Synovus Financial Corp. (NYSE: SNV-PD), a leading regional bank headquartered in Columbus, Georgia, has demonstrated remarkable resilience and strategic execution amidst a challenging macroeconomic environment. With a strong footprint in the rapidly growing Southeastern U.S. markets, Synovus has consistently delivered solid financial performance, showcasing its ability to navigate through economic cycles and position itself for long-term success.
Financials
In the fiscal year 2023, Synovus reported annual net income of $543,705,000, annual revenue of $2,031,586,000, annual operating cash flow of $937,350,000, and annual free cash flow of $905,143,000. These impressive figures underscore the company's financial strength and its commitment to driving shareholder value.
The second quarter of 2024 was a testament to Synovus' strategic focus and operational excellence. The company reported a loss of $0.16 per share, which included a previously announced $256 million loss from a securities repositioning initiative. However, the company's adjusted earnings per share came in at $1.16, a significant improvement from the $0.79 reported in the first quarter of 2024. This strong performance was driven by a 4% sequential increase in net interest income, a 9% jump in adjusted non-interest revenue, and a 5% decline in adjusted non-interest expense.
Net interest income for the second quarter of 2024 rose to $435 million, a 4% increase from the previous quarter. This was primarily driven by improving loan yields, the residual impact of first-quarter hedge maturities, and the securities repositioning completed in May 2024. The net interest margin expanded by 16 basis points sequentially to 3.2%, reflecting the company's ability to effectively manage its balance sheet and optimize its funding sources.
Adjusted non-interest revenue, which excludes the impact of the securities repositioning, increased by 9% to $127 million in the second quarter. This growth was largely attributable to a 128% surge in capital markets fees, driven by strong performance in syndication, finance, arranger fees, and debt capital markets income. Additionally, the company's commercial analysis, treasury, and payment solutions fees increased by 4%, while core wealth management income rose by 2%.
On the expense front, Synovus demonstrated its commitment to disciplined cost management. Adjusted non-interest expense declined by 5% sequentially, primarily due to a 4% decrease in employment expense and a partial reversal of the FDIC special assessment accrued in the first quarter. The company's adjusted efficiency ratio improved to 53% in the second quarter, further solidifying its position as an industry leader in operational efficiency.
The company's credit quality metrics also showed significant improvement in the second quarter. Net charge-offs declined by 9 basis points to 32 basis points, while non-performing loans decreased by 22 basis points to 0.59% of total loans. The allowance for credit losses remained relatively stable at 1.25% of total loans, reflecting the strength and resilience of Synovus' loan portfolio.
Synovus' capital position continued to strengthen in the second quarter, with the preliminary Common Equity Tier-1 (CET1) ratio reaching 10.62%, the highest level in over eight years. This robust capital position provides the company with the flexibility to support future growth initiatives, while also allowing for opportunistic share repurchases to manage capital levels within the targeted range of 10% to 10.5%.
Outlook
Looking ahead, Synovus has provided updated guidance for the remainder of 2024. The company now expects period-end loan growth to be in the 0% to 2% range, supported by continued success in its middle market, corporate investment banking, and specialty lending segments. Core deposit growth is forecasted to be within the 2% to 4% range, aided by seasonal tailwinds and new core funding growth initiatives.
Regarding revenue, Synovus has adjusted its outlook to reflect a negative 3% to 0% growth in adjusted revenue, which now assumes a 25 basis point rate cut by the Federal Reserve in December 2024. The company expects more net interest income improvement in the second half of the year, driven by deposit cost stability, fixed-rate asset repricing, and the full impact of the securities repositioning. Adjusted non-interest revenue is now projected to grow in the mid-single digit percentage range, supported by the robust capital markets pipeline and continued growth in treasury, payment solutions, and commercial sponsorship fees.
On the expense front, Synovus remains focused on disciplined cost control. Excluding the FDIC special assessments, the company anticipates its adjusted non-interest expense will increase by 1% to 3% in 2024, primarily due to incremental infrastructure investments, legal costs associated with resolved credits, and higher team member incentives.
Synovus' credit quality outlook remains positive, with the company expecting net charge-offs to be flat to down in the second half of 2024 compared to the 36 basis point level recorded in the first half of the year. This guidance reflects the company's confidence in the strength and resilience of its loan portfolio, as well as its proactive approach to managing credit risk.
Conclusion
The company's strategic initiatives, including the optimization of its balance sheet, the expansion of its commercial and wealth management businesses, and the enhancement of its digital capabilities, have positioned Synovus for sustainable growth. The Southeastern U.S. markets, where Synovus maintains a strong presence, continue to outperform the national economy, further bolstering the company's growth prospects.
Synovus' unwavering commitment to its clients, its talented workforce, and its disciplined approach to risk management have been the driving forces behind its success. As the company navigates the evolving economic landscape, investors can take comfort in Synovus' proven track record of delivering consistent financial performance and its well-defined strategy for long-term value creation.