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BankUnited (BKU) Q3 Earnings Beat Estimates, Revenues Grow

BankUnited, Inc. BKU reported third-quarter 2017 earnings per share of 62 cents, which surpassed the Zacks Consensus Estimate of 59 cents. Moreover, the bottom line increased 31.9% from the year-ago-quarter.

Results were primarily driven by an increase in both net interest income and non-interest income. Also, the company witnessed strong growth in loans and deposits. However, higher expenses hurt results to quite an extent. Further, an increase in provisions was an undermining factor. It is probably due to these negatives that the shares of the company declined nearly 1.6% following the release.

Net income for the quarter increased 33.3% year over year to $67.8 million.

Revenues Improve, Costs Increase

Net revenues for the quarter came in at $294.6 million, surpassing the Zacks Consensus Estimate of $273.5 million. Further, the reported figure increased 19.4% year over year.

Net interest income climbed 8.8% year over year to $241.3 million, led by higher interest income, partially offset by an increase in interest expenses.

Net interest margin decreased 7 basis points year over year to 3.62%. Continued run-off of high-yielding covered loans and an increase in the cost of interest-bearing liabilities led to the margin contraction.

Non-interest income was $53.3 million, increasing significantly from the year-ago quarter. The rise was primarily driven by an increase in net gain on investment securities available for sale.

Non-interest expenses increased 5.9% from the year-ago quarter to $156.7 million due to a rise in all the components, except other non-interest expense and professional fees.

Credit Quality Deteriorated

As of Sep 30, 2017, the ratio of net charge-offs to average loans was 0.39%, increasing from 0.13% as of Dec 31, 2016. Also, nonperforming loans to total loans was 0.99%, increasing from 0.70% as of Dec 31, 2016.

Further, provision for loan losses for the quarter was $37.9 million, up from $24.4 million in the prior-year quarter.

Solid Balance Sheet & Capital Ratios

As of Sep 30, 2017, net loans totaled $20.5 billion compared with $19.2 billion as of Dec 31, 2016. Further, total deposits amounted to $21.2 billion, increasing from $19.5 billion as of Dec 31, 2016.

As of Sep 30, 2017, Tier 1 leverage ratio was 8.6%, while Tier 1 risk-based capital ratio came in at 11.9%. Further, total risk-based capital ratio was 12.7% as of the same date.

Profitability Increases

As of Sep 30, 2017, quarterly return on average assets was 0.92%, increasing from 0.76% as of Sep 30, 2016. Also, return on average stockholders’ equity was 10.21%, up from 8.52% as of Sep 30, 2016.

Our Take

BankUnited’s revenue growth is commendable. Also, the company’s consistent growth in loans and deposits is impressive. This testifies that BankUnited is well positioned to grow organically and through acquisitions, given its strong balance sheet position.

However, exposure to risky loans and continued margin pressure, due to a liability-sensitive balance sheet, could hurt the company’s financials.

BankUnited, Inc. Price, Consensus and EPS Surprise
 

BankUnited, Inc. Price, Consensus and EPS Surprise | BankUnited, Inc. Quote

BankUnited currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Major Regional Banks

BB&T Corporation’s BBT third-quarter 2017 adjusted earnings of 78 cents per share came in line with the Zacks Consensus Estimate. Results reflected an increase in revenues and higher expenses. The quarter witnessed a decrease in loans and leases and deposits. Additionally, provision for credit losses decreased, which was a tailwind.

Comerica Incorporated CMA reported third-quarter 2017 adjusted earnings per share of $1.27, surpassing the Zacks Consensus Estimate of $1.20. Results reflected an increase in revenues supported by easing margin pressure and higher fee income. However, higher provisions and a decrease in loans balance remained major headwinds.

KeyCorp’s KEY third-quarter 2017 adjusted earnings of 35 cents per share were in line with the Zacks Consensus Estimate. Results were supported by revenue synergies from the First Niagara Financial Group acquisition deal (completed in August 2016) and higher interest rates. On the other hand, higher operating expenses were on the downside.

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