BankUnited (BKU) Falls as Q1 Earnings Lag, Deposits Decline
Shares of BankUnited, Inc. BKU declined 3.1% following the release of its lower-than-expected first-quarter 2023 results. Earnings per share of 70 cents missed the Zacks Consensus Estimate of 93 cents. The bottom line also declined 11.4% from the prior-year quarter. We had projected earnings per share of 97 cents.
Results were adversely impacted by an increase in operating expenses, lower deposits and high provisions for credit losses. However, higher net interest income (NII), non-interest income and increasing rates acted as tailwinds.
Net income was $52.9 million, plunging 21.2% year over year. Our estimate for the metric was $73.4 million.
Revenues & Expenses Increase
Net revenues were $244.4 million, growing 9.6% year over year. The top line missed the Zacks Consensus Estimate of $264.7 million. Our estimate for net revenues was $263.3 million.
NII was $227.9 million, increasing 9.2%. The improvement was driven by higher interest income. NIM rose 12 basis points (bps) year over year to 2.62%. Our estimates for NII and NIM were $238.4 million and 2.80%, respectively.
Non-interest income of $16.5 million was up 15.6%. The increase was mainly due to a rise in other non-interest income. Our estimate for non-interest income was $24.9 million.
Non-interest expenses grew 20.9% to $152.8 million. The increase was mainly due to the rise in deposit insurance expenses, employee compensation and benefits costs, technology expenses and other non-interest expenses. Our estimate for non-interest expenses was $149.7 million.
As of Mar 31, 2023, net loans were $24.7 billion, relatively stable from the prior quarter. Total deposits amounted to $25.7 billion, down 6.5% from the end of December 2022.
Credit Quality: A Mixed Bag
In the reported quarter, the company recorded a provision of credit losses worth $19.8 million, up significantly from $7.8 million in the prior-year quarter. Our estimate for the metric was $20.2 million.
As of Mar 31, 2023, the ratio of net charge-offs to average loans was 0.08%, down 14 bps from Dec 31, 2022 level.
Capital & Profitability Ratios Deteriorate
As of Mar 31, 2023, Tier 1 leverage ratio was 7.4%, down from 7.5% as of Dec 31, 2022. Common Equity Tier 1 risk-based capital ratio was 10.8%, down from 11%. The total risk-based capital ratio was 12.6%, down from 12.7% in the prior-year period.
At the end of the first quarter, the return on average assets was 0.58%, down from 0.76% in the year-earlier quarter. Return on average stockholders’ equity was 8.5%, down from 9%.
Share Repurchase Update
During the reported quarter, BankUnited repurchased 1.6 million shares for $55 million at an average price of $33.41 per share.
Our View
BankUnited’s efforts to grow organically, driven by higher NII and a strong balance-sheet position, are expected to support financials. However, higher expenses and rising provisions are major concerns.
BankUnited, Inc. Price, Consensus and EPS Surprise
BankUnited, Inc. price-consensus-eps-surprise-chart | BankUnited, Inc. Quote
Currently, the company 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 Banks
Hancock Whitney Corporation’s HWC first-quarter 2023 earnings of $1.45 per share met the Zacks Consensus Estimate. The bottom line rose 3.6% from the prior-year quarter. Our estimate for earnings was $1.38 per share.
HWC's results benefited from higher NII, a rise in loan balance and increasing interest rates. However, lower non-interest income, higher expenses and a rise in provisions were concerning.
Washington Federal’s WAFD second-quarter fiscal 2023 (ended Mar 31) earnings of 95 cents per share missed the Zacks Consensus Estimate of $1.11 per share. The bottom line, however, reflects a year-over-year jump of 35.7%. Our model projected earnings per share of $1.09.
WAFD's results benefited from a steady loan balance and higher rates, which, in turn, supported NII growth. However, an increase in other expenses and a fall in other income were headwinds. Also, higher provisions on the back of a deteriorating economic outlook acted as a spoilsport.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Washington Federal, Inc. (WAFD) : Free Stock Analysis Report
BankUnited, Inc. (BKU) : Free Stock Analysis Report
Hancock Whitney Corporation (HWC) : Free Stock Analysis Report
