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  • normlasky normlasky Jan 16, 2012 8:22 PM Flag

    bank united....good buy or loser

    Bku is up for sale but its share price is already ridiculously high. The initial owners will be lucky to recover iheir initial $975 million investment. No competitive advantage - me too bank.

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    • The initial owners have tripled their investment. Remember, they got this bank for pennies on the dollar from the FDIC along with an extremely generous loss sharing agreement. They had made their fortunes and don't see a reason to stick around much longer.

      • 1 Reply to adamreynolds56
      • John Kasas the ceo of bku is a banker and sharp cookie. His investment is up 150% since the fdic acquisition of bku - think in 2010. Their loans are only $4 billion and most are credit impaired loans guaranteed by the fdic. Their net interest margin is 6.30% even with some very high cost deposits thanks to some nice accretion on the fdic stuff. But this is only temporary. Once loans become normalized, their net interest margins will drop in half. Also, their provision for bad loans was only 10 bsp last quarter the normalized level is probably 8 to 10 times higher than this.

        I'm also not too excited about their investment securities which total $4 billion, about the same as their loans. Kind of like a first niagara situation.

        Last qtr. bku pretax profit was $80 million - but once it normalized I think it drops to $25 million, so the current equity cap is well in excess of a pe multiple of 20.

        Kasas was offers this week and solidify the deal in 2 weeks. Why the hurry? Obvious - bku is a hot potatoe and Kasas is looking for a sucker.

        Kelly King is pretty shrewd. He's not going to fall for Kasas baloney. Now there is some significant branch cost reduction which bbt could realize from an acquisition but I think the share price would have to fall back to tangible book value which is almost half the current share price. If bbt does a deal, the irr would have to be close to 20%, so any bbt offer would have to be well below share price.

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