BankUnited, Inc.’s BKU first-quarter 2015 earnings per share of 44 cents came in line with the Zacks Consensus Estimate. However, earnings came in 17% lower than the year-ago figure.
Bankunited Inc. - Earnings Surprise | FindTheCompany
Results benefited from higher net interest income, offset by lower non-interest income and elevated costs. Growth in loans and deposits continued to be strong while credit quality showed mixed figures. Also, capital and profitability ratios weakened further during the quarter.
Net income declined 16% year over year to $46.5 million.
Performance Details
BankUnited’s net revenue fell 2% year over year to $193.5 million. However, it surpassed the Zacks Consensus Estimate of $186.0 million.
Net interest income (excluding provision for loan loses) increased 4% year over year to $172.7 million. The rise was driven by an increase in interest income, partially offset by higher interest expense. Further, net interest margin plunged 103 basis points (bps) year over year to 4.02%.
Non-interest income declined 31% year over year to $20.7 million. The reduction was mainly attributable to higher net loss on FDIC indemnification and a fall in net gain on sale of loans as well as other income. However, these were partly mitigated by an increase in net gains on net investment securities available for sale, lease financing as well as net income from the resolution of covered assets.
Non-interest expenses climbed 11% year over year to $114.1 million. The rise was primarily due to an increase in all components except professional fees.
As of Mar 31, 2015, net loans summed $13.1 billion, up from $12.3 billion as of Dec 31, 2014. Further, total deposits amounted to $14.3 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 0.38% as of Mar 31, 2015, up 7 bps from Dec 31, 2014.
However, net charge-offs to average loans came in at 0.12%, down 3 bps from Dec 31, 2014. Also, provision for loan losses decreased 3% year over year to $8.1 million.
Profitability and Capital Ratios
BankUnited’s capital ratios continued to deteriorate. As of Mar 31, 2015, Tier 1 leverage ratio stood at 10.34%, down from 10.70% as of Dec 31, 2014. Tier 1 risk-based capital ratio came in at 14.87% versus 15.45% as of Dec 31, 2014. Total risk-based capital ratio came in at 15.67% against 16.27% as of Dec 31, 2014.
Profitability ratios also weakened during the quarter. The return on average assets fell 50 bps year over year to 0.96% as of Mar 31, 2015. Further, return on average stockholder equity stood at 9.02% against 11.41% as of Mar 31, 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 first-quarter 2015 earnings from continuing operations of 26 cents per share came in line with the Zacks Consensus Estimate.
On the other hand, BB&T Corporation’s BBT first-quarter 2015 adjusted earnings per share of 68 cents lagged the Zacks Consensus Estimate of 70 cents.
However, The Bank of New York Mellon Corp.’s BK first-quarter 2015 earnings per share of 67 cents surpassed the Zacks Consensus Estimate of 59 cents, driven by improved trading volumes in the quarter.
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