Synovus sees more loan growth but reserves for cash flow

Synovus Financial Corp. in Columbus, Georgia, is expecting continued growth in loans and interest income next year, but executives said the cost of deposits is rising and financial pressures may follow. .

The $60 billion-asset company on Thursday projected loan growth of 5% to 9% in 2023, with commercial and industrial businesses continuing to borrow and invest, and declining A decline in demand for commercial real estate loans amid concerns about a slowing economy. .

“The real difference is that C&I will continue to grow at a double-digit rate,” said Chairman, President and CEO Kevin Blair during Synovus’ fourth quarter earnings. found

Synovus said in its report that loan income increased to $ 1.14 billion in the last quarter of 2022. The total increase is 11% annually, marking the company’s sixth quarter the double digit increase in loans.

Synovus Financial estimates loan growth at 5% to 9% by 2023, with commercial and industrial customers continuing to borrow and invest, thereby reducing the satisfaction needs of real estate buyers.

According to Blair, the rate of growth is likely to moderate this year, if given back to the CRE needs and increased credit standards. But, despite the information for at least a lower rate, he expects the strength of loans to continue.

Amid growth and higher interest rates that boosted profitability, Synovus said its fourth-quarter interest income rose 5% from the first quarter and 28% from a year earlier.

Fourth-quarter loan-to-value ratios were stable from last quarter – and strong – with a non-performing loan to loan ratio of just 0.29. %.

The company said deposits grew 2% to $1.17 billion in the fourth quarter, while financing costs remained in check. With lending rates strong and deposit rates growing relatively small, Synovus reported an interest rate of 3.60%. That was up 11 basis points from the first quarter and ahead 64 basis points from a year earlier. In inflationary environments, flexible loans quickly recover and support bank surpluses. Deposit increases are often delayed.

However, in the year ahead, Synovus expects an increase in the cost of deposits to accumulate and affect the funds.

“As we look to 2023, we expect the revenue to drop from where we finished in the fourth quarter,” Chief Financial Officer Andrew Gregory said on the earnings call. “And really, what’s going to happen with that, in the first half of the year, we believe we’re going to see heavy investment.”

Caution about rising deposit rates and signs of a slowdown in lending are expected to be reflected in the earnings season, as “better off uncertainty, particularly in the health of the economy and the impact of interest rates and asset quality,” said Keefe, Bruyette & Woods analysts. Christopher McGratty.

Synovus reported net income available to common stockholders of $197.5 million, or $1.35 per diluted share. That was up from $192.1 million, or $1.31, for the fourth quarter of 2021.

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