Synovus Financial (US:SNV)2023-10-19 17:21Financial Data and Key Metrics Changes - The company reported a diluted EPS of $0.60 and adjusted EPS of $0.84 for Q3 2023, with net interest income of $443 million, down 7% year-over-year and 3% sequentially [53][45] - Total loan balances decreased by $674 million or 2% sequentially, impacted by the sale of a $1.2 billion medical office loan portfolio [24] - The common equity Tier 1 (CET-1) ratio ended the quarter at 10.13%, slightly above the targeted capital levels [23][60] Business Line Data and Key Metrics Changes - Core deposits increased by 1% or $432 million from the previous quarter, driven by a 23% increase in time deposits, while non-interest bearing deposits declined by 4% [55] - Loan growth is expected to be between 0% to 2% for 2023, with fourth quarter loan production anticipated to be similar to the third quarter [3] - Non-interest revenue was reported at $107 million, with adjusted non-interest revenue at $106 million, down $4 million from the previous quarter [46] Market Data and Key Metrics Changes - The average cost of deposits increased by 36 basis points to 2.31% in Q3, with a total deposit beta of 42% through the third quarter [44] - The company expects total deposit betas to reach 46% to 47% by year-end [28] Company Strategy and Development Direction - The company is focusing on optimizing its business mix and balance sheet, including the sale of its asset management firm, GLOBALT, to reallocate capital to higher returning fee income lines [15] - Discussions are ongoing to expand a partnership with GreenSky, which could provide additional revenue opportunities [16] - The company aims to maintain a strong capital position while navigating a volatile economic environment [23][60] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by higher interest rates and emphasized the importance of cost containment and balance sheet optimization [17] - The outlook for net interest margin (NIM) is expected to decline in Q4, stabilize in Q1 2024, and then expand due to fixed-rate asset re-pricing [29][32] - Management remains optimistic about the company's ability to grow core client businesses faster than the market [91] Other Important Information - Adjusted non-interest expense increased by 2% from the prior quarter, with a focus on maintaining expense discipline [21][56] - The company implemented a voluntary early retirement program, resulting in a nearly 4% reduction in headcount [49] Q&A Session Summary Question: Credit quality outlook and potential stress areas - Management discussed the normalization of credit costs and indicated that while there have been increases in non-performing loans, they remain manageable within expected ranges [71][70] Question: Update on initiatives and performance targets - Management provided updates on various initiatives, including the Maast banking platform, which has onboarded nine independent software vendors and is seeing significant interest [82][81] Question: Expectations for NIM expansion and risks - Management highlighted that Fed policy and deposit mix shifts are key risks to NIM expansion, with expectations for a gradual improvement in the coming quarters [126][128]