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Fitch Affirms Synovus Financial at 'BB'/'B' Following Mid-Tier Peer Review; Outlook Positive

February 5, 2014

NEW YORK --(BUSINESS WIRE)-- Fitch Ratings has affirmed Synovus Financial Corp.'s (SNV) ratings at 'BB'/'B'. The Rating Outlook remains Positive. The Positive Rating Outlook reflects Fitch's view that SNV's IDR's could be upgraded from current levels. A full list of rating actions is at the end of this press release. KEY RATING DRIVERS - IDRS, VRs, AND SENIOR DEBT SNV's ratings remain at the low end of the mid-tier peer group reflecting a still-elevated level of NPAs and relatively tepid earnings performance. SNV's Rating Outlook remains Positive reflecting its improving overall risk profile combined with solid capital levels and recovering asset quality. SNV reports the highest TCE level in the mid-tier regional peer group as well as some of the best year-over-year improvements in asset quality. Fitch calculates SNV's NPAs at 5.4% at 4Q'13, an improvement of over 2% year-over-year but still elevated when compared to higher-rated banks. The volume of NPAs has fallen more than 20% over the same time period. Fitch notes that nearly half of SNV's remaining NPAs are accruing troubled debt restructurings (TDRs) of which 60% are to C&I or investment property borrowers that are able to generate cash flow for repayment as opposed to vacant land borrowers that are likely repaying out of pocket. Fitch expects these TDR characteristics to produce lower levels of loss content than those banks with a high level of consumer-related TDRs that typically perform relatively worse post-modification than commercial TDRs. Fitch also expects the company's level of NCOs to continue to fall throughout 2014 along with nonperforming loan inflows that have averaged under $70 million over the last three quarters. Given SNV's elevated risk profile relative to others in the peer group, Fitch expects capital to be managed at relatively higher levels. Fitch notes that SNV's Fitch Core Capital ratio has increased to 7.7%, or 240 bps, year over year, and is in line with the mid-tier regional peer group average, primarily through the retention of earnings and balance sheet shrinkage. Fitch anticipates that if upcoming stress test results show an ability to do so, SNV will likely begin bumping up its dividend over the near- to mid-term from the current quarterly rate of $0.01 /share that it has been paying since 2009. However, Fitch expects any significant dividend increase to coincide with stronger earnings performance. Fitch notes that earnings performance (current and expected) remains relatively weaker than higher rated banks. While SNV has remained consistently profitable since mid-2011, the bank's ROA has remained in the 45-55 bps range. Fitch expects this level of earnings to just marginally improve in 2014 as credit costs reductions are off-set by continued net interest margin compression. RATING SENSITIVITIES - IDRS, VRs, AND SENIOR DEBT Fitch has maintained SNV's Positive Rating Outlook reflecting its view that over the near to mid-term, SNV's financial and credit profile will continue to improve. Fitch believes that SNV's improvement in fundamental asset quality performance, a primary rating driver, will be a long-term process, as existing NPAs are likely stickier than those that have been worked out of to this point. However, to the extent that Fitch observes continued asset quality improvement that brings asset quality in line with higher rated peers, additional positive rating action are likely. Fitch expects SNV's earnings power to be fairly tepid relative to higher rated peers over the next 18 to 24 months driven by relatively higher credit costs. Once Fitch observes earnings performance consistently in line with those banks in higher rating categories, Fitch would likely take positive rating action. Although unexpected, to the extent that earnings remain depressed and Fitch foresees little uplift over the long term, SNV's Outlook could be revised to Stable from Positive. KEY RATING DRIVERS - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES Upon further review of its rating criteria for subordinated and hybrid securities and not as the result of any type of credit or financial performance deterioration on the part of SNV, Fitch has downgraded SNV's noncumulative preferred stock issued in 3Q'13 to 'B-' from 'B' to correct an error by Fitch in the application of Fitch's criteria when the rating was assigned in 3Q'13. Fitch notes this strictly serves to properly align the instrument's characteristics to the appropriate notching in Fitch's criteria and is not the result of any type of deterioration in SNV's credit profile. As noted above, the Rating Outlook for SNV remains Positive given Fitch's expectations for continued improvement in the company's financial condition and performance. Subordinated debt and other hybrid capital issued by SNV and its subsidiaries are all notched down from SNV's Viability Rating (VR) of 'bb' in accordance with Fitch's assessment of each instrument's respective non-performance and relative Loss Severity risk profiles, which vary considerably. RATING SENSITIVITIES - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES SNV's subordinated debt and other hybrid capital ratings are is sensitive to changes in SNV's VR . Rating sensitivities for the VR are listed above. SUBSIDIARY AND AFFILIATED COMPANY KEY RATING DRIVERS Synovus Bank is a wholly owned subsidiary of SNV. Synovus Bank's ratings are aligned with SNV reflecting Fitch's view that the bank subsidiary is core to the franchise. SUBSIDIARY AND AFFILIATED COMPANY RATING SENSITIVITIES Synovus Bank's ratings are sensitive to changes to SNV's VR or any changes to Fitch's view of structural subordination between bank subsidiary and holding company. Rating sensitivities for the VR are listed above. KEY RATING DRIVERS - SUPPORT RATING AND SUPPORT RATING FLOOR SNV's Support Rating and Support Rating Floor of '5' and 'NF' reflect Fitch's view that the company is unlikely to procure extraordinary support should such support be needed. KEY RATING SENSITIVITIES- SUPPORT RATING AND SUPPORT RATING FLOOR SNV's Support Rating and Support Rating Floor are sensitive to Fitch's assumption as to capacity to procure extraordinary support in case of need. Fitch reviewed SNV's ratings as part of the mid-tier regional bank review. The 19 banks in today's review include: Associated Banc-Corp (ASBC), BOK Financial Corp (BOKF), Cathay General Bancorp (CATY), City National Bancorp (CYN), Cullen/Frost Bankers, Inc (CFR), East West Bancorp, Inc. (EWBC), First Horizon National Corp (FHN), First National of Nebraska, Inc. (FNNI), First Niagara Financial Group, Inc. (FNFG), First Republic Bank (FRC), First Merit (FMER), Fulton Financial Corp (FULT), Hancock Holding Company (HBHC), People's United Financial, Inc. (PBCT), Synovus Financial Corp (SNV), TCF Financial Corp (TCB), UMB Financial Corporation (UMB), Webster Financial Corp (WBS), Wintrust (WTFC). Fitch has affirmed the following ratings with a Positive Outlook: Synovus Financial Corp. --Long-term Issuer Default Rating (IDR) at 'BB'; --Senior unsecured debt at 'BB'; --Viability at 'bb'; --Subordinated debt at 'BB-'; --Short-term IDR at 'B'; --Support Ratings at '5'; --Support Rating Floor at 'NF'. Synovus Bank --Long-term IDR at 'BB'; --Viability at 'bb'; --Long-term deposits at 'BB+'; --Short-term IDR at 'B'; --Support Ratings at '5'; --Support Rating Floor at 'NF'. Fitch has downgraded the following rating to correct an error by Fitch in the application of Fitch's criteria when the rating was assigned in 3Q'13: Synovus Financial Corp. --Preferred Stock to 'B-' from 'B'. Additional information is available at ' www.fitchratings.com '. Applicable Criteria and Related Research : 2014 Outlook: U.S. Banks ( Nov 21, 2013 ) U.S. Banks: Liquidity and Deposit Funding ( Aug 08, 2013 ) U.S. Banks: Interest Rate Risks (What Happens When Rates Rise) ( Jun 18, 2013 ) U.S. Bank Mergers and Acquisitions -- When Will The Catalysts Kick In? ( Jul 11, 2013 ) Global Trading and Universal Banks - Periodic Review ( Dec 12, 2013 ) Fitch Fundamentals Index - U.S.; Index Trend Analysis 4Q13 (Jan15, 2014) Risk Radar Global - Q313 ( Sep 05, 2013 ) Fitch Global Corporate Rating Activity - Third Quarter 2013 ( Dec 5, 2013 ) U.S. Banking Quarterly Comment: 4Q13 (Earnings Continue to Tick Up, but Challenges Remain) ( Jan 27, 2014 ) Global Financial Institutions Rating Criteria ( Jan 31, 2014 ) Assessing and Rating Bank Subordinated and Hybrid Securities ( Jan 31, 2014 ) Applicable Criteria and Related Research : Assessing and Rating Bank Subordinated and Hybrid Securities Criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732137 Global Financial Institutions Rating Criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397 U.S. Banking Quarterly Comment: 4Q13 (Earnings Continue to Tick Up, but Challenges Remain) http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732295 Fitch Global Corporate Rating Activity - Third-Quarter 2013 http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720480 Risk Radar Global - Q313 http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=717023 Global Trading and Universal Banks - Periodic Review http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=726150 U.S. Bank Mergers and Acquisitions -- When Will The Catalysts Kick In? http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=712539 U.S. Banks: Interest Rate Risks (What Happens When Rates Rise) http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=710875 U.S. Banks: Liquidity and Deposit Funding http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=714196 2014 Outlook: U.S. Banks http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723989 Fitch Fundamentals Index http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=729196 Additional Disclosure Solicitation Status http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=819719 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS . IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE ' WWW.FITCHRATINGS.COM '. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Fitch Ratings, New York Media Relations Brian Bertsch , +1-212-908-0549 brian.bertsch@fitchratings.com or Primary Analyst Associate Director Bain K. Rumohr , CFA, +1-312-368-3153 or Fitch Ratings, Inc. 70 West Madison Street Chicago, IL 60602 or Secondary Analyst Director Ryan Doyle , +1-212-612-0162 or Committee Chairperson Managing Director Christopher Wolfe , +1-212-908-0771 Source: Fitch Ratings


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