What a wild ride it has been for mild-mannered banker Richard Anthony since taking the reins of Synovus Financial Corp. in 2005.
Rising to chief executive officer that year — then adding “chairman of the board” to his resume a year later with the retirement of longtime leader James Blanchard — Synovus appeared to be firmly in a sweet spot under Anthony’s tutelage.
The regional bankholding firm that calls Columbus home piled up a $516 million profit his first year, then followed that up with a $616 million profit in 2006. Headlines from an annual report during that period touted: “Synovus has a full-speed philosophy and an open road ahead.”
Anthony himself talked at the time of waking a “sleeping giant,” in essence honing its retail branch operations and fuel-injecting its revenues even faster. The company, spun out of Columbus Bank and Trust and with roots dating to the 1880s, also made a strategic decision to grab more of the business pie in the Atlanta area to complement its strong push into key Florida markets.
At that point, Synovus appeared to be on cruise control.
The company, in fact, was so confident about its future that its board of directors approved a split in late 2007 between the banking company and its longtime credit-card processing subsidiary and cash generator, TSYS. The move was meant to give the Synovus offspring its own resources and momentum to grow.
But it was at that critical moment that the wheels began to fly off the U.S. economy, induced heavily by a housing market meltdown sparked by subprime lending to borrowers ill-prepared to handle their mortgages.
“I don’t think any of us knew what was about to happen,” Anthony said in a recent interview. “There are very few people in the world, if any, that envisioned the extreme nature of this real estate meltdown and recession that we’ve been in.”
Synovus profits dipped to $526 million in 2007, just as the recession was gaining its grip on the nation. Without TSYS’ revenue stream, the banking company entered 2008 in a much riskier position. It began to write off soured real-estate development loans in overbuilt areas of Florida, Atlanta and South Carolina. It developed a plan called “Project Optimus” that asked employees to come up with ideas for making the firm more efficient, even possibly at the expense of their own jobs.
Then bad got worse as the U.S. financial meltdown froze credit markets. The company opted to raise money through the federal Troubled Asset Relief Program, with the banking firm pocketing $968 million for safe-keeping. The 2008 bottom line for Synovus was dire — a $582 million loss.
The past year has only been more of the same pain, with the company working feverishly to ditch non-performing real-estate loans from its books at fire-sale prices. A key customer, The Sea Island Co., which operates a luxury resort and seaside community on the Georgia coast, hit the skids and reneged on its loans, which reportedly amounts to $220 million for Synovus affiliate Columbus Bank and Trust.
The startling turn of events for Anthony and the company he leads has been dramatic. Synovus, which once boasted to shareholders that it was poised to “excelerate” its vision of excellence and profits, posted a loss of nearly $1.5 billion last year. Today, there are 1,000 fewer employees on the payroll.
The Ledger-Enquirer sat down recently with the CEO at his office overlooking the Chattahoochee River to get his thoughts on the company and its prospects. Here’s what he had to say on a number of topics in the wide-ranging interview:
Downsizing through Project Optimus
“It’s always difficult to downsize any company. And we never would take that aspect lightly. On the other hand, the world of banking and financial services has been under a lot of pressure. It’s a different environment today. You have to do more with less ... I think we have managed that very thoughtfully and very carefully. We’ve been very sensitive to those that don’t have a place going forward and helping them resume their careers with any support that we could provide, whether it be financial or counseling of other types.”
Consolidating from 30 bank charters to one
“There’s a lot of juggling that has come about as a result of having 30 different charters. We knew several years ago that we must move toward eliminating as much complexity as possible. The regulators guided us on that. They never mandated fewer charters. They just suggested that our company could be organized in a less complex fashion.”
Possible sale or merger of Synovus
“We expect to come out of this critical period stronger than we’ve ever been, and a leading mid-size Southeastern regional bank that will be able to be a consolidator ourselves. We think we can make acquisitions and we fully intend to. I doubt that 2010 will be a year for that. But I think in our industry, as we get beyond 2010, there’ll be more of that. But we’re not setting ourselves up to sell. We’re setting ourselves up to be stronger so that we can play offense again.”
Purchasing failed community banks
“I don’t think we’re ready today to do that. I think we need to get our house in better order. I think our credit indicators need to be stronger, and they are improving every day. But toward the back end of this year, I think there’s a chance that we would consider taking one of these on. A lot of these failed community bank situations involve franchises, particularly from a deposit standpoint, that have run down to some degree. They’re just not as seasoned or as strong or as sticky as an acquirer would want. So you have to be careful in that you don’t always get what you think you’re getting on the deposit side.”
Making a profit this year
“It is realistic. What we’re saying there is that we think in the second half of the year there is the opportunity for us to post a quarterly profit, somewhere in the third or fourth quarter. Our whole view of the Synovus future starts with the moderating trends that we have seen in 2009. As elevated as some of these costs were and as painful as they have been, the trends moderated, the key indicators moderated ...
“We expect the first quarter to still be close to the fourth quarter of ’09. But our expectations, based on a lot of careful analysis, are for the second, third and fourth quarters to see significant reductions in that non-performing loan inflow. Once that category is stabilized, we start to see other good things happen, because we don’t have to sell as many assets at a loss ... We really believe that we have reached a turning point. That doesn’t mean the losses are completely over. But we’re headed toward light at the end of this tunnel.”
Dealing with Sea Island Co.
“It is such a well known and important brand in the resort business that it does draw a lot of attention to it ... I have been quoted, based upon one of our investor conference calls, as saying Synovus would not take on credit relationships of this size in the future. We are taking a more conservative view, not with just the Sea Island Co., but with other credits of our larger exposures, so that we don’t have concentrations as big as we might have had in the past.”
Resolution with Sea Island
“I just go back to the press release that many have seen, in which the company stated that they were in the process of selecting an investment banker who would help them pursue strategic alternatives. The strategic alternatives likely would include either the sale of the company or the infusion of additional equity. There is a lot of interest in it, I know that, because we have been contacted by people who know we are in the credit facility.
“It is a superior brand. It has a great experience for those who rent or own property there. So it has a lot of good features that would make it attractive. On the other hand, this has been a tough economy. So the work is just beginning to see how many actually are interested.”
Public backlash against banks
“I think a lot is unfair and unwarranted. Certainly mistakes were made in many different areas that have led to this real estate meltdown and this extreme downturn in the economy that we felt over the last couple of years. I think banks like ours that are out there serving their communities and really not undertaking participation in any exotic instruments, whether that be securitization or unusual mortgage products, are getting lumped into a category that is undeserved because we are basically a bank that supports its communities and supports its customers with credit and other services.
“There was a level of complexity on Wall Street, particularly through securitization and I guess some of the compensation that came from the sales of those products, that really has turned a lot of the American public off, and bankers have been vilified around the country. Maybe not all, but many people, when surveyed, say that they like their banker, but they don’t like banks. So it’s become a perception challenge.”
Economic role of banks
“Banks provide the lubrication that makes our economy function well. We provide credit; we provide deposit services; we provide other specialty areas of expertise that really help virtually every household and small business and governmental entity in this country. Our people participate in community activities and charitable endeavors. I think most people know that, but they forget the good things that banks do.
“Banks also provide a discipline in the credit process that keeps people out of trouble sometimes. I mean the worst thing a banker can do is to make a loan that is not sound because not only is the bank harmed, but the borrower becomes harmed as well.”
Freezing of consumer, business credit
“There’s a lot of angst expressed today about the lack of credit being extended. I personally don’t think that is accurate because there still is a lot of credit being generated in the banking system. However, we’re in a weak economy and there is de-leveraging going on in businesses and in households and in governments. When de-leveraging is occurring, there’s just not a lot of demand for new loans. But banks are out there doing business. They are out there making loans. The economy is soft, so you’re just not going to see a lot of aggregate loan demand.”
Learning from the recession
“It has certainly created a lot of challenges for us, for our team. I’m proud of the way that our team, from top to bottom, has responded with the support that they give each other, the support that they give me. But, no, this has been a unique period of time. Adversity can make you stronger.”
Sharp decline of stock price and dividend
“It is frustrating. I feel badly for our shareholders. I feel responsible. We are doing, and I’m doing, everything within our power to return to a level of strength so that we can restore the dividend to a higher level and so that we can begin to demonstrate the creation of value from this very low base that we have gotten down to here in recent times. Every move that we make has shareholder and value creation attached to it. But you just have to start with the fundamentals. You have to build your company based upon sound credit practices. The cleansing of our real-estate loan portfolio has had to occur.
“By the way, on that I think we deserve good marks for being proactive, for being aggressive, for being conservative in our evaluations, for being out in front in problem recognition in this loan portfolio. The temptation sometimes is there to deny that problems exist and to hope that prices will increase sooner rather than later. But we know that hope is not an option. We’ve had to be realistic. We’ve had to be out in front.”
Economic expectations
“We’re optimistic, but we all have to be guarded. I personally don’t worry about the double dip (recession). I’m sure there’s some percentage possibility of that. But I think what is a more common concern would be an extended period of very slow growth, without a really strong upturn. Right now we’re not factoring in a major upturn. We’re assuming a period of modest growth out for two to three years.”
Harder to be a CEO today?
“I think the job is more demanding. There is a level of scrutiny that comes from the role of government, the role of corporate governance, the activist shareholders that are pretty evident. The stock market values create unique challenges. Growth prospects seem at this time to be more limited. But we are a great country. We’re a country that’s very resilient. I think innovation will continue to be a driver. In this country people in business just seem to always develop a solution to the challenges of the era, of the period ...
“I think the demands of leadership in business today, particularly of public companies, are great. And you have to be so sensitive to all of your constituencies. You can’t just tend to one or two and leave the others unattended.”
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