BankUnited (BKU) Stock Gains 3.2% Despite Q2 Earnings Miss
Shares of BankUnited, Inc. BKU gained 3.2% following the release of its second-quarter 2023 results. Earnings per share of 78 cents missed the Zacks Consensus Estimate of 79 cents by a penny. The bottom line also declined 4.9% from the prior-year quarter.
Results were adversely impacted by an increase in operating expenses, lower deposit and loan balance and a decline in net interest income (NII). However, higher non-interest income and lower provisions for credit losses acted as tailwinds.
Net income came in at $58 million, plunging 11.8% year over year. Our estimate for the metric was $55.8 million.
Revenues & Expenses Increase
Net revenues were $239.37 million, marginally growing year over year. The top line missed the Zacks Consensus Estimate of $247.56 million.
NII was $213.9 million, decreasing 5.1% year over year. The decline was due to higher interest expenses. NIM shrunk 16 basis points (bps) year over year to 2.47%. Our estimates for NII and NIM were $225.5 million and 2.56%, respectively.
Non-interest income of $25.5 million was up 89.5%. The increase was mainly due to a rise in net gain on investment securities and other non-interest income. Our estimate for non-interest income was $23.8 million.
Non-interest expenses grew 14% to $145.2 million. The increase was mainly due to the rise in almost all the components of expenses, except occupancy & equipment charges and depreciation of operating lease equipment fees. Our estimate for non-interest expenses was $142.3 million.
As of Jun 30, 2023, net loans were $24.5 billion compared with $24.7 billion as of Dec 31, 2022. Total deposits amounted to $25.8 billion, down from $27.5 billion at the end of December 2022. Our estimates for net loans are the same as reported numbers, while total deposits were estimated to be $27.5 billion.
Credit Quality Strengthens
In the reported quarter, the company recorded a provision of credit losses worth $15.5 million, down 35.3% from $7.8 million in the prior-year quarter.
As of Jun 30, 2023, the ratio of net charge-offs to average loans was 0.09%, down 13 bps from the Dec 31, 2022 level.
Capital Ratios Improves & Profitability Ratios Deteriorate
As of Jun 30, 2023, the Tier 1 leverage ratio was 7.6%, up from 7.5% as of Dec 31, 2022. Common Equity Tier 1 risk-based capital ratio was 11.2%, up from 11%. The total risk-based capital ratio was 13%, up from 12.7% as of Dec 31, 2022.
At the end of the second quarter, the return on average assets was 0.63%, down from 0.72% in the year-earlier quarter. Return on average stockholders’ equity was 9.2%, down from 9.7%.
Share Repurchase Update
During the reported quarter, the company did not repurchase any shares.
Our View
BankUnited’s efforts to grow organically, driven by higher fee income and a decent balance-sheet position, are expected to support financials. However, higher expenses and a fall in NII 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
Bank of Hawaii Corporation BOH reported second-quarter 2023 earnings per share of $1.12, beating the Zacks Consensus Estimate of $1.11 by a penny. The bottom line declined 18.8% from the year-ago quarter’s number.
BOH results were aided by higher fee income and decent loan demand. However, a fall in NII and a rise in operating expenses and provisions were significant drag.
Bank OZK’s OZK second-quarter 2023 earnings per share of $1.47 missed the Zacks Consensus Estimate by a penny. However, the bottom line reflects a rise of 33.6% from the year-earlier quarter.
Results were positively impacted by an improvement in NII, driven by higher rates and loan balances. However, rising expenses and a rise in provision for credit losses on a challenging economic backdrop were concerns for OZK.
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BankUnited, Inc. (BKU) : Free Stock Analysis Report
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