Synovus Financial Corp Q4 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Kevin, can you talk a little bit more about the loan growth expectations. You flagged some of the headwinds, but it looks like you've seen better production as well. Curious what you're hearing from the borrowers? And then what could keep you at the lower end or the higher end or put you at the higher end of the range. It feels like I'd take the over, but just curious what your thoughts are on that.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Okay. Good. That's very helpful. Jamie, just one for you. You're indicating very slight margin pressure in the first quarter, and that gives us a good starting point. But how do you expect the margin to trend after the first quarter? Can you give us some of the puts and takes around that?

Question: Michael Rose - Raymond James & Assoc., Inc. - Analyst : Maybe just on the buyback and capital return. I know you guys are talking about keeping the CET1 relatively stable. But if we do go into this kind of deregulatory environment, is there more leverage there as we think about kind of the intermediate term for the CET1 ratio? And could we kind of expect even more capital return, assuming your growth expectations on the loan side hold?

Question: Michael Rose - Raymond James & Assoc., Inc. - Analyst : Very helpful. And then maybe just as a follow-up, just back to Jon's question around the margin. I think one of the potential levers is just a continued decline in broker deposits. I think you guys are about 9.5% of total now. Is there a range you'd like to get that down to? And as you think about the margin guide that you just gave for the back half of the year, what does that assume in terms of cash balances, which you called out as being elevated. And are there any other levers that could be supportive of a range even above what you just guided to? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 16, 2025 / 1:30PM, SNV.N - Q4 2024 Synovus Financial Corp Earnings Call

Question: Anthony Elian - JP Morgan - Analyst : On your 2025 outlook slide, you reiterated pretty much all parts of it, but you still expect the FOMC easing cycle to continue in the first half. I guess if we don't get a rate cut in the first half, can you just talk about the impact to your 3% to 7% revenue growth guidance you expect.

Question: Anthony Elian - JP Morgan - Analyst : And then my follow-up, if your revenue growth guidance comes towards the lower end, so say that 3% range, will expenses follow towards the lower end as well? Or do you have less of a lever to pull on expenses given the strategic initiatives, hires and tech investments you plan to make this year?

Question: Jared Shaw - Barclays - Analyst : Looking at the capital markets, any color you can give in terms of trajectory there as we look through the year, anything specific coming up at the beginning that could drive either upside or downside there?

Question: Jared Shaw - Barclays - Analyst : Okay. And just as a follow-up, following up, I guess, on Michael's question on capital, with very strong capital here and an administration coming in that's perceived to be more industry-friendly, does that change your view on M&A at all? Or how should we think of your appetite on M&A?

Question: Bernard von-Gizycki - Deutsche Bank Securities, Inc. - Analyst : So my first question on the '25 expense growth range of the 3% to 7%, I think you previously identified 1% to 2% in efficiencies to help offset some of that expense pressure. Could you just maybe talk through some of the areas you're looking for the efficiencies, whether it's reduction in footprint or headcount or technology efficiencies that you could lean into to possibly get that 1% to 2%?

Question: Bernard von-Gizycki - Deutsche Bank Securities, Inc. - Analyst : Okay. Great. And then just -- I know you're trying to refine the delivery models for payments, the consumer bank in wealth. Could you just talk to how far along you are and the benefits you see there?

Question: Manan Gosalia - Morgan Stanley - Analyst : I wanted to follow up on the other question on expenses. It sounds like you're suggesting there is room for positive operating leverage if you're at the mid to high end of the revenue guide, but it might get a little bit more difficult if you're at the low end of the revenue guide. Is that the right way to think about it? And then just in terms of the puts and takes there, is loan growth and the shape of the yield curve really? Are those the two biggest drivers and whether you can get that positive operating leverage or not?

Question: Manan Gosalia - Morgan Stanley - Analyst : That makes a lot of sense. On loan growth, part of the weakness that we've seen in loan growth across the banks has been -- the yield curve has been inverted, it makes more sense for borrowers to term out some of their things. Now that the yield curve is steepening again, are you seeing some more borrowing from the banks essentially on -- at the front end of the curve, borrowers using more of those revolvers. Do you think that that starts to pick up now to the yield curves team?

Question: Stephen Scouten - Piper Sandler & Co. - Analyst : I guess as I think about some of these strategic initiatives in '25 and the relationship management hiring plan and continued progress in capital markets. Can you kind of talk about where you guys think you are kind of in the, I guess, the stage of those strategic initiatives, maybe even like what inning in terms of developing out capital markets? And if -- and if there's kind of an aspirational goal of, hey, here's where we want to get the size of the bank as we think about maximum scale and efficiency within the sector today. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 16, 2025 / 1:30PM, SNV.N - Q4 2024 Synovus Financial Corp Earnings Call

Question: Stephen Scouten - Piper Sandler & Co. - Analyst : Got it. That's really helpful, Kevin. And then maybe the last question for me here, a follow-up. It's just kind of around the credit outlook. I mean, obviously, it feels like credit is smooth for much of the industry, your trends are continuing to improve and are encouraging. But is there a tension point for you all as you model out future loss given defaults with where the 10-year could go? I mean, do you get more trepidation if the 10-year goes to 5% or 5.5%. And kind of how do you think about that trajectory and the impact around credit?

Question: Christopher Marinac - Janney Montgomery Scott - Analyst : Just to continue with Bob. There was about $110 million, Bob, of office loans that we're rolling over in the fourth quarter. Could you just walk us through what happened with those? And did some of those get renewed? Are they paid off and that we see the very good and stable criticized numbers and just want to use that as an illustration for what to expect on the rest of the portfolio.

Question: Christopher Marinac - Janney Montgomery Scott - Analyst : Great, Bob. That's really helpful. And then just, Kevin, a quick one for you on sort of lift outs in general. I mean what would be your kind of pipeline, if you will, of new personnel and maybe what's happening below the surface there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 16, 2025 / 1:30PM, SNV.N - Q4 2024 Synovus Financial Corp Earnings Call

Question: Catherine Mealor - Keefe, Bruyette & Woods - Analyst : I had one follow-up on just the margin on the deposit side. So the reduction in deposit costs was really great to see. Is there any -- can you talk to us about the trends throughout the quarter and maybe where deposit costs ended the quarter to give us a sense as to where we'll be starting our first quarter.

Question: Catherine Mealor - Keefe, Bruyette & Woods - Analyst : Great. That's helpful. And then one question -- or one comment you made, Kevin, about the pipeline. You mentioned that both C&I and CRE pipelines were up in the fourth quarter, which I thought was interesting on the CRE side. I'm just curious if you could give a little bit of color around that. And just with the move in the 10-year, how sensitive do you think CRE new production is to that level of rates? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 16, 2025 / 1:30PM, SNV.N - Q4 2024 Synovus Financial Corp Earnings Call

Question: Catherine Mealor - Keefe, Bruyette & Woods - Analyst : Great. Helpful. And I see slide 32. So thank you for pointing that out. Appreciate that.

Question: Nick Holowko - UBS Financial Services Inc - Analyst : Appreciate all the color on the margin trajectory as we're progressing throughout the year. I know in the past, I think you've talked about a 15 basis point benefit or so in 2025 and 2026 from the fixed rate asset repricing opportunity. I'm wondering with the moves in rates over the past couple of weeks and months, is that still a fair way to ballpark the opportunity? Or could there be some incremental upside from repricing on the yield side?

Question: Nick Holowko - UBS Financial Services Inc - Analyst : Perfect. And then just touching on credit. I know nonperforming and criticized loans were pretty stable in the quarter. And but a small increase in the reserve ratio despite some improvement in the scenarios, which it looks like was performance-driven a small component of it. So I was wondering if maybe you could touch on that and then how you're thinking about the direction of the allowance coverage as we're progressing throughout the year?

Question: Timur Braziler - Wells Fargo - Analyst : Looking back on the loan growth, clearly, the entire industry is looking for loans to rebound. I think that statement is even more profound for some of the Southeast banks. I'm just wondering what that portends for the competitive landscape. Are you starting to see greater competition on the lending side? Is that mainly on rates right now? I guess, how are you thinking of the competitive landscape progresses as we go through the course of the year here?

Question: Timur Braziler - Wells Fargo - Analyst : Great. And then just looking at the other side of the balance sheet, just on the wholesale funding, you guys have a good job working that down. I'm just wondering where that 11% goes throughout the course of '25. How much more are there to bring that down?

Question: Gary Tenner - DA Davidson - Analyst : Most of my questions have been answered, but I had a short-term kind of loan question. You talked about it, and I think we probably expect the year to start off slowly, for loan growth in the group overall. But as you talk about the headwinds versus the kind of fourth quarter production levels and the good pipelines, is there an avenue to stabilize loan balances in the first quarter or is a greater likelihood another quarter of contraction before we maybe pivot the other direction?