Synovus Financial Corp, a regional bank nestled in the heart of the booming Southeast, has often been perceived as a reliable, if somewhat unremarkable, player in the financial landscape. However, a careful examination of their recent Q1 2024 earnings call transcript reveals a subtle shift in strategy, a quiet revolution that could propel Synovus into a period of explosive growth, leaving Wall Street analysts scrambling to catch up.

While most eyes are glued to the predictable dance of interest rates and margin compression, a more profound narrative is unfolding. Synovus is strategically repositioning itself to capitalize not just on the growth of the Southeast, but on capturing market share from its larger competitors. The clues are there, whispered between the lines of cautious guidance and detailed credit analyses.

First, Synovus is quietly assembling an army of top talent, strategically hiring in areas identified for growth. Middle-market bankers, private wealth specialists, and corporate and investment banking professionals are being added at a rapid clip. In fact, their middle-market banker team has grown by an impressive 50% over the last three years. These are not just warm bodies filling seats. They are seasoned professionals with deep relationships and proven track records, strategically placed to attract new clients and, importantly, to poach clients from bigger institutions.

This talent grab is already paying off. Synovus is experiencing double-digit, annualized loan growth in middle-market, corporate and investment banking, and specialty lending. Their Corporate and Investment Banking (CIB) division, a relatively new endeavor launched in mid-2022, has already amassed $725 million in loan outstandings, added six new clients in Q1 alone, and achieved PPNR positivity. This rapid success paints a vivid picture of Synovus' ability to compete and win against the giants.

But the story goes deeper than just hiring bankers. Synovus is simultaneously rightsizing its balance sheet, strategically shrinking portfolios in non-relationship areas like shared national credits and third-party consumer lending. This deliberate "pruning" allows them to redeploy capital towards higher-yielding, relationship-based opportunities. The bank is not just chasing growth for growth's sake. It is actively pursuing profitability and efficiency, as evidenced by its impressive 25% increase in revenue per FTE since 2019.

This laser focus on profitability is also evident in their approach to credit. Synovus' credit metrics are demonstrably healthy, with stable net charge-offs and a low NPL ratio. However, it's their proactive approach to risk management that truly sets them apart. They have conducted deep dives into their office and multifamily portfolios, proactively downgrading loans and building reserves based on conservative assumptions about valuations and future loss given default. This proactive stance, coupled with their focus on relationship-based lending, suggests that Synovus is not only comfortable with their credit outlook, but confident in their ability to outperform in a potentially weakening economy.

Synovus is further bolstering its position through an ongoing risk-weighted asset optimization program. While details are still under wraps, this program has the potential to free up significant capital, perhaps upwards of $1 billion or even $2 billion, according to CFO Jamie Gregory. This additional capital could fuel further investments in securities repositioning, share buybacks, and, most importantly, continued growth in their key business lines.

The bank's strategic transformation is not confined to the balance sheet. Synovus is also aggressively expanding its non-interest revenue streams, building on existing strengths in treasury and payment solutions and wealth management, while venturing into new areas like Banking-as-a-Service through its GreenSky partnership and Qualpay investment. These efforts have already resulted in double-digit fee income growth in 2023, a trend they expect to continue in 2024.

The Hypothesis:

Synovus' strategy of talent acquisition, balance sheet optimization, and diversification into non-interest revenue streams, combined with its strong market position and proactive risk management, suggests that the bank is poised for explosive growth in the coming years. While 2024 guidance remains conservative, the underlying momentum points towards a much stronger long-term outlook.

The Numbers:

Double-digit annualized loan growth in key commercial business lines. 25% increase in revenue per FTE since 2019. Double-digit fee income growth in 2023. Potential for $1 billion to $2 billion in freed-up capital from the RWA optimization program. 8% to 10% forecasted PPNR growth from 4Q 2023 to 4Q 2024.

Loan Growth Comparison (Q1 2024 vs. Q4 2023)

Deposit Cost and Mix Trends (Q1 2024)

The Takeaway:

Synovus is not just riding the wave of growth in the Southeast. It is building a powerful engine to capture market share and deliver superior returns. This quiet revolution may be overlooked by Wall Street today, but the results will be impossible to ignore in the years to come.

"Fun Fact: Synovus' name is derived from a combination of the Latin words "synergy" and "novus," reflecting the bank's commitment to collaborative growth and innovation."