Synovus Unloads Huge Portfolio of Nonperforming Real Estate Loans
Synovus Financial's decision to unload $530 million in troubled assets should help it move past lingering credit woes, though the company still faces plenty of uncertainty as it heads into 2013.
The $26 billion-asset company said recently that it had sold a batch of nonperforming and substandard assets. It said it would record a pretax charge of $155 million in the fourth quarter.
By removing a huge amount of dead weight—the sale equated to about 40% of nonperforming assets at Sept. 3 —Synovus is finally in a position to focus on lending, industry observers say.
"They've had to shrink the loan portfolio dramatically and loans equal revenue," says Jeff Davis, an analyst at Mercer Capital. "Historically, they have been a…real estate lender and they are having to reposition themselves" for commercial lending.
Synovus, of Columbus, Ga., has been reducing its exposure to real estate in recent years while hiring lenders to target areas such as assisted-living projects and asset-based lending. Many of Synovus' competitors are pursuing the same clients, and stiff competition "usually means taking loans from someone else and that has pricing implications," Davis says.
Removing nonperforming assets should free up time and resources to help Synovus focus more on lending. Over the past 12 months a number of banks have been shifting employees who were once focused on resolving bad assets to revenue-generating areas. The same is likely happening at Synovus, Davis says.