Synovus (SNV) Arm Ratings Affirmed by Moody's, Outlook Stable

Ratings and Outlook - Moody's affirmed Synovus Bank's long-term issuer rating at Baa3 and maintained its long- and short-term local currency deposit ratings at A3 and Prime-2, respectively [1] - The outlook for Synovus Bank's long-term issuer and deposit ratings remains stable [2][10] - Synovus Bank's Baseline Credit Assessment (BCA) and adjusted BCA of baa2, as well as its long- and short-term Counterparty Risk Ratings, were also affirmed [11] Financial Performance and Risk Management - Synovus Bank's capitalization, measured by TCE/risk-weighted assets (RWA), increased to 10.3% as of Mar 31, 2024, up from 9.7% a year earlier [12] - The bank's profitability is relatively strong, with an average net income to tangible assets ratio of 0.97% between 2019 and 2023 [4] - Synovus Bank has taken strategic initiatives, such as shifting its investment portfolio, to boost asset yields [13] - The bank's core deposit funding is about 68% insured or collateralized, which mitigates funding constraints [5] - Synovus Bank's liquidity profile is considered a strength, with 20.5% liquid banking assets to tangible banking assets as of Mar 31, 2024 [14] Commercial Real Estate (CRE) Concentration - Synovus Bank faces credit headwinds due to significant concentration in commercial real estate (CRE) loans [3] - The bank's higher level of capitalization and competent credit risk management help mitigate CRE concentration risks [4] - The recent sale of medical office building loans has strengthened the bank's resilience against CRE concentration risks [12] Potential Rating Changes - A deterioration in asset quality, increased risk appetite, or capital levels below 9.5% TCE/RWA could negatively impact Synovus Bank's ratings [6] - A continuous decline in profitability to a net income/tangible assets ratio of 0.6% or a steep decline in deposits and balance sheet liquidity levels could also pressure ratings [6] - An upgrade in the BCA is possible if Synovus maintains a TCE/RWA ratio well over 11%, significantly lowers asset risk, and improves pre-provision profitability and liquidity profile [15] Industry Comparison - Synovus Financial Corp's (SNV) shares have gained 0.3% year to date, compared with a 2.3% decline in the industry [16] - Truist Financial's (TFC) long-term senior unsecured debt rating was downgraded to Baa1 from A3 in May 2024 [18] - New York Community Bancorp, Inc's (NYCB) Long-Term Issuer Default Ratings were downgraded to BB from BB+ by Fitch Ratings in May 2024, though the outlook remains stable [19]