Synovus expects fee-income boost with GreenSky partnership

Synovus Financial says it's expecting to become the primary banking partner for the home improvement lender GreenSky, a deal that will boost the Georgia-based bank's fee income as it originates GreenSky loans. 

The news is part of Goldman Sachs' planned exit from consumer lending, an ill-fated strategy that prompted the Wall Street firm to buy GreenSky in 2022 when the sector was red-hot only to put it up for sale a year later.

Before being part of Goldman, GreenSky made point-of-sale loans in partnership with regional banks that included Synovus, Regions Financial in Alabama and Fifth Third Bancorp in Ohio. It has a wide network of contractors who float financing options to homeowners. 

Synovus, which has continued working with GreenSky while it's been under Goldman Sachs, disclosed in an investor presentation this week that it's expanding its relationship with the home improvement lender.

Goldman Sachs is in the process of selling GreenSky to a consortium of investors led by the firm Sixth Street; the deal is expected to close early next year. 

Once the deal closes, Synovus will be the sole administration agent for GreenSky, CEO Kevin Blair said at an investor conference Wednesday. Whenever GreenSky makes a new loan, Synovus will bring it onto its portfolio for a few days and then sell it to a third party — and reap a fee for those services.

The arrangement will "create an opportunity for us to continue to produce additional fee income," Blair said. The $59-billion asset company expects its GreenSky-related fee income could top $20 million next year based on the lender's current projections for activity.

Brandon King, an analyst at Truist Securities, was upbeat on the deal.

"We think the expanded relationship provides a low-risk source of fee income that should help improve SNV's return on equity," King wrote in a note to clients, referring to Synovus' stock ticker. 

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Under the arrangement, GreenSky would underwrite its loans to fit with Synovus' credit appetite and risk management policies. 

Synovus will also see a one-time gain of $12 million this quarter and $5 million next quarter, since it's facilitating two chunks of loan sales that are currently on Goldman Sachs' portfolio.

Goldman's GreenSky acquisition was part of the investment bank's much publicized push into consumer lending, which included personal loans through its Marcus brand along with credit card partnerships with Apple and General Motors. 

The efforts have racked up losses for Goldman Sachs, adding to the skepticism among investors who thought the bank should have stuck to its strengths in M&A dealmaking and wealth management for high net worth investors. 

While it's selling GreenSky and sold its Marcus loan portfolio, Goldman's card programs with Apple and General Motors are part of longer-term deals. CEO David Solomon has said the company's focus is "managing them better, getting rid of the drag and bringing them to profitability." But the Apple card has run into trouble for Goldman, and the two companies are reported to be discussing terms to end their partnership, with Apple potentially moving to a different bank.