Synovus unloading repo homes to clear bad loans

By Paul Donsky

The Atlanta Journal-Constitution

Want a hot deal on a house? Georgia’s second-largest bank is in the mood to make one.

Columbus-based Synovus is in the midst of a massive purge of distressed property, mostly foreclosed homes and vacant lots.

Through auctions run by contractors, the banking company has sold thousands of properties over the past four months as it works to cleanse a balance sheet hammered by bad real estate bets, many in the troubled metro Atlanta market.

The sell-off continues this week and next as the bank plans to auction off about 150 distressed properties through a combination of online and live auctions. Properties on the block include homes from Carrollton to Canton and vacant lots from Newnan to Austell.

Minimum bids at one auction hosted by Williams & Williams range from $10,000 for a 2-bedroom, 2-bath home in Cartersville to $50,000 for a 5-bedroom, 3-bath house in Woodstock.

Many banks are selling repossesed homes, but the numbers for Synovus are eye-popping.

Synovus sold $400 million worth of distressed assets in the second quarter alone and plans to sell $600 million more over the third and fourth quarters.

The bank has recorded large losses on the transactions, including $165 million in the second quarter. The bank, which is averaging returns of about 45 cents on the dollar, expects to lose $300 million more in the second half of the year through asset sales.

A Synovus spokesman said auctions have been a successful way of selling assets, with five planned this quarter.

Wall Street analysts cheer the company’s aggressive actions, saying they put it on the road back to profitability. With bad loans cleared off the books, money that’s been siphoned off to cover loan losses can be used to boost earnings.

Jennifer Demba, an analyst at SunTrust Robinson Humphrey, recently upgraded Synovus’s stock to a “buy” rating.

“As promised, Synovus was very aggressive in disposing of problem assets, and investors should be pleased with the [loan loss reserve] build,” Demba wrote in a recent report.

Other large Georgia banks, including United Community Banks, are making significant progress in disposing of their problem loans. But Georgia’s biggest bank, SunTrust, would not talk about its plans for selling distressed property.

Some smaller banks grumble, worrying that the property dumps by the big players causes housing prices to tumble even further.

“It’s definitely going to have an impact on those banks that do have toxic assets they are trying to get rid of,” said Carolyn Brown, president of the Community Bankers Association of Georgia. “They all are trying to get the best dollar they can obtain.”