Synovus Sinks After Stuffing Loss Cushion

Synovus CEO Richard Anthony said at the time that the firm plans to use the capital to further manage credit losses, increase lending and invest in other growth opportunities.

US Bancorp (USB Quote) and Regions Financial (RF Quote) also recently warned shareholders that they plan to boost their loan loss provisioning.

At least one analyst, Robert Patten of Regions Financial's Morgan Keegan, cut his rating on Synovus to market perform following the warning.

"While Synovus' announcement for significantly higher credit losses is hardly a surprise given the accelerated pace of deterioration in the housing market and the overall economy that we have witnessed over the last few months, the size of the losses was higher than we had anticipated," he wrote in a note Monday. "If this announcement is management's attempt to catch up and better position the bank to deal with its challenges that would be a positive. The other side is that management was far behind the curve in dealing with credit issues. [O]ur view is it is a little of both."

Patten added that most banks will report "significantly higher" credit losses and large reserve builds during fourth-quarter earnings results. He says the banking industry is likely to post its first overall earnings loss since 1990.

Other Southeastern regional banks, including SunTrust Banks (STI Quote), The South Financial Group (TSFG Quote) and Colonial Bancgroup (CNB Quote), were also trading lower Monday morning as investors worried about their loss exposures.

Scott Valentin, an analyst at Friedman Billings Ramsey, says Synovus' loss expectations for the quarter "suggest that there is no imminent prospect of a recovery, even in markets such as Atlanta or Florida that led us into this recession," according to a note. He worries about other Southeastern regional banks with large construction and commercial real estate portfolios.

SunTrust, which has a "significant presence in these markets, remains the most at risk in our coverage for substantial reserve add and a dividend cut," he notes.