MOODY'S UPGRADES LONG-TERM RATINGS OF SYNOVUS FINANCIAL CORP. (SENIOR TO A2) AND COLUMBUS BANK & TRUST COMPANY (DEPOSITS TO A1)
Moody's Investors Service today raised the long-term ratings of Synovus Financial Corp. (Senior to A2) and its lead-bank subsidiary Columbus Bank & Trust Company (CBT) (Deposits to A1). The rating agency said its move reflects the improved profitability at Synovus' banking operations, as well as the growing product and geographic diversification, solid competitive position and franchise value at its transaction-processing subsidiary, Total System Services, Inc.(TSYS).
Headquartered in Columbus, Georgia, Synovus is a bank holding company with 38 community bank subsidiaries operating in Georgia, Alabama, South Carolina and Florida. The profitability of the company's banking operations has improved in recent years, the rating agency noted, as the company has consolidated back office and administrative support functions and improved its information systems.
Through CBT, Synovus also owns 80.8% of TSYS, which in 1999 accounted for approximately 25% of consolidated earnings. TSYS is the second largest third-party processor of credit cards in the U.S. In the past few years TSYS has leveraged its strength in processing credit cards to also become the largest third-party processor of commercial and retail cards in the U.S., and the largest third-party card processor in Canada and Mexico. In addition, the company has recently expanded into the UK and Europe. Moody's believes the increased product and geographic diversification at TSYS provides a more stable and predictable earnings source for Synovus.
With a return on assets of nearly 2.0%, consolidated earnings at Synovus are among the strongest in the U.S. banking industry. The company also has strong capital ratios and a solid base of core-deposits. Moody's remains concerned about Synovus' large commercial real estate exposure, which accounts for over 40% of loans and more than 300% of tangible equity. While the asset quality and underwriting in this portfolio is good, in Moody's view commercial real estate performance can still be volatile in an economic downturn. Nonetheless, Moody's believes that the more stable and predictable earnings generated by Synovus' core deposit business and by TSYS provide solid protection for bondholders, even in the event of an economic downturn.
Moody's said that the ratings outlook for Synovus is stable. While the company's strong profitability, good earnings diversification, and solid franchise value might support higher ratings, the large commercial real estate exposure and limited geographic diversification is a limiting factor on the company's ratings.
The following ratings were upgraded:
Synovus Financial Corp. -- senior debt to A2 from A3.
Columbus Bank & Trust Company -- the rating on the bank for long-term deposits and other senior obligations to A1 from A2, the bank's issuer rating to A1 from A2, and the bank financial strength rating to C+ from C.
Synovus Financial Corporation, headquartered in Columbus, Georgia, had $13 billion in assets and $9.3 billion in deposits as of March 31, 2000. Synovus' lead bank subsidiary, Columbus Bank & Trust Company, also headquartered in Columbus, Georgia, has $2.6 billion in assets and also owns 80.8% of Total Systems Services, Inc.
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