Synovus Financial Corp. President and CEO Kevin Blair ruled out bank deals in the near term at his company, citing often "underestimated" integration challenges and a belief that Synovus can accomplish a technological transformation under its own power.

"Bank M&A often looks great on paper when you look at the pro forma financial metrics," Blair said during a conference call on second-quarter results. "But I think there are challenges that are present with system and cultural integration, as well as just creating growth off the acquired company's base."

Blair said that low interest rates are creating revenue challenges and bleak two- to three-year outlooks that are prompting banks to reach out for partners and driving deal activity. But initiatives his bank is carrying out under the "Synovus Forward" banner have a self-reinforcing momentum enabling the company to add product enhancements and generate cost savings that create room for further technology upgrades, Blair said.

"With those improvements, our currency will improve, and then that will allow us over time to consider alternatives and options in that bank M&A space," he said. "But for now, I think the only M&A that we've evaluated or would evaluate would be smaller companies that provide solutions or capabilities that would be additive to our existing customer base." He added that such acquisitions would also "have to provide elevated returns and a growth profile that align with our overarching strategies."

Blair, formerly Synovus' president and COO, became the bank's CEO in April and has given a similar outlook on M&A before. Synovus' last bank deal was the $1.6 billion acquisition of FCB Financial Holdings Inc. in 2018.

Synovus said the Forward program had achieved $75 million of run-rate cost savings as of the second quarter. The bank is targeting $175 million by the end of 2022.

Blair said Synovus is "partnering with the right fintechs to build and deliver new products and solutions" and has developed a roadmap to migrate to a "modern" core banking system. He said the bank would make the move in phases but would not "do a rip and replace and move off of our mainframe core today over into a cloud-based core tomorrow."

He added that there is no set time frame for the conversion and that the bank is experimenting to develop the right approach. Collaborating with financial technology companies allows Synovus to proceed "without having to have an R&D shop inside of our bank."

Synovus also reported that its third-party consumer loan balances increased $272.5 million sequentially in the second quarter, partially offsetting a decline of $763.4 million in Paycheck Protection Program loans. A portfolio of $300 million of auto loans represented the bank's largest purchase of third-party consumer loans in the second quarter, CFO Andrew Gregory Jr. said.

Overall, loans declined $569.1 million, or 1%. The bank said it would probably land at the lower end of its previous guidance for loan growth of 2% to 4% in 2021, excluding PPP and third-party consumer loans, because of higher paydowns than initially anticipated.

Blair said he did not think that President Joe Biden's executive order calling for more scrutiny of bank deals is targeting mid-cap companies and would not slow down consolidation in the sector. "If anything, I think it will just hinder banks' ability to close branches, and may increase the amount of investment that's required for community development," he said.