Why Is BankUnited, Inc. (BKU) Down 15.4% Since Last Earnings Report?
It has been about a month since the last earnings report for BankUnited, Inc. (BKU). Shares have lost about 15.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is BankUnited, Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
BankUnited Q2 Earnings Miss, Revenues & Expenses Rise Y/Y
BankUnited’s second-quarter 2023 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. 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.
Outlook
Management expects stability in NIM in the near term.
Management expects non-interest expenses in the second half of 2023 to be flat compared to the first half.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, BankUnited, Inc. has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, BankUnited, Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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