Columbus-based Synovus Financial, the second-largest bank based in Georgia, plans to slash an additional 14 percent of its workforce and shutter 39 branches across its five-state Southeastern footprint.
Monday's announcement is only the latest in cost-cutting efforts for Synovus, a one-time high-flier that has been swamped by heavy losses on real estate lending.
Though the nation’s biggest banks have largely returned to profitability, and signs suggest a bottoming out for others, some of Georgia’s biggest players continue to nurse the wounds of a brutal economy.
Synovus, which operates 30 community banks, including Bank of North Georgia and Bank of Coweta in metro Atlanta, said it will eliminate 850 jobs and close unprofitable or redundant branches .
The move is not unexpected. The job cuts and branch closings are a large part of a previously announced plan to streamline the bank to save $100 million annually by the end of 2012.
“I do believe this is a positive long-term step as we position Synovus as a bank of strength and long-term success,” Synovus President and CEO Kessel Stelling said in an interview with The Atlanta Journal-Constitution.
Synovus’ woes have made it the subject of buyout rumors, something bank leaders have strongly denied.
Analysts have long called on the banking company to make itself more efficient. Chris Marinac, a bank analyst with FIG Partners in Atlanta, said Monday’s announcement is a sign the bank wants to remain independent.
“Part of their repair effort is [fixing credit woes], and part is operational,” Marinac said.
Synovus, once recognized by Fortune Magazine as one of the nation’s best places to work, will have seen its employee ranks reduced 25 percent from more than 7,000 in early 2008, to about 5,200 after the latest round of cuts.
The company, which has lost more than $2 billion in the past two years, continues to grapple with souring real estate loans, and is expected to post yet another loss when it reports fourth quarter earnings later this month.
“This is a culture (now) that is focusing on survival,” Marinac said.
A large portion of the newest job cuts will be front line branch positions, though back office and management positions will also be cut, Stelling said.
Employees begin receiving notices this week.
Atlanta is likely to see some consolidation of branches and personnel, but Synovus officials said cuts will be widely spread across its network.
“We’re not exiting markets. We’re not leaving customers uncovered,” Stelling said. Synovus has banks in Georgia, Alabama, Tennessee, South Carolina and Florida.
The bank is required to provide 90 days notice before closing branches. He said the closures will make Synovus more efficient with minimal effect on customer service.
Synovus said about 470 jobs will be eliminated within 30 days, with the rest cut during the second half of 2011.
Synovus will record a $28 million restructuring charge, most of it in the first quarter of 2011.
As part of Monday's announcement, Synovus said the bank will seek to grow its traditional business banking as it weans itself off real estate.
Many questions for the bank remain. For one thing, Synovus has yet to signal how it will pay off nearly $1 billion in government bailout funds. Analysts say the bank will have to sell more stock to do that. Marinac said the bank could announce it has been given approval by regulators to defer dividend payments to the government in order to focus its attention on returning to profitability.
Stelling said Synovus is committed to returning to the black, where it hasn’t been in nine straight quarters. Cutting costs while also working through credit issues is the fastest way to do that, he said.
Last year, Synovus consolidated its 30 bank charters into one and cut 300 jobs.
In 2008, Synovus asked employees to come up with cost-saving plans in a program dubbed “Project Optimus.” Those initiatives led to more than 1,000 job cuts.
Synovus reported a loss of $195.8 million in the third quarter, which was an improvement. FIG Partners forecasts a fourth quarter 2010 loss of 29 cents per share.
Synovus reported $422 million in new loan problems emerged in third quarter. About $1.6 billion in loans were considered non-accruing, meaning interest wasn’t being paid on those notes.
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