Magazine article American Banker

1Q Earnings: A Nonperformer Surprise from Synovus

Magazine article American Banker

1Q Earnings: A Nonperformer Surprise from Synovus

Article excerpt

Synovus Financial Corp. of Columbus, Ga., suffered an unexpected decline in its net interest margin and a jump in nonperforming assets, despite a 9% rise in its first-quarter profits.

The $32.7 billion-asset company blamed rising deposit costs for the compression in its margin, which fell 10 basis points from the fourth quarter and 22 basis points from a year earlier, to 4.1%.

Previously Synovus had predicted its margin would be stable, and on Monday it said it does not expect further erosion this year.

Deposits rose 13.9% from a year earlier and 2.3% from the fourth quarter, to $24.8 billion. Loans grew 12.5% from a year earlier and 3.6% from the fourth quarter, to $25.2 billion.

"Both were a bit sluggish," said Steven Alexopoulos, an analyst at JPMorgan Securities LLC. However, "commercial and industrial loan growth was strong, and commercial real estate loan growth was exceptional, surprisingly so."

Synovus reported first-quarter net income of $146.8 million, or 45 cents a share, which missed the average estimate of analysts by a penny, according to Thomson Financial.

Kevin Fitzsimmons, an analyst at Sandler O'Neill & Partners LP, called the results "slightly disappointing, because Synovus is seen as a better operator." The environment is "becoming a bit more difficult than they had thought."

Credit quality is one of those difficulties. Like several other banking companies, Synovus reported that loan losses fells but nonperforming assets rose in the first quarter. …

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