Synovus Sinks After Stuffing Loss Cushion

Synovus (SNV Quote) shares sank as much as 17% early Monday after the bank increased the amount it is setting aside for loan losses in the fourth quarter.

The Columbus, Ga.-based bank on Saturday increased its fourth-quarter loan-loss provision by $200 million from the prior period to $350 million, as it warned of higher loan charge-offs and other credit expenses due to the current troublesome economic conditions. Shares recently were falling 13.2% to $7.12, after hitting a low of $6.79 Monday morning.

The bank also said its charge-off ratio rose to 3.2% of its loan portfolio, with the largest component of the loans related to Atlanta residential real estate loans.

The bank on Friday had said it would increase its provision to $250 million with its charge-off ratio increasing to 2.2% of its loan portfolio. It corrected those warnings on Saturday.

Synovus is also assessing its goodwill for potential impairment during the fourth quarter, it said. The bank said it would officially report fourth-quarter results Jan. 22.

Synovus is the latest regional bank to say that further reserve-building was necessary. The company has a large presence in the Southeast. Synovus said during its third-quarter earnings results in October that the Atlanta market represents 56% of its total nonperforming loans in the residential construction and development portfolios.

The banking institution with $34 billion in assets completed the sale of $968 million of preferred stock and warrants to the U.S. Treasury through the Troubled Asset Relief program, or TARP, in mid-December. Synovus had received preliminary approval on Nov. 14.