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BankUnited's (BKU) Q4 Earnings Miss, Costs & Provisions Rise

Zacks Equity Research

BankUnited, Inc.’s BKU fourth-quarter 2018 earnings per share of 50 cents missed the Zacks Consensus Estimate of 60 cents. The bottom line also compares unfavorably with the prior-year quarter’s adjusted figure of 86 cents per share.

Results were affected by higher expenses and provisions, and lower non-interest income. However, the company’s overall loans and deposit balances remained strong. Also, rise in net interest income was a support.

Net income for the reported quarter was $52.4 million or 50 cents per share, down from $417.8 million or $3.79 per share recorded in the prior-year quarter. Prior-year quarter figure included certain non-recurring item.

For 2018, earnings per share of $2.99 lagged Zacks Consensus Estimate of $3.07. However it grew 12.8% year over year. Net income for 2018 was $324.9 million compared to $614.3 million in the prior year. Prior-year figures included certain nonrecurring item.

Revenues Improve, Expenses Rise

Net revenues for the fourth quarter came in at $328.4 million, surpassing the Zacks Consensus Estimate of $286.6 million. The top line also increased 15.1% year over year.

Net revenues for 2018 came in at $1.18 billion, outpacing the Zacks Consensus Estimate of $1.14 billion. The reported figure also witnessed 6.7% year-over-year growth.

Net interest income for the quarter totaled $295 million, increasing 23.5% year over year, backed by higher interest income, partially offset by rise in interest expenses.

Net interest margin expanded 49 basis points year over year to 4.01%.

Non-interest income was $33.3 million, down 28.4% from the year-ago quarter. The decline was mainly due to fall in net gain on investment securities and net gain on sale of loans.

Non-interest expenses flared up 53% from the year-ago quarter to $246.7 million, primarily due to rise in telecommunications and data processing costs, amortization of FDIC indemnification asset costs, and depreciation of equipment under operating lease.

Credit Quality: Mixed Bag

As of Dec 31, 2018, the ratio of net charge-offs to average loans was 0.28%, down from 0.38% as of Dec 31, 2017.

However, provision for loan losses in the quarter under review was $12.6 million, up from $5.2 million in the prior-year quarter. In addition, ratio of non-performing loans to total loans was 0.59%, down from 0.81% as of Dec 31, 2017.

Solid Balance Sheet

As of Dec 31, 2018, net loans were $21.9 billion, up 2.8% from the Dec 31, 2017 level. Total deposits amounted to $23.5 billion, up 7.3% from Dec 31, 2017 level.

Capital & Profitability Ratios Deteriorate

As of Dec 31, 2018, Tier 1 leverage ratio was 9% compared with 9.6% recorded at the end of the prior-year quarter. Moreover, Tier 1 risk-based capital ratio was 12.6% down from 13.5% recorded on Dec 31, 2017. Further, total risk-based capital ratio was 13.1% compared with 14% in the year-ago quarter.

At the end of the fourth quarter, return on average assets was 0.66%, down from 5.54% reported at the prior-year quarter end. Additionally, return on average stockholders’ equity was 6.85%, significantly down from 59.33% witnessed at the end of the year-ago quarter.

Our Take

Supported by continued growth in loans and deposits, BankUnited remains on track for top-line improvement in the future. However, rising expenses might hinder the company’s bottom-line growth in the near term.

BankUnited, Inc. Price, Consensus and EPS Surprise

 

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

BankUnited currently has 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

Washington Federal’s WAFD first-quarter fiscal 2019 (ended Dec 31) earnings came in at 65 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. The figure also reflected year-over-year growth of 10.2%.

Synovus Financial’s SNV fourth-quarter earnings of 92 cents per share lagged the Zacks Consensus Estimate of 94 cents. However, the reported figure came in 27.8% higher than the prior-year tally.

Hancock Whitney Corporation’s HWC fourth-quarter 2018 operating earnings per share of $1.12 missed the Zacks Consensus Estimate of $1.13. The reported figure, however, came in 30.2% higher than the year-ago tally.

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