Yield Curve Concerns Are Yet Another Worry For Synovus

Georgia-based Synovus (SNV) continues to confound me. I realize that it’s not the best-run bank in the region, and I realize there are outsized risks in buying an aggressive, fast-growing Florida bank like FCB with large exposure to Florida real estate at or near the peak of the cycle, but the bank’s operating performance since the deal has been pretty steady and it seems to me that the Street continues to price in an ugly scenario of curve-based spread compression and elevated credit losses.

Credit quality is one of those “you don’t know until you know … you know?” risks with any bank, and I do think there is downside risk for Synovus here as the rate cycle reverses course and the Fed starts an easing cycle. It would seem to take a pretty grim set of assumptions to backwards-calculate today’s price and I don’t that’s the most likely path for Synovus. That said, the shares have lagged the bank sector since my last update, so clearly my bullishness is out of step with the Street’s sentiment.

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Yield Curve Concerns Are Yet Another Worry For Synovus