Synovus Financial (SNV) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Synovus reported fourth quarter EPS of $1.25, up 6% from the previous quarter, and adjusted fourth quarter EPS rose 18% year-over-year, excluding the FDIC special assessment [6][10] - For 2024, EPS was$ 3.03, while adjusted EPS was $4.43, indicating a year of healthy focused growth [6][10] - Adjusted revenue increased 3% on a sequential and year-over-year basis, with net interest income growth and net interest margin expansion [10][22] Business Line Data and Key Metrics Changes - The company grew balances by 4% in higher-growth commercial lending segments, including middle market, corporate, and investment banking [7] - Core deposits grew by 3%, with a new legal industry deposit vertical launched [8][19] - Adjusted noninterest revenue increased 2% from the prior quarter, driven by stronger core banking, capital markets, and wealth management income [12][25] Market Data and Key Metrics Changes - Core deposit balances grew by$ 1.1 billion or 3% sequentially, with public funds growth contributing significantly [19] - The average cost of deposits declined 26 basis points to 2.46%, reflecting efforts to manage deposit costs amid changing rates [21] - The wholesale funding ratio improved to 11% compared to 13.5% in the previous year [21] Company Strategy and Development Direction - Synovus aims to continue executing strategies outlined in late 2023, focusing on healthy growth and effective collaboration [6][7] - The company plans to invest in expanding middle market commercial and wealth relationship manager teams, as well as other growth-related investments [30][41] - The capital deployment priority remains on client loan growth, with a $400 million common share repurchase program authorized [43] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to a more normalized growth environment in 2025, supported by improved client sentiment and production momentum [51][56] - The company expects loan growth of 3% to 6% in 2025, driven by middle market, corporate, and investment banking segments [36][37] - Management anticipates net charge-offs to remain in the 25 to 35 basis point range in the first half of 2025 [41] Other Important Information - The preliminary common equity Tier 1 ratio increased by 62 basis points to 10.84% in 2024, supported by solid earnings accretion [9][33] - The company executed about$ 50 million in share repurchases during the fourth quarter [14][33] - Management acknowledged the retirement of Chief Credit Officer Bob Derrick, who contributed significantly to the company [14] Q&A Session Summary Question: Can you talk about the loan growth expectations? - Management expressed optimism about returning to a more normalized growth environment in 2025, citing improved client sentiment and production momentum [51][56] Question: How do you expect the margin to trend after the first quarter? - Management expects the margin to be in the mid-320s in the first half of the year, with potential expansion in the second half [60] Question: Is there more leverage for capital return in a deregulatory environment? - Management indicated flexibility in their capital plan, allowing for stable capital ratios even with varying loan growth scenarios [66][68] Question: What are the expectations for revenue growth if there are no rate cuts in the first half? - Management noted that the lead-lag impact of rate changes would be less severe than previously anticipated, potentially benefiting revenue guidance [82] Question: Can you provide insight into capital markets trajectory? - Management highlighted a 13% growth in capital markets and expressed confidence in continued double-digit growth due to increased diversification [91][92] Question: What is the outlook for credit quality with rising interest rates? - Management indicated that while higher rates could pose some concerns, they do not expect a material negative effect on credit outlook [140][145]