Synovus Financial grew loans at a strong pace in the second quarter, but noted hints of ebbing demand amid inflationary pressures and a series of Federal Reserve interest rate hikes.
The “wild card” for the second half of 2022 is “uncertainty in the environment and what will happen with client loan demand,” President and CEO Kevin Blair said on the $57 billion-asset company’s earnings call Thursday.
In particular, he noted “some slowing” in recent commercial real estate lending activity.
In addition to rising interest rates potentially curbing demand, Chief Credit Officer Robert Derrick said Synovus has already seen some businesses push the pause button on CRE projects because of inflation in the form of both high labor and materials costs.
“So we would expect that to have a headwind to real estate growth,” Derrick said. “All in all, I think it will slow.”
Through the second quarter, however, any easing of demand had yet to show up in Synovus’ results.
The Columbus, Georgia-based bank reported broad-based loan growth, with total loan balances ending the second quarter at $41.2 billion. Excluding Paycheck Protection Program balances, loans grew by 12% on an annualized basis.
The Buffalo, New York, bank flagged urban hotels and construction projects as potential sources of trouble. “But there’s nothing that’s flashing red right now that says there’s a big crisis coming,” said a top executive.
It marked Synovus’s fourth consecutive quarter of annualized double-digit loan growth. CRE loans and consumer loans each rose at a 12% rate, while commercial and industrial credits increased at an 8% pace.
Total second-quarter revenue of $522.7 million was up 7% from a year earlier.
Synovus posted net income of $169.8 million, or $1.16 per share, compared with $177.9 million, or $1.19, a year earlier. The decline was primarily due to a prior-year benefit from the reversal of a provision for credit losses, the company said.
