NEW YORK (
(SNV - Get Report)
saw shares climb by more than 6% Friday following second-quarter earnings that were nearly doubled profits of a year ago and an announcement by the Columbus, Ga-based institution that it would pay back nearly $1 billion in preferred shares to the U.S. Treasury.
Synovus shares, which were up more than 6% Friday morning, were up 4.85% to $3.24 midday Friday, compared to just a 0.27% rise for
SPDR KBW Regional Banking
, an exchange-traded fund that tracks the regional banking sector.
Synovus also sold nearly 60 million shares at $3.09 per share. Proceeds of this offering, a planned $130 million preferred stock offering and a $680 million dividend from its subsidiary bank will be used to pack back the Treasury.
The bank's pre-tax income rose to $72.9 million for the second quarter, up 56.6% from $46.6 million in the first quarter of 2013, and up 95.2% from $37.3 million in the second quarter of 2012.
"They're going to end up with lots of capital. It makes them much more attractive. The regulators can't go after them. This is suddenly a much stronger institution than it was before. Clients, particularly business clients that might not have been willing to work with them in the past because the capital was slender won't have than concern today," said Gary Townsend, portfolio manager at Hill Townsend Capital who owns Synovus shares.
Synovus was one of the hardest hit among the large regional banks that survived the subprime mortgage crisis, and it is still in recovery mode. Townsend expects it will eventually be sold, and though he doesn't expect it to command a large premium above book value, he believes the bank will continue to grow earnings and recapture a $789 million deferred tax asset, allowing the stock to appreciate until it is eventually taken out.
"It's one of the few of the larger regional banks that is nowhere near finally recovering. It has certainly been a laggard if we look at, say,
(STI - Get Report)
Fifth Third Bancorp
(FITB - Get Report)
, there have been remarkable turnarounds," Townsend says.
Written by Dan Freed in New York