Shares of Synovus Financial (SNV -0.61%) climbed 13% on Tuesday after the regional banking company reported better-than-expected second quarter earnings. Bank stocks typically struggle during periods of economic turbulence and low interest rates, but Synovus held its own through the worst of the coronavirus pandemic.
Before markets opened Tuesday, Synovus reported second quarter adjusted earnings of $0.23 per share on revenue of $550.9 million, easily topping consensus expectations for $0.05 per share in earnings on sales of $445.18 million.
Net interest margin did fall along with interest rates, to 3.13% from 3.69% in the second quarter of 2019, but the bank's $141.9 million provision for credit losses was down from $158.7 million in the first quarter and better than the $152 million analyst forecast.
"Our performance in the second quarter demonstrates the key role we play as a financial resource and community partner in the markets we serve," CEO Kessel D. Stelling said in a statement. "We delivered approximately $3 billion in Paycheck Protection Program loans to more than 19,000 customers and originated a record $1.4 billion in consumer mortgages."
Going into earnings, analysts were bracing for the worst, with Synovus late last week downgraded by RBC Capital on fears that higher credit losses would lead to an eventual dividend cut.
Chief financial officer Jamie Gregory on the post-earnings call with investors said, "we are comfortable with our dividend," noting that it is determined based on capital adequacy and long-term earnings outlook. "We remain confident in our current capital level, which is supported by stress testing and sensitivity analyses."
If the dividend is safe, buying into Synovus offers a 7% yield to wait for an economic recovery. Investors on Tuesday found the prospect of that payout too enticing to ignore.