Synovus Financial Corp.'s banking business tends to be overshadowed by its hugely successful credit card processing affiliate, Total System Services Inc.

Chairman and chief executive officer James H. Blanchard has a plan to change that. He calls it the "new bank project."

"We're big enough, from a size standpoint," Mr. Blanchard said in a recent interview at Synovus' headquarters. "The question is, are we good enough?"

Over the last 10 years net income has grown at a compound 22.3% rate. Second-quarter return on assets, 1.80%, and on equity, 19.52%, put $9 billion-asset Synovus among the industry's top performers.

But much of the growth over the last decade was at Total System, of whose publicly traded shares Synovus owns 80.7%.

Second to First Data Corp. in card account processing, Total System handles more than 88 million cardholder accounts and is growing internationally, having completed a $100 million, five-year investment in new software.

Synovus is also building a $100 million operations complex in Columbus and plans to hire more than 2,000 additional workers for the credit card unit.

Mr. Blanchard, 56, is concerned about the revenue growth prospects of the banking business. He and his management team announced the "new bank project" a year ago, calling for sweeping changes to transform a somewhat sleepy chain of community banks Synovus owns into highly automated, information-rich sales centers offering a variety of fee-generating products and alternative delivery options.

The initiative aims to near triple revenues over the next few years from each major fee-income business line.

For example, Synovus wants the trust operation that currently brings in about $14 million a year to grow to at least $40 million in five years, said Synovus president Stephen L. Burts Jr.

The trust unit currently provides personal trust services primarily in the Columbus market. But Synovus aims to put trust officers in branches throughout South Carolina, Florida, Georgia, and Alabama.

A similar strategy is planned for retail brokerage, a business Synovus entered 10 years ago. With only 15 brokers, all working primarily in the Columbus area, the unit accounts for about $7 million in annual revenue. Synovus says it will add at least eight brokers by yearend in other markets, and more in 1998. Within five years, Mr. Burts wants retail brokerage revenues to top $20 million.

Mortgage banking is also slated for revamping. An operation based in Birmingham, Ala., services about $1.5 billion of mortgages, primarily loans originated by affiliate banks. To add vitality and spark loan growth, Synovus' lead bank in Columbus has started an aggressive advertising and sales campaign and has focused on increasing referrals from builders and real estate agents.

Residential loan originations at the lead bank, Columbus Bank and Trust Co., have jumped from "$5 million a year to $5 million a month," said Stephen A. Melton, president of the bank.

All told, Synovus' 34 banks originated more than $470 million in loans last year, generating about $7 million in annual revenue. But most of that volume came from five of the banks. By duplicating Columbus Bank and Trust's growth efforts, others should also be able to grow significantly, Mr. Burts said.

"We have a lot of opportunity to generate more revenue than we have been," he added.

Insurance and bank cards are other areas targeted for growth.

The overarching goal is to move the banking operations, separated out from Total System, to a 1.80% return on assets in the next two years from 1.47% in the most recent quarter. Add Total System's profits to the calculations, and Synovus should be reporting an overall 2.25% ROA by 1999, said Mr. Blanchard.

But the job will get harder because Synovus will not be relying on mergers and acquisitions to fuel growth.

The company has eschewed acquisitions for the last two years, which has boosted Total System's percentage of the bottom line. The higher the contribution by Total System, considered a hot stock on Wall Street, the higher the multiple on Synovus stock.

The company is working to move Total System's net income contribution from its current 22.7%, to 30% at the end of this year.

Analysts have mixed feelings about the company and its strategy. Naysayers see little value in Synovus outside of the card processing unit. Total System boosted profits 26% in the second quarter. Its revenues have been increasing at a compound rate of 24% over the last decade.

The stock-price multiples of both Total System (more than 60 times 1997 estimated earnings) and Synovus (27 times earnings) have some analysts concerned about overvaluation.

"I'm very uneasy about the stock," said one, who asked for anonymity. "I think they ought to dump the bank and go just with Total System."

Yet some analysts see Synovus as a savvy investment. They see not only a stake in Total System's growth, but also an interest in a solid banking company undergoing rejuvenation.

Earnings at both Synovus and Total System are growing faster than at their peers. Banking operations alone reported a 17% gain in net income for the most recent quarter. And Synovus' results have been driven by revenue growth, not by share repurchases or expense cuts, analysts pointed out.

"You have two lines of business that are growing at twice the rate of peers from an earnings standpoint, which makes a case for a significantly higher premium over peers," said John A. Pandtle, an analyst at Robinson- Humphrey Co. in Atlanta.

"A lot of the perceived sizzle in the Synovus story is Total System, but if you get behind the bank, there is a lot there they can do."

That's exactly what Mr. Blanchard and his team have in mind.

Along with the operational changes, the company is overhauling training, evaluation, mentoring, compensation, and other aspects of human resources. Keeping workers happy and productive is a crucial element to everything Synovus does, Mr. Blanchard stressed. As a result, virtually every personnel practice is under review, and top executives are taking part in meetings on such topics as "managing from your heart."

"We can't just be above average," said Mr. Blanchard. "We've got to be way above average." u

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