Synovus (NYSE:SNV) has significantly underperformed its peer group as the COVID-19 pandemic has wreaked its havoc on the economy. A big part of the problem is that Synovus's previous decisions regarding capital management, including significant buybacks and running with a thin capital buffer at a CET1 ratio of 9%. That has come back to bite management, as lackluster PPOP performance, reserve-building, and a sudden shift in risk-weighted assets have chewed into that buffer. On top of that, investors are taking a "show me" stance of Synovus's underwriting quality, remembering the outsized losses during the GFC and not giving much credit to the idea of improved underwriting since then.
I've been steadily wrong on this name since the FCB acquisition, and I'm not going to pretend otherwise. Synovus still looks undervalued on what I consider to be a very low earnings growth threshold, and management has some opportunities to further boost capital without cutting the dividend, but there are only so many times you can go to the well on a story. I still look at this as a potential portfolio addition on the basis of growth opportunities in the Southeast U.S. and the "Synovus Forward" program, but this stock remains deep in the Street's doghouse.
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