Back to top

Analyst Blog

On Jan 7, 2014, we reaffirmed our Neutral recommendation on BankUnited, Inc. (BKU). Though the company reported better-than-expected third-quarter results, we remain concerned about its compressed net interest margin as well as exposure to disadvantageous residential loans and an increasingly competitive market.

Why Neutral?

On Oct 22, BankUnited reported third-quarter 2013 earnings per share of 52 cents, comfortably beating the Zacks Consensus Estimate of 46 cents. Results were primarily aided by growth in net interest income, partially offset by decline in non-interest income and higher operating expenses.

The Zacks Consensus Estimate for 2013 advanced nearly 1% to $1.95 per share over the last 60 days. However, for 2014, the Zacks Consensus Estimate decreased 1.6% to $1.81 per share over the same time period. As a result, BankUnited now has a Zacks Rank #4 (Sell).

Given BankUnited’s strong capital and balance sheet levels, the company is well-positioned to expand organically as well as through acquisitions. The company is also a lucrative option for yield-seeking investors as since its inception, in 2009, BankUnited has hiked its dividend twice and maintained the payment regularity.

Moreover, the company is trying to reduce exposure to risky residential loans and provide impetus to commercial loans, which will lead to a steady source of income. As of Sep 30, 2013, commercial loans were 60.0% of total loans and 71.7% of new loans.

However, rising expenses is a major challenge for BankUnited. Going forward, we expect costs to remain high due to the company’s continuous expansion in the New York market.

Further, we are skeptical about BankUnited’s geographic concentration in the highly competitive Florida region. Big players like Bank of America Corp. (BAC - Analyst Report), BB&T Corp. (BBT), JPMorgan Chase & Co. (JPM - Analyst Report), Regions Financial Corp., SunTrust Banks, Inc. and Wells Fargo & Company operate in the region through a huge branch network. Hence, expansion in the region as a profitable company will be quite challenging for BankUnited.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%