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Synovus Financial Corp. SNV shares have gained 31.5% in the past six months, outperforming the industry’s growth of 19.7%. The stock has also outperformed its close peers like Hancock Whitney Corporation HWC and F.N.B. Corporation FNB in the same time frame.
Six-Month Price Performance
Image Source: Zacks Investment Research
After such a strong rally, investors are left wondering whether they should buy SNV stock now or wait for a better entry point. Let us find out.
What’s Aiding SNV’s Performance?
Positive Impact of Fed’s Rate Cuts: The Federal Reserve lowered the interest rates by 100 basis points since September 2024. The fed fund rates are now in the 4.25-4.5% range. Also, the central bank hinted at two more rate cuts this year.
The rate cut is a positive development for SNV, which is under increased funding cost pressures. During the nine months of 2024, NII declined 6.2% from the same period a year ago. NIM declined to 3.16% in the first nine months of 2024 from 3.25% in the same period of 2023.
With a decline in interest rates, funding costs will stabilize and decline eventually. This will support Synovus’ NII and NIM growth in the upcoming period.
Technological and Digital Advancement: Synovus is making progress in technology and digital advancement to enhance its financial services and expand its capabilities. In December 2024, SNV launched Accelerate Trade to support its international business clients by streamlining global trade finance processes. This platform, developed in collaboration with fintech provider Finzly, offers comprehensive visibility into international transactions and integrates essential tools, such as letters of credit, documentary collections, export and import financing, and bank guarantees.
Additionally, Synovus extended its collaboration with Sagent in October 2023 to enhance mortgage loan servicing through real-time, cloud-based solutions. In April 2022, SNV acquired a 60% stake in Qualpay, reinforcing its payment processing capabilities and enabling seamless integration of financial services for merchants and software vendors.
These initiatives highlight the bank’s focus on leveraging technology to improve efficiency, enhance client experience and expand its footprint in international banking and fintech-driven services.
Decent Balance Sheet: The bank has a decent liquidity position. Its cash and cash equivalents were $1.85 billion as of Sept. 30, 2024. As of the same date, the bank didn’t have any short-term borrowings. Its long-term debt was $2.02 billion as of Sept. 30, 2024.
Thus, given the company’s decent cash levels and access to debt markets, it is expected to continue meeting debt obligations, even if the economic situation worsens.
Strong Capital Position Aids Capital Distribution: As of Sept. 30, 2024, Synovus’ Common Equity Tier 1 ratio and the total risk-based capital ratio of 10.65% and 13.62%, respectively, were well above the regulatory requirements.
The company has paid out a steady dividend of 38 cents per share since March 2023. The company raised its dividend three times in the past five years and has a payout ratio of 38%.
The company authorized a new share repurchase program worth $300 million in January 2024. As of Sept. 30, 2024, approximately $79.4 million worth of buyback authorization remained available. Management expects to utilize the whole authorization in the upcoming quarter.
Given its robust capital position, the company’s capital-deployment activities seem sustainable and will boost investor confidence in the stock.
Likewise, its peers FNB and HWC also have steady capital distribution plans. F.N.B Corp pays out a dividend of 12 cents per share while Hancock Whitney pays 40 cents per share. FNB and HWC have payout ratios of 34% and 31%, respectively.