Synovus Financial Corp., still working feverishly to rid itself of bad loans, today reported a $180 million loss in the fourth quarter of 2010, or 23 cents per share.
For full-year 2010, the Columbus-based regional banking firm posted a loss of $848 million, or $1.24 per share.
Both of those numbers are improvements from 2009, when the beleaguered company racked up losses of nearly $283 million in the quarter and nearly $1.5 billion for the year.
More than two dozen Wall Street banking analysts who follow the company were expecting a loss of 20 cents per share for the quarter and $1.32 for the year.
“We’re happy 2010 is behind us and excited about the opportunities that lie ahead in 2011 and years beyond,” Kessel Stelling, Synovus chairman and chief executive officer, said in a conference call with the analysts. “We believe without question we enter 2011 with a stronger balance sheet than we did the previous year, with stronger capital levels, with lower problem levels, with an energized team.”
The company has been plagued by loans it wrote to residential developers in the speculative Atlanta and Florida markets leading up to the national housing meltdown and subsequent banking crisis, both of which pushed the U.S. economy into a severe 18-month recession.
The bank also suffered when its largest client, Sea Island Co., a resort developer and operator on the Georgia coast, fell into bankruptcy and was subsequently sold to private investment firms.
Synovus, parent company of Columbus Bank and Trust Co., has written off more than $2.9 billion in loan losses since the end of 2007, when the recession was just beginning. That includes $252 million in the latest quarter, which is down from $387 million in the same quarter of 2009. The peak for writeoffs was $632 million in the second quarter of 2009.
The company noted today that its aggressive disposition of non-performing assets totaled $573 million in the fourth quarter, the highest number in its history. It also said the rate of return it is now getting on sales of distressed property has risen from 39 cents on the dollar to 46 cents.
Synovus also said non-performing assets in the fourth quarter were at nearly $1.3 billion, but trending lower, as were inflows of non-performing loans.
“We’re dealing with a lot less (non-performing loan) inflows than we were dealing with over the last two or three years,” said Kevin Howard, Synovus chief credit officer. “Our expectations are inflows in 2011 are going to be significantly less than 2010.”
Adam Barkstrom, an analyst with the brokerage firm Sterne Agee, said there weren’t many surprises in the banking firm’s earnings report, with the exception of the larger-than-expected total of problem assets sold.
“It appears to be a good thing,” he said. “It appears that they keep making pretty aggressive efforts. The question is are they kind of getting to the bottom of the loss content or is there more stuff to come.”
Aside from raising another $1.1 billion in cash from the sale of common stock last year to weather financial storm, Synovus also embarked on a refresh of its three-year strategy plan.
That led to the firm earlier this month unveiling a restructuring plan that includes 850 job cuts, or about 14 percent of its work force. It also will close 39 branches, three in the Columbus market.
The goal is to save $100 million in expenses annually by the end of 2012. The firm expects to save $75 million in 2011 as the job cuts wrap up this quarter and next.
Since reaching a peak of 7,331 of employees in early 2008, Synovus has pulled the trigger on two restructurings. The first cut more than 1,000 jobs from its ranks. On Friday, the firm said it will be down to 5,275 employees by the second quarter of this year.
Through it all, Stelling has said the aim is to improve the experience of customers, while bringing Synovus back to profitability. This marked the 10th straight quarterly loss for the company, which dates to the late 1880s.
“Our (computer) models we update and validate and re-validate on a continuous basis,” he said today. “And we still remain confident that we’ll return to profitability in 2011, but I really can’t be more specific as to the quarter or time period.”
Barkstrom said his office is projecting Synovus could break even or hit profitability in the fourth quarter of 2011, if only by a couple of pennies per share.
But he also said the company faces big challenges moving forward because of the construction-oriented lending business from which it is now trying to recover.
“I think they’ve done what they’ve had to do,” Barkstrom said. “They’ve accomplished several important things. They went and raised capital; I think that makes them look good on a capital front. Ultimately, I think they can survive from a capital adequacy perspective.”
But there are questions to be answered in the minds of existing shareholders and those who might consider buying the firm’s stock, the analyst said.
“I think the question that investors are going to ask longer term, when we get through this, is what is the normalized earnings run rate going to be and does that justify owning the shares,” Barkstrom said. “That’s kind of the key question in my mind.”