Is Synovus Financial Finally Moving On?


Synovus Financial (NYS: SNV) has seen tough times since the financial crisis, but its ambitious turnaround plan is producing some impressive results.

The bank reported its fourth profitable quarter in a row earlier this week, indicating that its improved outlook has some staying power.

The housing bust caused a $1.41 billion loss for the bank in 2009, when it was left holding the bag for nearly $800 million of outstanding residential construction loans, primarily in the Atlanta area. The bank began to clean up its act, cutting costs and consolidating its 30 separate bank charters in mid-2010. Credit quality is improving.

One thorny issue, however, is the nearly $1 billion in Troubled Asset Relief money the bank borrowed during the crisis and has still been unable to repay. Though the bank had hoped to do so this year, its CEO has stated that it will most likely have to wait until 2013.

Synovus isn't the only regional player that hasn't repaid TARP loans. M&T Bank (NYS: MTB) also has a balance of over $380 million, which it has not repaid despite a fairly hardy balance sheet. Regions Financial (NYS: RF) , however, paid back $3.5 billion this past April, and it has been performing admirably this year, with its stock value rising over 60%. The bank is increasing its presence in the credit card market as well as it looks for new products and services to make up for revenue lost to increased regulation.

Other regional banks have been riding high as well, perhaps because of the distrust of larger banks, and the fact that these institutions have been taking up the slack as big banks tighten up on lending. BB&T (NYS: BBT) , for example, has been on a tear, having just released an earnings statement showcasing a revenue increase of over 20% since last year, and EPS boosted by 64% from a year ago. The bank reported decreased credit costs as well as a jump in mortgage business.

SunTrust (NYS: STI) is another regional that has turned in some nifty numbers recently, beating both EPS and revenue estimates. The bank has also seen increased loan performance, and its charge-off rate declined by 62 basis points from this time last year. The horizon is not clear just yet, however, as increased put-back requests from Fannie Mae and Freddie Mac spurred Suntrust to pad its reserves for that purpose.

Fool's Take
Investors' heightened awareness of smaller regional banks this year has given all these banks a boost, but the hard work put in by institutions like Synovus will be what turns a short-term lift into a long-term improvement that investors can count on. The next year will be important for Synovus, as investors watch to see if the bank manages to pay down its TARP debt. With the great strides the bank has made so far, that is a distinct possibility. For investors, keeping an eye on this bank could be time well spent.

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