fully phased-in) was 9.63% compared with 9.3% witnessed in the year-ago quarter. Tier 1 Leverage ratio was 8.82% compared with 8.48% recorded in the year-earlier period.

Return on average assets was 1.34% compared with the prior-year quarter’s 0.69%. Return on average common equity was 14.96%, up from the prior-year quarter’s 7.28%.

Our Take

Synovus put up a decent show in the July-September quarter. We believe the company’s focus on both organic and inorganic growth, together with its cost-containment efforts, will pay off and aid bottom-line expansion in subsequent years. Though there has been a reduction in net interest margin, improving expenses are encouraging.

Synovus Financial Corp. Price, Consensus and EPS Surprise

Synovus Financial Corp. price-consensus-eps-surprise-chart | Synovus Financial Corp. Quote

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

Performance of Other Banks

Bank of America’s BAC third-quarter 2021 earnings of 85 cents per share beat the Zacks Consensus Estimate of 71 cents. The bottom line compared favorably with 51 cents earned in the prior-year quarter. Results in the quarter included a reserve release of $1.1 billion.

Robust advisory business, reserve release and a modest rise in demand for loans drove JPMorgan’s JPM third-quarter 2021 earnings of $3.74 per share. The bottom line outpaced the Zacks Consensus Estimate of $3.00.

First Republic Bank FRC delivered an earnings surprise of 4.4% in third-quarter 2021 on solid top-line strength. Earnings per share of $1.91 surpassed the Zacks Consensus Estimate of $1.83. The bottom line improved 18.6% from the year-ago quarter’s figure.

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