BankUnited, Inc.’s (BKU - Free Report) shares gained 12.9%, following the release of its second-quarter 2020 results. Earnings per share of 80 cents hugely surpassed the Zacks Consensus Estimate of 21 cents. Nevertheless, the figure reflects a decline of 1.2% from the prior-year quarter.
Results primarily benefited from an improvement in fee income as well as lower expenses. Also, solid loan and deposit balances were positives. However, a marginal decline in net interest income and significantly higher provisions were headwinds.
Net income was $76.5 million, down 6.1% from the prior-year quarter.
Revenues Improve & Expenses Decline
Net revenues of $228.7 million surpassed the consensus estimate of $217.7 million. Also, the top line improved 1.1% year over year.
Net interest income totaled $190.3 million, which decreased marginally year over year. The decline was due to a fall in interest income.
Net interest margin contracted 13 basis points (bps) year over year to 2.39%.
Non-interest income was $38.4 million, up 8.5% from the year-ago quarter. The upside stemmed from an increase in net gain on sale of loans and net gain on investment securities.
Non-interest expenses fell 11.4% from the year-ago quarter to $106.4 million. The decline resulted from a fall in almost all expenses components except for technology and telecommunications costs, and costs related to the depreciation of operating lease equipment.
As of Jun 30, 2020, net loans were $23.6 billion, up from $23 billion recorded on Dec 31, 2019. Total deposits amounted to $26.1 billion, up from $24.4 billion recorded as of Dec 31, 2019.
Credit Quality Worsens
In the reported quarter, provision for credit losses totaled $25.4 million against recovery of credit losses of $2.7 million recorded in the prior-year quarter. As of Jun 30, 2020, the ratio of net charge-offs to average loans was 0.20%, up from 0.05% as of Dec 31, 2019.
However, the ratio of non-performing loans to total loans was 0.86%, down from 0.88% as of Dec 31, 2019.
Capital Ratios Mixed
As of Jun 30, 2020, Tier 1 leverage ratio was 8.5%, down from 8.9% as of Dec 31, 2019. Moreover, Common Equity Tier 1 risk-based capital ratio was 12.2%, down from 12.3% recorded as of Dec 31, 2019. However, total risk-based capital ratio was 14.3%, up from 12.8%.
BankUnited’s continued efforts to strengthen fee income sources and a strong balance sheet position are expected to keep supporting profitability. However, due to near-zero interest rates, the company’s margins will likely remain under pressure in the near term, thus hurting the top line to an extent.
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 Banks
Zions Bancorporation’s (ZION - Free Report) second-quarter 2020 net earnings per share of 34 cents missed the Zacks Consensus Estimate of 37 cents. Moreover, the bottom line compared unfavorably with the year-ago quarter’s 99 cents.
Washington Federal’s (WAFD - Free Report) third-quarter fiscal 2020 (ended Jun 30) earnings were 46 cents per share, missing the Zacks Consensus Estimate by a penny. The figure also declined 31.3% year over year.
Associated Banc-Corp’s (ASB - Free Report) second-quarter 2020 adjusted earnings of 26 cents per share came in line with the Zacks Consensus Estimate. The bottom-line figure, nevertheless, slumped 49% year over year. Earnings excluded gain on the sale of Associated Benefits and Risk Consulting in the reported quarter.
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