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BankUnited, Inc.’s (BKU - Free Report) first-quarter 2017 earnings per share of 57 cents surpassed the Zacks Consensus Estimate by a penny. Moreover, the bottom line increased 11.8% from the year-ago-quarter.
Better-than-expected results were primarily driven by higher net revenue, partially offset by escalated expenses and substantially higher provisions. Notably, the company witnessed slowdown in loan and deposit growth while credit quality worsened. These were perhaps the reasons for the nearly 1% decline in the company’s share following the announcement of the results.
Net income for the quarter increased 13.5% year over year to $62.3 million.
Revenue Growth Offsets Rise in Costs
Total net revenue for the quarter came in at $258.7 million, lagging the Zacks Consensus Estimate of $260.5 million. However, the reported figure was up 12.5% year over year.
Net interest income climbed 11.5% year over year to $230.6 million, led by higher interest income, partially offset by an increase in interest expenses.
However, net interest margin fell 13 basis points year over year to 3.70%. The origination of new loans at current market yields, lower than those on covered loans, was mainly responsible for this decline.
Non-interest income was $28.1 million, increasing 21.3% from the year-ago quarter. The rise was primarily driven by an increase in all fee income components. Notably, the quarter recorded a rise in net loss on FDIC indemnification.
Non-interest expenses were up 10.2% from the year-ago quarter to $156.6 million due to a rise in all the components, except occupancy and equipment, and telecommunications and data processing.
Credit Quality Deteriorates
As of Mar 31, 2017, the ratio of total nonperforming loans to total loans was 0.68%, down from 0.70% as of Dec 31, 2016. However, net charge-offs to average loans was 0.29%, up from 0.13% as of Dec 31, 2016.
Also, provision for loan losses for the quarter was $12.1 million, significantly up from $3.7 million in the prior-year quarter. The increase mainly reflected a jump in provision related to taxi medallion loans.
Solid Balance Sheet & Capital Ratios
As of Mar 31, 2017, net loans totaled $19.3 billion compared with $19.2 billion as of Dec 31, 2016. Further, total deposits amounted to $19.9 billion, up from $19.5 billion as of Dec 31, 2016.
As of Mar 31, 2017, Tier 1 leverage ratio was 8.7% while the Tier 1 risk-based capital ratio came in at 11.8%. Further, total risk-based capital ratio was 12.6% as of the same date.
Steady Profitability Ratios
As of Mar 31, 2017, quarterly return on average assets was 0.91%, on par with the prior-year quarter level. Also, return on average stockholders’ equity was 10.08%, up from 9.76% as of Mar 31, 2016.
Our Take
BankUnited remains well positioned to grow organically and through acquisitions, given its strong balance sheet position. Also, a change in deposit mix and increased proportion of commercial loans are expected to support the company’s financials, going forward.
However, mounting costs due to higher funding and M&A activities will likely curb bottom-line growth in the near term.
BankUnited, Inc. Price, Consensus and EPS Surprise
BB&T Corporation’s first-quarter 2017 adjusted earnings of 74 cents per share surpassed the Zacks Consensus Estimate by a penny. Better-than-expected results were primarily driven by an improvement in both net interest income and non-interest income. However, escalated expenses remained a major headwind.
Comerica Inc.’s (CMA - Free Report) first-quarter 2017 adjusted earnings per share of $1.02 surpassed the Zacks Consensus Estimate by a penny. Better-than-expected results reflect higher revenues and lower expenses. Moreover, lower provisions and better credit quality were the tailwinds.
KeyCorp’s (KEY - Free Report) first-quarter 2017 adjusted earnings of 32 cents per share handily surpassed the Zacks Consensus Estimate of 28 cents. Better-than-expected results were attributable to revenue synergies from the First Niagara Financial Group acquisition deal (completed in Aug 2016) and lower provision for credit losses. However, higher operating expenses were the downside.
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Why BankUnited (BKU) Stock Fell 1% Despite Q1 Earnings Beat
BankUnited, Inc.’s (BKU - Free Report) first-quarter 2017 earnings per share of 57 cents surpassed the Zacks Consensus Estimate by a penny. Moreover, the bottom line increased 11.8% from the year-ago-quarter.
Better-than-expected results were primarily driven by higher net revenue, partially offset by escalated expenses and substantially higher provisions. Notably, the company witnessed slowdown in loan and deposit growth while credit quality worsened. These were perhaps the reasons for the nearly 1% decline in the company’s share following the announcement of the results.
Net income for the quarter increased 13.5% year over year to $62.3 million.
Revenue Growth Offsets Rise in Costs
Total net revenue for the quarter came in at $258.7 million, lagging the Zacks Consensus Estimate of $260.5 million. However, the reported figure was up 12.5% year over year.
Net interest income climbed 11.5% year over year to $230.6 million, led by higher interest income, partially offset by an increase in interest expenses.
However, net interest margin fell 13 basis points year over year to 3.70%. The origination of new loans at current market yields, lower than those on covered loans, was mainly responsible for this decline.
Non-interest income was $28.1 million, increasing 21.3% from the year-ago quarter. The rise was primarily driven by an increase in all fee income components. Notably, the quarter recorded a rise in net loss on FDIC indemnification.
Non-interest expenses were up 10.2% from the year-ago quarter to $156.6 million due to a rise in all the components, except occupancy and equipment, and telecommunications and data processing.
Credit Quality Deteriorates
As of Mar 31, 2017, the ratio of total nonperforming loans to total loans was 0.68%, down from 0.70% as of Dec 31, 2016. However, net charge-offs to average loans was 0.29%, up from 0.13% as of Dec 31, 2016.
Also, provision for loan losses for the quarter was $12.1 million, significantly up from $3.7 million in the prior-year quarter. The increase mainly reflected a jump in provision related to taxi medallion loans.
Solid Balance Sheet & Capital Ratios
As of Mar 31, 2017, net loans totaled $19.3 billion compared with $19.2 billion as of Dec 31, 2016. Further, total deposits amounted to $19.9 billion, up from $19.5 billion as of Dec 31, 2016.
As of Mar 31, 2017, Tier 1 leverage ratio was 8.7% while the Tier 1 risk-based capital ratio came in at 11.8%. Further, total risk-based capital ratio was 12.6% as of the same date.
Steady Profitability Ratios
As of Mar 31, 2017, quarterly return on average assets was 0.91%, on par with the prior-year quarter level. Also, return on average stockholders’ equity was 10.08%, up from 9.76% as of Mar 31, 2016.
Our Take
BankUnited remains well positioned to grow organically and through acquisitions, given its strong balance sheet position. Also, a change in deposit mix and increased proportion of commercial loans are expected to support the company’s financials, going forward.
However, mounting costs due to higher funding and M&A activities will likely curb bottom-line growth in the near term.
BankUnited, Inc. Price, Consensus and EPS Surprise
BankUnited, Inc. Price, Consensus and EPS Surprise | BankUnited, Inc. Quote
BankUnited currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Major Regional Banks
BB&T Corporation’s first-quarter 2017 adjusted earnings of 74 cents per share surpassed the Zacks Consensus Estimate by a penny. Better-than-expected results were primarily driven by an improvement in both net interest income and non-interest income. However, escalated expenses remained a major headwind.
Comerica Inc.’s (CMA - Free Report) first-quarter 2017 adjusted earnings per share of $1.02 surpassed the Zacks Consensus Estimate by a penny. Better-than-expected results reflect higher revenues and lower expenses. Moreover, lower provisions and better credit quality were the tailwinds.
KeyCorp’s (KEY - Free Report) first-quarter 2017 adjusted earnings of 32 cents per share handily surpassed the Zacks Consensus Estimate of 28 cents. Better-than-expected results were attributable to revenue synergies from the First Niagara Financial Group acquisition deal (completed in Aug 2016) and lower provision for credit losses. However, higher operating expenses were the downside.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>