Columbus, Ga.-based SynovusFinancial Corp. expects to grow its net interest income by 3.6% overthe next 12 months, in case the Fed increases its interest rates by 100 basis pointsas of March 31, according to the company's 10-Q filed May 5.
Interest rate risk is the primary market risk that the companyis currently exposed to. Synovus uses a simulation model to measure its sensitivityto changes in market interest rates and determine a baseline net interest incomeforecast.
According to the model, the company is expected to grow its netinterest income by 5.6%, if the Fed increases its rates by 200 basis points overthe next 12 months. The company noted that several factors can diminish or eliminatethis asset sensitivity in a rising rate environment, including a higher-than-estimatedlevel of deposit customer migration to higher cost deposits and re-pricing behaviorof interest bearing non-maturity deposits.
Christopher Marinac, a FIG Partners LLC analyst, noted that thecompany's updated guidance is down slightly from a 3.8% impact at year-end 2015.In a May 6 research note, the analyst also noted that even though the company remainsasset sensitive, should interest rates increase, it is not as sensitive as somebanks, where the companies' Form 10-K disclosures suggest that the highest levelsof net interest income change are 7% to 10%.
The analyst reiterated his "market-perform" recommendationfor the company, after it filed its Form 10-Q.