A lagging stock price, seven straight quarters of losses and persistent takeover talk are not enough to get Richard Anthony down.
Anthony, the chairman and chief executive of Synovus Financial Corp., is instead talking about the $1.1 billion in capital his company raised last week, calling it "foundation-building" and a sign of confidence in the Southeastern franchise. The added cushion, he said, will protect Synovus against credit losses and allow it to court commercial clients more actively.
Synovus has a mix of supporters who are impressed by the capital boost, and skeptics who consider the move long overdue and want the company to hunker down over the next few quarters rather than stretch for profit. Most agreed that Anthony has put his credibility and Synovus' on the line by predicting at least one profitable quarter this year.
Kevin Reynolds, an analyst at Wunderlich Securities Inc., said Synovus is trapped in an "earnings prison" for the foreseeable future after multiple trips to capital markets diluted its stock. "They just raised $1 billion in defensive capital to be relevant on the other side" of the cycle, he said. "This was not offensive capital."
But Paul Miller Jr., an analyst at FBR Capital Markets, said the extra capital "places Synovus solidly in the survivor category," though he did predict it will need to raise more to repurchase roughly $970 million in preferred stock from the Troubled Asset Relief Program.
Miller questioned Anthony's prediction of a profitable quarter. "We believe Synovus will not reach normalized earnings until 2013," he said.
Investors are cautious. Synovus' stock has risen 40% this year, though shares remained depressed Friday, at $2.79 each.
Anthony, in an interview late last week, sought to dispel the doubters.
"This was an exciting, transformational event that let's us move forward, rebuild our balance sheet, take care of customers and focus on returning to profitability," he said.
He and his team have struck a more optimistic tone since stating on Jan. 28 that a profitable quarter was possible in the second half of 2010. On Thursday, Anthony said the $32 billion-asset Synovus may have already absorbed 70% of the losses expected from the credit crisis, much of which was tied to the company's historical emphasis on residential development in areas such as Atlanta and Florida.
In addition to last week's capital raise — primarily from a common stock sale — Synovus expects to add $550 million in capital when it recovers a portion of deferred tax assets.
Anthony said the Columbus, Ga., company is ready to pursue midsize businesses and some corporate clients, noting that more lending is a key to profitability. Synovus, once one of the nation's biggest decentralized banking companies, is thinking more like a regional bank, evaluating markets on state levels rather than individual cities.
Tommy Prescott, the company's chief financial officer, said commercial lenders are "beginning to see some signs of" loan demand.
As Anthony put it, "We won't go up to dramatic scale right away, but we can go out now and play offense."
Synovus plans to start hiring commercial bankers in states such as Alabama and Tennessee to support existing staff, the CEO added. "We will take a broader view of our business banking approach, and you will see us do much more in the next five years."
Synovus' top priority remains credit quality, the lack of which is its chief impediment to profitability.
"We are getting more precise predicting inflows" of problem loans, Anthony said.
Analysts said Synovus will benefit from early efforts to record hefty writedowns in its commercial real estate portfolio and a tangible common equity ratio that now exceeds 8%.
That puts the company in a far better position than some of its rivals. South Financial Group Inc., for instance, on Tuesday signed a consent order with the Federal Reserve and must submit a plan for raising capital within the next 60 days.
BB&T Corp. in Winston-Salem, N.C., which bought Colonial Bank in August, emerged from Tarp last year, and the Southeast has several big regionals such as Regions Financial Corp. and SunTrust Banks Inc. that could repay the Treasury Department around the same time as Synovus, analysts said.
Anthony said he sees Synovus emerging from the cycle as an independent company, but doing so will require a stronger balance sheet and reliable profits.
"That's no easy task," he said. "But this capital puts us in a place where we can think long-term and capitalize on a region that will be stronger and better despite the current stress."
