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Analyst Blog

We issued an updated research report on BankUnited, Inc. (BKU - Analyst Report) on Jul 2, 2014. Despite reporting better-than-expected first-quarter 2014 results, rising expenses and pressure on net interest margin (NIM) pose major challenges for the company.

BankUnited has recorded a rise in operating expenses every year since 2010 but for 2012 when expenses fell. Going forward, steeper compensation expenses as well as costs associated with the company’s inorganic growth strategies will continue to increase the expense burden.

Also, BankUnited witnesses persistent pressure on NIM. As the interest rate environment is not expected to improve significantly in the near future, we foresee substantial margin pressure in the near-to-mid term.

Nevertheless, given BankUnited’s healthy liquidity position, we find it favorably positioned to grow both organically and inorganically. Synergies from the company’s extended foothold in the New York metropolitan market and Florida would support top-line growth in the quarters ahead.

Moreover, BankUnited is an attractive pick for yield-seeking investors. The company disburses capital to shareholders in form of regular dividend payouts.

The Zacks Consensus Estimate for 2014 declined nearly 1.0% to $1.85 per share over the last 60 days. However, for 2015, the Zacks Consensus Estimate advanced 1.0% to $2.13 per share over the same time period.

BankUnited currently carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked banks include Huntington Bancshares Incorporated (HBAN - Analyst Report), Associated Banc-Corp (ASBC - Analyst Report) and Comerica Incorporated (CMA - Analyst Report). All these stocks carry a Zacks Rank #2 (Buy).

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