April 20, 2010 / 10:33 PM / 8 years ago

UPDATE 3-Synovus stock drops as co explores capital raise

* Q1 loss/shr $0.47 vs $0.46 yr-ago

* Says has been in touch with regulators

* Still sees profitability in 2010

* Stock drops 10 pct after the bell (Adds conference call details, background, updates stock move)

BANGALORE, April 20 (Reuters) - Troubled lender Synovus Financial Corp (SNV.N) posted a wider quarterly loss, and said it was exploring all capital-raising measures, partly in response to “regulatory expectations.”

Shares of the bank fell 10 percent to $3.43 after the bell. The stock, which closed at $3.82 Tuesday on the New York Stock Exchange, was the biggest percentage loser after the bell among stocks that trade on NYSE. Synovus said on a conference call with analysts that it has been in regular communication with regulators since last December, but did not clarify if there was any regulatory pressure on the loss-making bank to raise capital levels.

One reason behind Synovus’ woes is that it is really an amalgamation of 30 banks, each with its own board of directors. Regulators require each of those subsidiaries to maintain certain capital levels.

Synovus, which plans to consolidate the legal charter structure of its subsidiary banks by combining all of them, expects to complete the consolidation by the end of May, a company executive said on the call.

The company, which lost $1.41 billion in 2009, is on track to complete projected $600 million in dispositions in the first half of 2010, and it still sees an opportunity to turn profitable during the year.

“As we look into the future, we expect our credit costs will continue to decline and that our capital ratios will exceed current regulatory standards as we pursue all alternatives to bolster our capital position,” Chief Executive Richard Anthony said in a statement.


Synovus, which has about $35 billion in assets, holds many commercial real estate and construction loans in some of the worst markets in the country, making credit quality a major concern.

Despite the company’s repeated assurances about its capital levels in the past couple of quarters, investors and analysts have been concerned about the bank’s future, and whether it will be able to maintain regulatory ratios without a dilutive raise.

The Columbus, Georgia-based bank said it was exploring strategic initiatives to raise “significant amounts” of cash and non-cash capital.

Earlier this month, Synovus said one of its affiliates sold its merchant services business to Merchant e-Solutions Inc for $70.5 million in cash. [ID:nSGE6300HQ]

Synovus is also looking to recover a portion of deferred tax assets — expected future tax benefits — once it demonstrates a sustainable return to profitability, it said.

Last year, Synovus, which sold $600 million of shares at $4 apiece in September and exchanged some of its debt for equity, said it was writing down its deferred tax assets by about $150 million, in part because it may not generate enough profit to realize those assets any time soon.

The company is also seen as a potential takeover target, with Toronto Dominion Bank (TD.TO), Royal Bank of Canada (RY.TO), JPMorgan Chase & Co (JPM.N), BB&T Corp (BBT.N) and SunTrust Banks Inc (STI.N) as potential suitors. [ID:nN13167915]

Earlier on Tuesday, for the first quarter, the bank posted a net loss available to common shareholders of $229.8 million, or 47 cents a share, compared with a loss of $150.9 million, or 46 cents a share, a year earlier. [ID:nASA008OS] (Reporting by Anurag Kotoky in Bangalore; Editing by Anne Pallivathuckal, Unnikrishnan Nair)

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