Synovus to focus on merger integration, digital upgrade in 2019
Synovus Financial, fresh off closing its first traditional bank acquisition since the financial crisis, plans to take another break from deals.
The $45 billion-asset company plans to spend this year integrating its purchase of FCB Financial Holdings in Weston, Fla., and rolling out an enhanced digital banking platform, Chairman and CEO Kessell Stelling said during a Tuesday conference call to review fourth-quarter results.
Acquisitions are "certainly off the table," he said.
“We’re going to be focused on integration and achieving the cost saves we’ve talked about, as well as the revenue synergies we think will come," Stelling added. "You don’t prove that out in one or two quarters, or even one year."
After reporting strong quarterly results, Synovus pledged to return about $500 million to investor through a higher dividend and more buybacks.
Synovus repurchased $175 million in stock and paid out $106 million in dividends in 2018.
The Columbus, Ga., company earned $101.9 million in the fourth quarter. A year earlier, Synovus reported net income of $27 million, though the results included $43 million hit from tax reform and $23 million in costs tied to debt repayment.
“Synovus became a stronger company in every respect in 2018,” Stelling said. “We delivered outstanding operating and financial performance last year. These results will provide the opportunity to accelerate capital returns to shareholders in 2019.”
While fourth-quarter revenue rose by 8%, $365.9 million, the overall results were slightly below analysts' expectations. Still, industry observers said the company’s aggressive capital plan would likely mute any negative reaction from investors.
“A more aggressive capital return strategy ... could lead to an upward bias to estimates and provide some lift to shares,” Will Curtiss, an analyst at Hovde Group, wrote in a note to clients.
The capital allocation moves “signal good use of excess tangible capital,” Christopher Marinac, an analyst at FIG Partners, wrote in his client note.
Synovus’ earnings did not include FCB, which the company bought on Jan. 1. FCB earned $41.8 million in the fourth quarter, Synovus said.
Deposits increased by 2.2% from a year earlier, $26.7 billion. The company reduced its reliance on brokered deposits, which fell to 6% of average deposits from 8.4% a year earlier.
Total loans rose by 4.7%, to $25.9 billion, as growth in commercial and consumer lending offset a 5% decline in commercial real estate loans.
Loans tied to land acquisition and residential construction and development made up just 1.7% of total loans, Stelling said. Such loans were a quarter of Synovus' portfolio before the crisis.
“We now consider them a nonstrategic portfolio,” Stelling said.
Synovus also reported strong asset quality. Nonperforming assets totaled 0.44% of overall assets, down 9 basis points from a year earlier. While the company's loan-loss provision increased by 41% from a year earlier, the $12 million set aside was significantly below analysts’ expectations.
The company plans to roll out its new My Synovus digital banking portal during the first quarter, Stelling said.
“We’re very excited about how existing customers and potential new customers will view it,” Stelling said. “I couldn’t be more pleased with our progress.”