Synovus reports strong credit growth in the second quarter but says demand may slow

Synovus Financial expanded lending strongly in the second quarter but noted signs of softening demand amid inflationary pressures and a string of Federal Reserve rate hikes.

The “wild card” for the second half of 2022 is “uncertainty in the environment and what will happen to customer demand for credit,” President and CEO Kevin Blair said on Thursday on the $57 billion company’s conference call.

In particular, he noted a “some slowdown” in recent commercial real estate lending.

Synovus Financial reported loan growth of 12% on an annualized basis in the second quarter, excluding paycheck protection program balances.

In addition to rising interest rates potentially dampening demand, Chief Credit Officer Robert Derrick said Synovus has already seen some companies hit the pause button on CRE projects due to inflation in the form of high labor and material costs.

“So we would expect that to be a headwind for real estate growth,” Derrick said. “All in all, I think it’s slowing down.”

However, until the second quarter, a slowdown in demand had to be reflected in the results of Synovus.

The Columbus, Georgia-based bank reported broad-based loan growth, with total loan balances reaching $41.2 billion at the end of the second quarter. Excluding Paycheck Protection Program balances, loans were up 12% on an annualized basis.

It was Synovus’ fourth straight quarter of annualized double-digit loan growth. Commercial and consumer credit each rose 12%, while commercial and industrial credit rose 8%.

Total revenue for the second quarter was $522.7 million, up 7% year over year.

Synovus posted net income of $169.8 million, or $1.16 per share, compared to $177.9 million, or $1.19 a year earlier. The decline is primarily due to a prior-year gain from the reversal of a provision for loan defaults, the company said.

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