Synovus Financial Stock Downgraded to 'Hold' by Salomon Bros. Analyst

By Kaplan, Daniel | American Banker, November 17, 1994 | Go to article overview

Synovus Financial Stock Downgraded to 'Hold' by Salomon Bros. Analyst


Kaplan, Daniel, American Banker


Salomon Brothers analyst Andrew O. Brown Wednesday downgraded Synovus Financial Corp. to "hold" from "buy," saying the company's strong business already is reflected in its stock price.

Citing margin pressure, he also lowered his earning estimate for 1996 by a dime, to $1.75 per share. Synovus fell 50 cents to close at $18,875.

The downgrade comes just four days after shares in the Columbus, Ga. holding company hit a 52-week high of $19.875. Almost alone in the industry, Synovus has defied the decline in share prices and risen 6% since the stan of September. By contrast, the American Banker index has declined roughly 7% in that time.

Synovus' decentralized approach to banking and vibrant returns from its credit card processing affiliate, Total System Services Inc., has buoyed the company's return on equity to 18.2% and its return on average assets to 1.58%, Mr. Brown said.

"However...these returns are currently fully reflected in the share price," he said. "In fact, Synovus shares are currently the most expensive shares in our universe, wading at a significant premium to the regional bank group on both a price/earnings and price-to-book basis."

Synovus' price to earnings multiple is 13.2, while its peers trade at an average of 9.3 times earnings, Mr. Brown said. And Synovus trades at 265% price-to-book value, compared to its regional peers' average of 155%.

Nonetheless, Mr. Brown remained bullish on the bank, complimenting its decentralized approach. The company's 32 banks enjoy wide latitude, and the results have paid off, Mr. …

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