Synovus Financial has been treading water for the past six months, recording a small return of 1.8% while holding steady at $51.75.
Is there a buying opportunity in Synovus Financial, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Synovus Financial Not Exciting?
We don't have much confidence in Synovus Financial. Here are three reasons why you should be careful with SNV and a stock we'd rather own.
1. Net Interest Income Points to Soft Demand
Our experience and research show the market cares primarily about a bank’s net interest income growth as non-interest income is considered a lower-quality and non-recurring revenue source.
Synovus Financial’s net interest income has grown at a 4.2% annualized rate over the last four years, worse than the broader bank industry.
2. Low Net Interest Margin Reveals Weak Loan Book Profitability
Net interest margin represents how much a bank earns in relation to its outstanding loans. It’s one of the most important metrics to track because it shows how a bank’s loans are performing and whether it has the ability to command higher premiums for its services.
Over the past two years, we can see that Synovus Financial’s net interest margin averaged a subpar 3.2%, indicating the company has weak loan book economics.
3. TBVPS Growth Demonstrates Strong Asset Foundation
In the banking industry, tangible book value per share (TBVPS) provides the clearest picture of shareholder value, as it focuses on concrete assets while excluding intangible items that may not hold value during challenging times.
Although Synovus Financial’s TBVPS increased by a meager 2.9% annually over the last five years, the good news is that its growth has recently accelerated as TBVPS grew at a decent 10.1% annual clip over the past two years (from $25.71 to $31.19 per share).
Final Judgment
Synovus Financial’s business quality ultimately falls short of our standards. That said, the stock currently trades at 1.4× forward P/B (or $51.75 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere. Let us point you toward one of our top digital advertising picks.
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