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Synovus: Regional Bank Rally Killer?

Regional banks surge on Tuesday after bullish guidance from Regions Financial, but regional peer Synovus slips in after market trading after its first quarter earnings.



) -- Regional banking player

Synovus Financial

(SNV) - Get Synovus Financial Corp. Report

reported an earnings per share loss two cents better than the Street consensus on Tuesday after the market close.

Synovus shares had gained 7% on Tuesday during regular trading, and in after market trading, shed close to 6%. Was Synovus just giving back after an aggressive one-day rally, or was its earning loss not a big enough improvement to satisfy investors?

The net loss at Synovus for the first quarter was $215.7 million, or a loss of 47 cents per share, versus a Street consensus of a 49 cent loss per share.

Regional banks surged on Tuesday in regular trading including Synovus and

Regions Financial

(RF) - Get Regions Financial Corporation Report

which was up Tuesday by more than 5% after its latest earnings loss.

Regions Financial was the trigger for the rally after its management team said the credit situation should improve by the second quarter, guidance that was viewed as a bold call by the market. Close to 60 million shares of Regions Financial were traded on Tuesday, twice its average trading volume.

The big banks, including


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, have reported earnings that beat expectations and rallied. The regional bank outlook has been less bullish as commercial loan losses continue to weigh on a sustained recovery.

Net charge-offs at Synovus decreased by $46 million from the previous quarter, yet non-performing assets were up by $11.5 million from the fourth quarter 2009.

Synovus' provision for loan losses increased by $25 million to just under 4% of total loans.

Synovus was less bold in its guidance than Regions Financial. "During the quarter, we continued our aggressive approach of recognizing, charging down, and disposing of non-performing assets," said Synovus CEO Richard Anthony in the earnings statement. "For the fourth consecutive quarter, our non-performing asset inflows declined, a trend which we believe to be the best predictor of future credit costs," Anthony said.

Synovus did guide investors to a good chance of profitability in 2010 based on an improving credit scenario, however. "With the expected decline in credit costs, which will drive a reduction in the loan loss reserve, we continue to believe that we have an opportunity to return to profitability at some point during 2010," Anthony said.

Synovus also stated in its earnings that it is looking at "additional strategic initiatives to bolster its capital position, including potential capital market transactions, additional liability management initiatives, and certain non-dilutive transactions."

-- Reported by Eric Rosenbaum in New York.

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