Synovus Financial: Banking on Growth

Synovus Financial, a regional bank holding company based in Columbus, Ga., is on a roll. Its profits jumped 18% in 2005, to $516 million, up from $437 million the year before, propelled by growth in the number of loans made by the company's 39 community banks.

Synovus operates two lines of business. Its main business consists of banks in Alabama, Florida, Georgia, South Carolina and Tennessee. Synovus also owns 81% of Total System Services (TSS), the top credit-card processor in the world.

Synovus's stock (symbol SNV) looks like a bargain. At $27, it trades at 15 times analysts' 2006 earnings estimate of $1.83 a share, according to Thomson First Call. Prudential Equity Group analyst Michael Mayo says the stock is worth $32.

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Synovus has a history of strong performance. Over the past decade, earnings per share have grown at a compounded rate of 14%, according to Morningstar. Synovus executives predict that earnings will increase 12% to 14% in 2006.

Synovus' banks are heavily focused on commercial and real-estate loans, but lately management has been revamping and expanding the retail side of the business. The company's plans include modernizing the look of branches, building its wealth-management business, and boosting its income from products such as CDs, money market accounts and interest-bearing checking accounts. Mayo says such plans should spur solid growth through 2007.

A potential hurdle for Synovus is the recent loss of two major TSS clients, Bank of America and Citigroup Sears. Bank of America is shifting the processing of its consumer credit cards in-house, and Citigroup Sears is switching its accounts to TSS rival First Data. Mayo says these concerns are overblown because TSS expects to add 75 million accounts in 2006, a large chunk of which will come from Capital One, a new client.

--Katy Marquardt