Sep. 16, 2009 (Business Wire) -- Fitch Ratings has affirmed the ratings of Synovus Financial Corporation (SNV) and its subsidiary banks, following the company's announcement on Sept. 14, 2009, describing multiple capital raising initiatives. The Rating Outlook remains Negative.
The affirmation anticipates that SNV will successfully execute on its announced $500 million capital raising plan, which includes a $350 million common stock issuance, a conditional exchange offer for subordinated debt, and various balance sheet refinements. Fitch views these capital enhancements as both prudent and necessary, given the company's ongoing asset quality challenges and significant exposure to troubled regions of the Southeast.
Credit issues continue to stem from SNV's residential construction, development, and land loan portfolios; the majority of which reside in the greater Atlanta area and Florida (which totaled 21% and 14% of total loans respectively, at June 30, 2009). While management has been successful in disposing of problem assets, Fitch believes nonperforming asset inflows will persist at an elevated level over the near-term. As such, Fitch believes prolonged credit stress will continue to weigh heavily on the company's financial condition, which may erode the full benefit of the potential capital augmentations.
Additional concerns exist regarding the Memorandum of Understanding (MOU) with the Federal Reserve Bank of Atlanta and the State of Georgia, with whom SNV and several of its subsidiary banks have entered. While the regulatory actions have not placed specific stipulations on SNV's capital levels, which were above 'well-capitalized' regulatory guidelines as of June 30, 2009, SNV has agreed to implement enhanced capital monitoring procedures. Under the MOU, the company has also agreed to provide additional detail with regards to its credit risk and liquidity management practices. Fitch anticipates that portions of the capital SNV raises through the common stock issuance will eventually have to be down streamed to certain subsidiary banks.
Maintenance of the Negative Outlook reflects both the possibility of credit deterioration becoming more pronounced and the weakening of some of SNV's other fundamental strengths, such as its core funding base. Should SNV be unsuccessful in its capital raising initiatives, the company's ratings could be downgraded. However, ratings are supported by the company's current liquidity position, sound funding base, improved reserve levels, and potentially enhanced capital levels.
With over $34 billion in assets, Synovus is a diversified financial services holding company based in Columbus, GA. Operating through its lead bank, Columbus Bank & Trust Company and its other numerous affiliated banks, SNV provides a broad range of traditional consumer and commercial banking products and services throughout its southeast footprint.
Fitch has affirmed the following ratings with a Negative Outlook:
Synovus Financial Corp.
--Long-term Issuer Default Rating (IDR) at 'BB-';
--Subordinated Debt at 'B';
--Preferred Stock at 'B-';
--Short-term IDR at 'B';
--Individual at 'D';
--Support at '5';
--Support Floor at 'NF'.
Columbus Bank & Trust
--Long-term IDR at 'BB-';
--Long-term Deposits at 'BB';
--Short-term IDR at 'B';
--Short-term Deposits at 'B';
--Individual at 'D';
--Support at '5';
--Support Floor at 'NF'.
Athens First Bank & Trust Co.
--Long-term IDR at 'BB-';
--Long-term Deposits at 'BB';
--Short-term IDR at 'B';
--Individual at 'D';
--Support at '5';
--Support Floor at 'NF'.
