Synovus Financial (SNV)2024-07-18 17:45Financial Data and Key Metrics - Adjusted expenses for Q2 2024 were 310 million in Q3 2024, driven by higher personnel costs and infrastructure project spending [1] - The company expects a 1% increase in expenses from Q2 to Q3 2024, with similar levels holding in Q4 2024 [1] - For full-year 2024, expenses are expected to increase by 2% (midpoint of guidance), driven by merit increases, consolidation of Qualpay, and credit-related expenses [11] - The company's CET1 ratio is slightly above the target range of 10% to 10.5%, and management intends to manage capital at the higher end of this range due to economic uncertainty [12][132] Business Line Data and Key Metrics - Capital markets fee revenue surged 128% in Q2 2024 and is expected to remain elevated in the second half of the year, though there may be some quarter-to-quarter variability [7][18] - Loan production increased by 37% quarter-on-quarter in Q2 2024, reaching 196 million in Q2 2024, while national accounts and third-party consumer loans decreased by 387 million in Q2 2024, but the pace of decline is slowing [103] Company Strategy and Industry Competition - The company is focusing on optimizing its balance sheet, reducing non-relationship lending, and prioritizing core client growth [101][122] - Investments in fraud detection, fraud prevention, and pricing analytics are ongoing, with some inflationary impacts expected [1] - The company is well-positioned for growth in its commercial and wealth management lines of business, with a strong value proposition for clients [80] Management Commentary on Operating Environment and Future Outlook - Management expects expenses to normalize in 2025, following efficiency efforts in 2023 that reduced costs and improved efficiency [3] - The company is optimistic about its ability to drive meaningful and sustainable growth, supported by a strong capital position and favorable economic conditions in its footprint [34][178] - Management anticipates net interest margin expansion in the second half of 2024, driven by fixed-rate asset repricing and the full impact of securities repositioning [127] Other Important Information - The company completed 538 million, or 1.25% of loans, in Q2 2024 [128] - Net charge-offs declined to 32 basis points in Q2 2024, and management expects charge-offs to be flat to down in the second half of the year [129] Q&A Session Summary Question: Expense Drivers for 2025 - Management expects expenses to normalize in 2025, with 2024 benefiting from efficiency efforts in 2023 [3] Question: Capital Markets Fee Revenue Outlook - Capital markets fee revenue is expected to remain elevated in the second half of 2024, though there may be some quarter-to-quarter variability [7][18] Question: CET1 Ratio Management - The company intends to manage its CET1 ratio at the higher end of the 10% to 10.5% range due to economic uncertainty [12][132] Question: Loan Growth and Payoff Activity - Loan production increased significantly in Q2 2024, but payoffs and paydowns, particularly in senior housing and national accounts, offset this growth [62] Question: Deposit Trends - Non-interest-bearing deposit balances declined in Q2 2024, but the pace of decline is slowing, and deposit costs remain stable [103][104] Question: Credit Quality and Charge-Offs - Net charge-offs declined in Q2 2024, and management expects charge-offs to be flat to down in the second half of the year [129] Question: Fee Income Growth - Fee income growth is expected to be in the mid-single-digit range for 2024, with potential upside from capital markets and loan growth [147][150]