Synovus Getting Better All the Time: Is It Safe?

COLUMBUS, Ga. (TheStreet) -- Synovus Financial(SNV Quote) raised $600 million in common stock last week, about as much as it lost in the second quarter. The Columbus, Ga.-based bank now has more capital as well as an attractive share price. But investors ought to expect another year of outsized loan losses.

The company's shares closed at $3.90 on Tuesday after pulling back from $4.43 on Sept. 16, when the offering was priced at $4 a share. Still, Synovus has risen 48% since the S&P 400 Midcap Financials Index bottomed on March 6. At any other time, that would be a stellar performance, but Synovus underperformed the index's 83% advance.

Larger regional banks also outperformed Synovus. FifthThird(FITB Quote) returned 695% and Marshall & Ilsley(MI Quote) jumped 173%. Huntington Bancshares(HBAN Quote), which priced a $400 million stock offering yesterday, soared 346%.

Synovus, founded in the 1880s by the treasurer of a mill, had $34 billion in assets in June, spread across 35 bank subsidiaries mainly in Georgia, but also in Alabama, South Carolina, Florida and Tennessee.

Analysts were positive about Synovus' capital increase, with Kevin Fitzsimmons of Sandler O'Neill calling it "a game-changer for worst-case fears on SNV." Sandler O'Neill was a co-manager of the equity offering.

Some analysts were cautious, including Paul Miller of FBR Capital Markets, who said the increased capital helped "to buy SNV time." He reiterated his $3 price target for Synovus, saying the bank will need to raise even more.

Synovus' second-quarter results looked ugly. The company reported a net loss of $587 million as it made aggressive provisions for loan-loss reserves and charged-off $355 million in nonperforming loans, concentrated mainly in commercial construction and development loans. The annualized ratio of net charge-offs to average loans was 5.04%.