BankUnited (BKU) Tanks 6.6% on Q1 Earnings & Revenue Miss

CBSH BKU HWC

Shares of BankUnited, Inc. (BKU - Free Report) lost 6.6% in response to lower-than-expected first-quarter 2021 results. Earnings per share of 79 cents lagged the Zacks Consensus Estimate of 85 cents. The bottom line also declined 25.5% from the prior-year quarter.

Results were largely hurt by lower non-interest income, rise in provisions and fall in loan balance. Also, the quarter recorded higher expenses. However, growth in net interest income acted as a tailwind.

Net income was $67.2 million, plunging 32% year over year.

Revenues Down & Expenses Rise

Net revenues were $222.9 million, down 1.6% year over year. The top line missed the Zacks Consensus Estimate of $236.4 million.

Net interest income was $208.6 million, up 6.3%. The improvement was driven by a fall in interest expenses. Net interest margin rose 11 basis points (bps) year over year to 2.50%.

Non-interest income was $14.3 million, plunging 52.8%. The decrease was mainly due to net loss on investment securities and lower other non-interest income.

Non-interest expenses jumped 2.5% to $126.3 million. The rise was mainly due to higher employee compensation and benefits costs.

As of Mar 31, 2022, total loans were $23.37 billion, down 1.7% from the prior quarter. Total deposits amounted to $28.54 billion, down 3%.

Credit Quality: A Mixed Bag

In the reported quarter, the company recorded a provision of credit losses worth $7.8 million against recovery of $28 million in the prior-year quarter.

As of Mar 31, 2022, the ratio of net charge-offs to average loans was 0.15%, down 14 bps from Dec 31, 2021 level. Ratio of non-performing loans to total loans was 0.65%, down 22 bps.

Capital & Profitability Ratios Deteriorates

As of Mar 31, 2022, Tier 1 leverage ratio was 8.3%, down from 8.4% as of Dec 31, 2021. Common Equity Tier 1 risk-based capital ratio was 12.5% compared with 12.6%. Total risk-based capital ratio was 14.3%, on par with the prior period level.

At the end of the first quarter, return on average assets was 0.76%, down from 1.14% in the year-earlier quarter. Return on average stockholders equity was 9%, down from 13.2%.

Share Repurchase Update

During the quarter, BankUnited repurchased 1.9 million shares for $82.1 million, at an average price of $42.50 per share.

Our View

BankUnited’s efforts to grow organically driven by higher loan demand and a strong balance-sheet position are expected to keep supporting financials. However, higher expenses and rising provisions remain concerns.

 

Currently, BankUnited 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 Banks

Commerce Bancshares Inc.’s (CBSH - Free Report) first-quarter 2022 earnings of 97 cents per share easily surpassed the Zacks Consensus Estimate of 89 cents. The bottom line, however, declined 8.5% from the prior-year quarter.

Results benefited from an improvement in net interest income, a slight rise in loan balance and provision benefit. However, an increase in non-interest expenses and lower non-interest income were the major headwinds for CBSH.

Hancock Whitney Corporation’s (HWC - Free Report) first-quarter 2022 earnings of $1.40 per share handily outpaced the Zacks Consensus Estimate of $1.32. The bottom line improved 15.7% from the prior-year quarter.

Results benefited from a fall in non-interest expenses, a slight rise in loan balance and provision benefit. However, a decline in net interest income, which reflected relatively lower interest rates and reduced non-interest income, were the undermining factors for HWC.

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