Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Deposit production, when you look at the third quarter deposit production, we’re up about 70% year-over-year, and then when you decompose that, because clearly a lot of that comes from time deposits, from CD production, but even when you back that out and when you look at interest-bearing non-maturity deposit production, so now in MMA deposit production, those together are up over 10% year-over-year, so that’s a positive production trend that’s sustained |
| We have a lot of different initiatives behind that flat expense guidance, and really what’s exciting to us a lot of it just improves how we go to market |
| Most importantly, we continue to believe that our strong underwriting, monitoring and client selection, as well as actions taken through the years to generate diversification in an economically vibrant southeastern footprint will result in manageable levels of credit losses over this economic cycle |
| I think to Bob’s point, client selection here, dealing with long term operators, more private pay, less skilled nursing has resulted in better overall performance, so I think that’s a big driver of that |
| Lastly, the company will continue to maintain a very strong liquidity and capital position to allow for flexibility in ongoing uncertainty |
| We are navigating the short term headwinds presented by higher interest rates by making the tough decisions around business mix, balance sheet optimization, and operating expenses, all of which will generate better financial performance in the quarters and years to come |
| Somewhat masked by the margin contraction, we are experiencing healthy steady growth in areas like CIB, middle market, wealth management and treasury and payment solutions |
| There continues to be an increased emphasis on stronger returns and more deposit relationship-based lending, which has translated into higher yields on new production |
| But when you look at quarterly increases, and it goes back to Ebrahim’s question just a minute ago, the NII tailwinds, because of fixed rate re-pricing and where yields are today, is very powerful, and so while we may not have positive operating leverage for calendar year 2024, if you’re comparing quarter-on-quarter, year-over-year, it gets pretty powerful as you go through calendar year 2024 |
| Net interest margin contraction was not as significant as expected due to modestly better asset yields and funding costs; also, our deposit generation strategies are demonstrating continued success as production remains strong with third quarter levels approximately 70% higher compared to the same period in 2022 |
| As previously announced, we completed two loan-sale transactions during the third quarter which strengthened the balance sheet and freed up capital for the bank to make more profitable relationship-oriented loans |
| We remain optimistic that through the actions we have taken, we are better positioned to overcome the short term headwinds and to strengthen the bank’s foundation for a return to growth as we proceed through 2024 |
| Despite a more challenging operating environment, Synovus continues to demonstrate strength, resilience and flexibility |
| We continue to invest in core non-interest revenue streams that deepen client relationships, such as treasury and payment solutions, capital markets and wealth management, which have demonstrated healthy growth over the past few years |
| You guys have built that into a pretty good business line for yourselves, and I think if I’m remembering correctly, it’s performed extremely well for you from a credit perspective versus some other banks that have maybe struggled a little bit, just with that generic kind of category of senior housing |
| Where we saw the increases was in C&I and small business, and so we feel good about what we can see in front of us |
| That continues for multiple years because you think about those exposures, especially when you look at residential mortgages, you look at the securities portfolio, we continue to benefit incrementally way beyond this--this time period, so this benefit will be--will overcome the headwinds of that lag headwind when the Fed does start to ease |
| But we’re just as bullish on the areas that we can grow, and as you noted, our goal is to continue to exceed the rate of growth of the underlying economy |
| Importantly, we leveraged our improved liquidity position to reduce wholesale funding by $1.6 billion, which improved our wholesale funding ratio by 240 basis points, while public funds declined $146 million or 2% |
| But what we’re optimistic about is our ability to continue to grow C&I loans through our CIB organization, through middle market and through some of our speciality areas |
| But the rate pressure on CDs has been a little bit reduced recently in the month of September, so we feel good about that, and then on other interest-bearing deposits, we saw MMA production come down about 11 basis points quarter-on-quarter, we saw now production down almost approximately 75 basis points quarter-on-quarter, so we feel good about the trends of deposit production within our interest-bearing products |
| Supporting this growth are seasonal tailwinds along with our targeted deposit gathering efforts |
| Our core commercial, kind of our community commercial, our small business areas, and even in our corporate and investment banking unit, where we’re going to market in industry verticals, we’re able to bring capital markets and additional fee income and treasury and deposits, where it makes those returns much higher |
| Then it also doesn’t include the impact of loan spreads, and I want to point to something there because loan spreads have been a really good story for us |
| We’re pleased with the trend of the slowing decline in NIB in the third quarter |
| But the positives here are, as an industry, this industry’s continuing to see increased occupancy rates, most of our operators have implemented increased rental rates, so the revenue top line improvement is there, it’s just not--it’s going to take some time for it to overcome the rapid increase in cost |
| We can make good returns there and manage the credit risk appropriately |
| Over the past three months, Synovus has taken several actions to better position the bank for a more challenging, higher-for-longer interest rate environment, while continuing to build and expand our diversified business model in order to deliver long term sustainable growth |
| Jamie Gregory Yes, Michael, as we look further out - and again, we’ll give a more detailed outlook here in about six weeks, but as we look further out, we do expect balanced loan and deposit growth, and what you’ll see there is you’ll see that our core client businesses will continue to grow and our objectives there are to grow faster than the market |
| We believe Globalt has a bright future as an independent investment advisor enabled to explore a wide range of additional partners and potential client relationships |
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| There were year-over-year and linked quarter revenue and PP&R headwinds as a result of continued higher deposit costs, leading to further but more moderate net interest margin contraction |
| If you have big moves on either side of Fed policy with their balance sheet, if they were to draw down the RRP significantly and take a lot of liquidity out of the system, I think that could be challenging for the banking industry |
| We have lowered our adjusted expense growth expectations to approximately 4% to 5% in 2023 versus previous expectations of 4% to 6% |
| It would likely lead to a decline in the margin for those periods, for those early Fed ease time periods |
| We expect the decline to slow again in the fourth quarter and then slow again end of 2024, but that’s--I would point to those as some of the risks to that outlook |
| But then also, if they were to start easing in the second half of next year, the same lag that benefited the industry on the way up would be a headwind, so if you’re just simply looking at the margin at the end of next year, if you assume that the Fed starts easing in the second half or third quarter of next year, then that will be a headwind |
| As you can see on Slide 4, total loan balances ended the third quarter at $44 billion, reflecting a sequential decline of $674 million or 2% |
| The non-interest bearing deposit decline is a by-product of deployment of excess funds and continued pressures from the higher rate environment |
| There was also a moderation in the decline in money market accounts during the quarter as the shift from money market accounts to CDs slowed |
| Reported non-interest expenses were impacted by an $18 million voluntary early retirement charge and a $31 million loss from loan sales during the quarter |
| The rate on those today is about 3.75, and so we will have a headwind to deposit costs in the fourth quarter as those re-price to kind of the normal going-on production rate |
| But the lag would definitely be impactful whenever that happens, so Fed policy is a risk, and then I would say just general deposit mix shifts are a risk |
| As expected, loan growth outside the medical office building sale was less than 1% in the third quarter |
| Importantly, the shift from consumer money market accounts to higher rate time deposits slowed during the third quarter |
| Overall, stress is in some of these portfolios, but nothing that we don’t feel like is manageable |
| Looking forward to the fourth quarter, there will be an incremental headwind in NIR from--on the retail side because of deposit fees, but we expect to overcome that headwind and we expect to be flat to slightly up from the 103 to 104 in the fourth quarter |
| We think about it today, it is certainly feeling some stress, and there’s no question about that, as it relates to increased labor costs, certainly the interest rates staying higher here in the last six months or so continue to put some stress on it |
| We feel good about that outlook, but when you think about positive operating leverage for the calendar year 2024, it’s challenging because the first half of 2023 had such strong revenue growth, that the exit run rate on revenue is just simply lower than it was at the entry to 2023 |
| Over the near term, we expect to continue to preserve capital in excess of our target levels, given the continued amount of economic uncertainty |
| Then on NII, as we mentioned, we expect the margin to decline in a similar amount as what you saw in the third quarter, but then you also have the impact, the full quarter impact of the sale of the medical office portfolio |
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