Winners and Sinners: Synovus Financial (SNV)

Synovus Financial (SNV) looks like it was hit by a bus today, down 21% from last night’s close as of this posting on a worse than expected earnings report.

Synovus Financial (SNV) 5 Day Chart

What’s notable about this Georgia-based bank is that in a rush to get long some banks this summer and fall, SNV was mentioned favorably by way too many pros both on Wall Street and in the media.

Here’s a look at some of the best and worst calls…

Sinners:

1. Sandler O’Neill & Partners, September 18th 2009 – “WE ARE UPGRADING Synovus Financial (ticker: SNV) from Hold to Buy on the heels of its upsized capital raise completed earlier this week.  Our new price target is $4.50 [up from $2.75], which implies 15% appreciation potential and assumes that the shares will trade modestly above our anticipated low-point for tangible book value (TBV) per share one year out.”

TRB:  hmm, I wonder if they took part in that capital raise they seem to be so enamoured of…

2. James Cramer, September 21st 2009 – “Could Synovus be next? I will say this: Huntington is a much better lender than Synovus. But Synovus is way too low and way too low below its offering.”

TRB:  ok, if was “way too low” then, what is now?

3. Tom Brown (Bankstocks.com), September 23rd 2009 – “Synovus’s credit issues seem manageable, we believe, even as it now seems to have enough capital to withstand even an extremely severe economic scenario. In our view, the company will almost certainly emerge from the credit mess with strong earnings power—yet it seems to be priced as if it might not even survive. Based on current valuations, we believe the stock offers plenty of reward.”

TRB:  Tom’s one of the most highly regarded bank analysts around, his models got it twisted in this case.

Winners:

FBR Capital, September 29th 2009 – “FBR Capital downgrades Synovus (NYSE: SNV) from Market Perform to Underperform; lowers price target to $2.50 from $3.00.  FBR analyst says, “Our downgrade is primarily driven by our new proprietary risk-adjusted valuation model, which we use as a tool to evaluate opportunities for achieving relative outperformance in the financials space. By our analysis, SNV is a high risk, low reward stock…Given the significant losses SNV will face across its loan portfolio and particularly in its construction and development portfolio.”

TRB:  You should’ve heeded FBR, a company well-versed in credit problems due to their own extensive experiences with them.

The purpose of the Winners and Sinners feature is not to beat someone up over a wrong call, it happens to everyone.  Rather, what we can learn from this exercise is the importance of paying attention to the other side of a trade prior to getting involved, understanding both the positives and negatives.

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