COLUMBUS, Ga. - Synovus Financial Corp.'s announcement this week that it would merge three of its Florida banks into one bearing the Synovus name may seem like another crack in its long-held strategy of decentralization.
But executives at the Columbus regional say they are committed to the approach, which they say gives Synovus an edge over both larger and smaller rivals.
Synovus, the No. 34 U.S. bank, with assets of $25 billion, has acquired dozens of banks over the past few decades. It usually keeps local management, charters, and bank names intact and gives bankers a high degree of autonomy over lending and other key decisions.
At a time when many larger banks are adding hundreds of branches and spending millions to build national brands, Synovus is the largest in the nation with such a decentralized strategy.
"We don't understand why everybody doesn't do it this way," chief executive James H. Blanchard joked during a recent interview in his new headquarters building overlooking the Chattahoochee River.
A few other regionals do it that way, but they are smaller. The $14 billion-asset Mercantile Bancshares Inc. of Baltimore operates 13 separate banks, though it has been consolidating charters in recent years. Likewise, the $5 billion-asset Alabama National Bancorp in Birmingham has been merging some of its banks and now operates 13.
"They clearly have the most decentralized structure of the top banks," Lehman Brothers analyst Jason Goldberg said of Synovus.
But Mr. Goldberg says the strategy could be severely tested over the next year as Synovus carries out a $7 million to $8 million retail banking overhaul intended to help it win more business from consumers, an area executives acknowledge is a "gap."
Synovus has traditionally made most of its profits through commercial real estate and commercial lending. "While on the commercial side, a common brand may not be as important, it is more important on the retail side," Mr. Goldberg said.
Eighty-four percent of Synovus' $19.4 billion of loans last year were commercial. The company wants the portfolio to have a larger percentage of consumer loans, though it did not specify how much larger.
Mr. Goldberg said that though Synovus' systems are centralized, customers may not be aware that they now can do their banking at any of its 40 banks.
"To the extent they further leverage the Synovus name," he said, "customers will have more options to use different affiliates of Synovus family."
In recent years Synovus has taken tentative steps toward fashioning a regional identity. Most branches, regardless of their local market names, now also have signs denoting the Synovus connection.
And like many bigger banks, Synovus has taken advantage of its size to centralize back-office operations and devise products it can sell through its bank network, covering Georgia, Alabama, Tennessee, South Carolina, and Florida. All 40 of the banks sell Synovus-branded specialty products and services including mortgages, credit cards, and wealth management.
It spent $10 million in the last couple of years to develop a customer relationship management system that gives all bank employees access to information on every customer. It worked with Atlanta's S1 Corp. on that project.
The company's size also allows individual banks to make larger loans and to expand more quickly than if they were independent.
"Dual branding is to us a way of life," said Mr. Blanchard, 62, who has been chief executive since 1971.
Keeping local management teams and boards fosters stability and helps the affiliates portray themselves as local banks providing personal service, Mr. Blanchard said. This is important because the competition includes such larger regionals as Bank of America Corp., Wachovia Corp., and SunTrust Banks Inc.
Mr. Blanchard acknowledged, though, that the strategy "is constantly being twisted and turned and tweaked."
In Florida, for example, Synovus is consolidating charters at three banks whose marketing had begun to overlap. In June, United Bank and Trust Co. of St. Petersburg, United Bank of the Gulf Coast in Sarasota, and Peoples Bank of Palm Harbor will become Synovus Bank of Tampa Bay.
Synovus did a similar consolidation of three Atlanta affiliates in February 2004.
Executives insist it was the local managers who decided to adopt the Synovus name in Tampa. It will become the second affiliate with its parent's name; executives at a bank the company started last year in Jacksonville, Fla., chose to call it Synovus Bank of Jacksonville.
"I don't think it's a trend," said Kevin Fitzsimmons, an analyst at Sandler O'Neill & Partners LP. "But it's something that the other [Synovus] banks may see as an option now," particularly if Synovus does more charter consolidations.
Executives say no other bank consolidations are planned. But other changes are on the way as the company embarks on a major upgrade of its 280-branch southeastern banking network this year in hopes of improving consumer-banking returns.
It plans to build 20 to 25 new branches (the cost was not disclosed); spend $6 million renovating branches to make them more open and less institutional, and spend $7 million to $8 million on increased training, sales incentives, and advertising.
"Historically, Synovus has been a big commercial bank," said Christopher Marinac, an analyst with FIG Partners in Atlanta. "They're realizing that they've left some business and some money on the table, from a retail perspective."
The company may be comfortable with new investments in consumer banking now that the CRM system is in place. Moreover, its commercial-oriented lending business stands to benefit as interest rates rise, and Synovus' card processing subsidiary, TSYS, has won a series of contracts in recent months, including one with JPMorgan Chase & Co.
The retail project emerged from a review that concluded that the company was falling short of its potential in consumer banking, said Richard E. Anthony, Synovus' president and chief operating officer.
"Retail is not necessarily struggling, but it is not being optimized as a line of business," said the 58-year-old Mr. Anthony, who is expected to succeed Mr. Blanchard when he retires sometime in the next few years and joined him in the interview.
Last month Synovus appointed its first companywide retail banking executive, Leila S. Carr, to oversee the retail upgrade project. She had been director of sales, service, marketing, and product development and had helped lead an employee committee that plotted the overhaul.
Synovus is also taking steps to boost sales of investment products through branches by hiring licensed sales representatives to work in branches instead of referring customers to a centralized unit. And it has created private banking groups in 15 of its largest markets over the past year to get more business from the affluent, Mr. Anthony said.
All the initiatives now under way are aimed at strengthening the company by adding new areas of growth. Still, as a midsize player in a world of ever-expanding megabanks, Synovus is sometimes mentioned as a potential takeover target.
But analysts say buyers would balk at Synovus because of its 80% ownership of TSYS and its decentralization philosophy.
TSYS earned $151 million in 2004, about 32% of Synovus' profit. The banking side brought in the rest, $315 million, Mr. Blanchard said.
TSYS could expand its share of profits up to about 35% in the short term as it integrates all the new contracts in its pipeline. Mr. Blanchard said he would be comfortable with that level, though "30% is probably the target. We could certainly go above it, but we don't want to go too much below it."
In other words, Synovus does not want to expand too quickly through acquisitions or retail growth.
Mr. Blanchard said that though he doubts his company will be forced to sell, unless it "really stumbles," there are no guarantees.
"Every day," he said, "we've got to get up and come down here and earn the right to keep doing it the way we're doing it."
