BankUnited Falls on In-Line Q2 Earnings, Revenues Rise - Analyst Blog
Shares of BankUnited, Inc. BKU fell over 1% after the company announced its second-quarter 2015 earnings yesterday. Earnings per share of 43 cents came in line with the Zacks Consensus Estimate. However, earnings came in 7% lower than the year-ago figure.
Bankunited Inc. - Earnings Surprise | FindTheBest
Growth in revenues was offset by elevated costs and higher provisions. Improvement in loans and deposits continued to be a tailwind during the quarter. While credit quality portrayed a mixed picture, capital and profitability ratios displayed weakness.
Net income declined 4% year over year to $46.6 million.
Performance Details
BankUnited’s net revenue grew 8% year over year to $202.0 million. Moreover, it surpassed the Zacks Consensus Estimate of $198.3 million.
Net interest income (excluding provision for loan loses) increased 9% year over year to $181.0 million. The rise was driven by an increase in interest income, partially offset by higher interest expense. Further, net interest margin plunged 72 basis points (bps) year over year to 3.95%.
Non-interest income rose 3% year over year to $21.1 million. The increase was mainly attributable to higher net income from the resolution of covered assets, service charges and fees, net gain on sale of loans, net gains on investment securities available for sale as well as lease financing. These were, however, partially offset by higher net loss on FDIC indemnification and a reduction in FDIC reimbursement of costs of resolution of covered assets as well as other income.
Non-interest expenses climbed 16% year over year to $123.4 million. The rise was primarily due to an increase in all components except professional fees as well as net other real estate owned expense.
As of Jun 30, 2015, net loans summed $14.2 billion, up from $12.3 billion as of Dec 31, 2014. Further, total deposits amounted to $15.2 billion, up from $13.5 billion as of Dec 31, 2014.
Asset Quality
Asset quality represented a mixed bag. The ratio of total nonperforming loans to total loans stood at 0.48% as of Jun 30, 2015, up 17 bps from Dec 31, 2014. Also, provision for loan losses increased 17% year over year to $8.4 million.
However, net charge-offs to average loans came in at 0.07%, down 8 bps from Dec 31, 2014.
Profitability and Capital Ratios
BankUnited’s capital ratios continued to deteriorate. As of Jun 30, 2015, Tier 1 leverage ratio stood at 9.9%, down from 10.7% as of Dec 31, 2014. Tier 1 risk-based capital ratio came in at 13.7% versus 15.5% as of Dec 31, 2014. Total risk-based capital ratio came in at 14.5% against 16.3% as of Dec 31, 2014.
Profitability ratios also weakened during the quarter. The return on average assets fell 28 bps year over year to 0.91% as of Jun 30, 2015. Further, return on average stockholder equity stood at 8.70% against 9.70% as of Jun 30, 2014.
Our Viewpoint
BankUnited has the potential for future growth based on its healthy liquidity levels as well as a sturdy balance sheet. While steady capital deployment activities remain impressive, increasing emphasis on commercial loan portfolio will prove accretive to the company’s future development.
Nonetheless, persistent margin compression owing to the prevailing low interest rate environment, weak cost management and exposure to risky residential loans are expected to keep the company’s financials under strain in the near term.
BankUnited currently holds a Zacks Rank #3 (Hold).
Performance of Other Major Regional Banks
KeyCorp.’s KEY second-quarter 2015 earnings from continuing operations of 27 cents per share missed the Zacks Consensus Estimate by a penny on the back of elevated expenses as well as a significant increase in provisions.
On the other hand, BB&T Corporation’s BBT second-quarter 2015 adjusted earnings per share of 69 cents surpassed the Zacks Consensus Estimate by a penny. A rise in fee income mainly drove the earnings beat.
Also, The Bank of New York Mellon Corp.’s BK second-quarter 2015 adjusted earnings per share of 77 cents came well ahead of the Zacks Consensus Estimate of 66 cents, driven by an improved top line.
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