Synovus struggles to win back investors despite early success integrating FCB
Executives at Synovus Financial know they must do more to win back investors — even though they are ahead of schedule cutting costs from the Columbus, Ga., company's latest acquisition.
The $47 billion-asset Synovus is on track to cut $30 million in annual expenses in 2019 from the purchase of FCB Financial Holdings in Weston, Fla., which closed on Jan. 1. The company originally forecast that it would cut half of the overall $40 million in costs in 2019.
Synovus is also on pace to reach the deal's expected 6.5% accretion in earnings per share.
While he declined to "wave the victory flag," Synovus Chairman and CEO Kessell Stelling said during a Tuesday conference call to review quarterly results that he is optimistic the company can cut more expenses than it projected, which should boost the deal's profitability.
Still, Synovus' stock is down 29% from the deal's July 24 announcement, which is something Stelling said he thinks about daily. He acknowledged during the conference call that management may have underestimated shareholders' skepticism about the acquisition.
Synovus needs "to grind it out," Stelling said. "At the end of the day, we've got to execute."
Stelling has spent considerable time in South Florida meeting with FCB Financial's employees and customers. The company announced last week that it had hired five bankers from SunTrust Banks to join its private wealth management team in South Florida.
The company's stock rose by nearly 4% on Tuesday following a strong earnings period.
Synovus reported that its first-quarter earnings rose 16% from a year earlier, to $117 million, as total revenue increased by 40%, to $476.5 million. Year-over-year comparisons were skewed by the FCB acquisition, with added $9.3 billion in acquired loan balances.
Though nonperforming assets rose by 18%, to $155 million on March 31, Synovus executives said they are not seeing any material weakness in credit quality. Synovus' net interest margin, which was unchanged at 3.78%, will likely face moderate pressure for the rest of the year.
Synovus is looking for a permanent chief financial officer to succeed Kevin Blair, who was named chief operating officer late last year. Stelling told an analyst on the call that the company hopes to fill that post by the end of May.
The company also noted that Kent Ellert, FCB's former president and CEO, will retire at the end of the year. Stelling said Ellert, who will remain an adviser through 2021, has been a "stabilizing force" since the deal's closing.
When asked why Ellert, who has a five-year noncompete agreement, was leaving so soon, Stelling said "you can't force someone to work." While Synovus had hoped Ellert would stay longer, Stelling said, "things change when you sell a bank ... and you're not the CEO anymore."