Synovus lowers loan growth outlook amid surge in CRE payoffs
Synovus Financial in Columbus, Ga., expects loan growth to fall short of its forecast for the year, in part because of a spike in payoffs on commercial real estate loans during the third quarter.
The $47.6 billion-asset bank company had been counting on increased volume to offset a squeeze on its margins from resulting from falling interest rates. It had been predicting growth of between 5.5% and 7.5% for 2019, but now expects growth to fall “slightly below” that range. The reason: Many customers are selling commercial real estate properties at attractive prices and using the proceeds to pay off loans, Chairman and CEO Kessel Stelling said on a call with analysts Tuesday.
These payoffs on commercial real estate increased about 50% from the previous quarter, resulting in a $62.4 million decrease on its commercial real estate balances to less than $10.3 billion.
Stelling said that the bank had the opportunity to renew some loans but decided to pass because it was not comfortable with the terms borrowers were expecting.
“I would much rather have to revise guidance down than compromise on those things we said we were not going to compromise on,” Stelling said on the call.
Synovus' shares were down 4.2% in midday trading Tuesday to $34.72.
Synovus’ earnings per share of 83 cents during the third quarter fell 17 cents short of the mean estimates of analysts polled by FactSheet Research Systems. Overall net income climbed 24% in the quarter year over year to $135.7 million.
The bank said that total loans increased $279.3 million for the quarter, or 3.1%, from three months earlier, to $36.4 billion. Loans climbed 42.4% year over year thanks primarily to the acquisition of FCB Financial Holdings in Florida, which closed in January.
During the call, the company reiterated its plans to continue making consumer loans in partnership with GreenSky, an Atlanta fintech that facilitates point-of-sale loans for Home Depot and other merchants. GreenSky lost a key banking partner in Regions Financial of Birmingham, Ala., earlier this year, sparking speculation that other banks might also sever ties to focus on making such loans themselves.
“We’re comfortable in the relationship,” Stelling said.
Synovus has seen its expansion into Florida markets start to pay off. Its new teams of middle-market bankers there were “primary drivers” of the bank’s more than 540% year-over-year growth in capital markets fee income to $6.2 million.
Synovus’ new hirings for its home lending division and a boom in refinancings led its mortgage income to nearly double year over year to $10.4 million.