Magazine article American Banker

Street Punishes Synovus for Loan Profit Warning

Magazine article American Banker

Street Punishes Synovus for Loan Profit Warning

Article excerpt

Synovus Financial Corp.'s shares fell 3.7% Wednesday, after the company warned that the Federal Reserve Board's interest rate cut will hurt lending profits this quarter.

Separately, the Columbus, Ga., company said that it agreed to raise the price it would pay for United Financial Holdings Inc. of St. Petersburg, Fla., after a recent decline in its stock price.

The $18 billion-asset Synovus' stock was down as much as 7% during trading Wednesday, when the stocks of many other large financial companies rose. The American Banker index of the 50 largest banks fell 0.5%, to 589.4.

Synovus' decline -- the second-steepest among the top 50 banks on Wednesday, behind Citigroup Inc.'s 3.8% -- followed an early-morning presentation by its vice chairman, Richard Anthony, at a Florida conference sponsored by Sandler O'Neill & Partners.

Mr. Anthony said that his company is comfortable with the Wall Street consensus earnings estimate of $1.21 cents per share for the year. However, he reiterated the company's projection last month that earnings would grow 10% to 14% next year, rather than the 15% to 18% it had previously predicted.

When it announced the guidance revision during its third-quarter earnings conference call on Oct. 16, Synovus had cited lowered earnings assumptions for its data processing subsidiary, TSYS. Patrick A. Reynolds, the company's head of investor relations, said Wednesday that TSYS had been expected to sign another major U.S. customer this year, which would boost next year's earnings, but that did not happen.

Mr. Anthony said Wednesday that Synovus expects its net interest margin to fall by 6 to 8 basis points this quarter as a result of the Federal Reserve Board's recent 50-basis-point cut in its benchmark loan rates. The company reported a margin of 4.64% for the third quarter. …

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