Synovus sees CET1 ratio increase of 40-50bps from risk weighted asset reduction

In a regulatory filing yesterday, the company stated: “On May 6, 2024, Synovus substantially completed a risk weighted asset (“RWA”) optimization analysis of certain of its loan portfolios to determine eligibility for reduced risk weighting. This analysis included such segments as securitization finance, multi-family mortgage, government lending, and residential mortgage. Based on this analysis, Synovus now expects an incremental reduction in RWA in the second quarter of 2024 of approximately $2.0 to $2.4 billion which will result in a marginal increase in its common equity tier 1, or “CET1″, ratio of approximately 40 to 50 basis points. Absent the planned actions noted below, Synovus would expect its CET1 ratio to exceed the previously announced targeted range of 10.0% to 10.5%. The increase in capital ratios resulting from this RWA optimization provides flexibility for incremental capital deployment and as such, Synovus expects, subject to market conditions, to reposition a portion of its $11 billion securities portfolio throughout the month of May. As part of this exercise, Synovus anticipates selling available-for-sale securities with a book value of approximately $1.6 billion, resulting in a pre-tax loss of approximately $275 million, with funds redeployed into other high quality liquid assets. Synovus expects this transaction to positively impact its future net interest income and net interest margin profile, with an estimated earn back period of approximately five years. After the foregoing anticipated securities repositioning, Synovus will continue to operate at the upper end of its targeted range of a 10.0% to 10.5% CET1 ratio.”