Synovus Financial increased lending at a healthy pace in the second quarter, but noted signs of falling demand amid inflationary pressures and a series of Federal Reserve interest rate hikes.
The “wild card” for the second half of 2022 is “the uncertainty in the environment and what will happen with customer demand for loans,” Chairman and CEO Kevin Blair said Thursday during the appeal to the results of the company with assets of 57 billion dollars.
In particular, he noted “some slowdown” in recent commercial real estate lending activity.
In addition to rising interest rates which could dampen demand, Chief Credit Officer Robert Derrick said Synovus has already seen some companies hit the pause button on CRE projects due to inflation in the form high labor and material costs.
“So we expect that to have a headwind on real estate growth,” Derrick said. “Overall, I think it’s going to slow down.”
During the second quarter, however, no slack in demand has yet manifested itself in Synovus’ results.
The Columbus, Georgia-based bank saw broad-based loan growth, with total loan balances ending the second quarter at $41.2 billion. Excluding Paycheck Protection Program balances, loans were up 12% on an annualized basis.
This is the fourth consecutive quarter of annualized double-digit loan growth for Synovus. CRE loans and consumer loans each grew at a rate of 12%, while commercial and industrial loans grew at a rate of 8%.
Total second quarter revenue of $522.7 million increased 7% over the prior year.
Synovus reported net income of $169.8 million, or $1.16 per share, compared with $177.9 million, or $1.19, a year earlier. The decline was primarily due to a prior-year benefit from the write-off of a provision for credit losses, the company said.