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On Sep 19, 2013, we upgraded our long-term recommendation on BankUnited, Inc. (BKU - Analyst Report) to Outperform. Our decision rests on the company’s impressive second-quarter earnings. Moreover, the company is conveniently positioned to grow both organically and inorganically based on its healthy liquidity levels.

The Rationale Behind the Upgrade

On Jul 24, BankUnited reported second-quarter 2013 earnings per share of 52 cents, substantially beating the Zacks Consensus Estimate of 43 cents. Results were primarily driven by growth in net interest income and a decline in operating expenses, partially offset by lower non-interest income. Further, growth in loan and deposit balances was the tailwind for the quarter.

The Zacks Consensus Estimate for 2013 advanced 10.6% to $1.88 per share over the last 60 days. Further, for 2014, the Zacks Consensus Estimate increased 8.3% to $1.82 per share over the same time period. Hence, BankUnited currently carries a Zacks Rank #1 (Strong Buy).

BankUnited is an attractive pick for yield-seeking investors. Earlier, in Feb 2012, the company had raised its cash dividend by 21% to 17 cents. Moreover, given the company’s strong capital and balance sheet levels, it is well positioned to expand organically as well as through acquisitions. Further, management intends to set up additional branches in the New York metropolitan market through the remainder of 2013.

Robust capital deployment plans and increasing emphasis on the commercial loan portfolio will prove accretive to BankUnited’s overall growth going forward. The company is well poised from the capital perspective as well. We expect BankUnited to continue building capital with the help of its earnings in order to meet the increasingly stringent capital requirements.

Other Stocks Worth Considering

Other banks worth a look include Firstbank Corporation , German American Bancorp Inc. (GABC - Snapshot Report) and Tower Financial Corporation . All these stocks carry the same Zacks Rank as BankUnited.
 

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