A month has gone by since the last earnings report for BankUnited, Inc. (
BKU Quick Quote BKU - Free Report) . Shares have added about 10.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is BankUnited, Inc. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
BankUnited Q4 Earnings Beat, Revenues & Expenses Up Y/Y
BankUnited’s fourth-quarter 2020 earnings per share of 89 cents surpassed the Zacks Consensus Estimate of 71 cents. However, the bottom line was down 2.2% from the prior-year quarter.
Results benefited from rise in net interest income (NII), provision benefit and solid loan and deposit balances. However, fall in non-interest income, rise in expenses and lower interest rates were the undermining factors. Net income was $85.7 million, down 4.2% from the prior-year quarter. In 2020, earnings of $2.06 per share beat the consensus estimate but were down 34.2% year over year. Net income declined 36.8% to $197.9 million. Revenues Improve, Expenses Rise
Net revenues of $228.6 million in the reported quarter beat the Zacks Consensus Estimate of $226.1 million. Also, the top line improved 2.5% year over year.
In 2020, net revenues declined 1.7% to $885 million. The top line marginally outpaced the consensus estimate of $884.3 million. NII totaled $193.4 million, which improved 4.3% year over year. NIM contracted 8 basis points (bps) to 2.33%. Non-interest income was $35.3 million, down 6.6%. The decline was mainly due to lower net gain on investment securities, lease financing and other non-interest income. Non-interest expenses rose 3.6% to $123.3 million. This was largely due to increase in almost all expense components except for occupancy and equipment, depreciation of operating lease equipment and other non-interest expense. As of Dec 31, 2020, net loans were $23.6 billion, up from $23 billion recorded as of Dec 31, 2019. Total deposits amounted to $27.5 billion, up from $24.4 billion. Credit Quality: Mixed Bag
The company recorded net recovery of credit losses of $1.6 million, up significantly from net recovery of $0.5 million recorded in the prior-year quarter.
However, as of Dec 31, 2020, the ratio of net charge-offs (NCOs) to average loans was 0.26%, up from 0.05% as of Dec 31, 2019. Also, the ratio of non-performing loans to total loans was 1.02%, up 14 bps year over year. Strong Capital Ratios
As of Dec 31, 2020, Tier 1 leverage ratio was 8.6%, down from 8.9% as of Dec 31, 2019. However, Common Equity Tier 1 risk-based capital ratio was 12.6%, up from 12.3% recorded as of Dec 31, 2019. Moreover, total risk-based capital ratio was 14.7%, up from 12.8%.
Management expects the commercial and industrial (C&I) business to return to a more normalized growth level this year. C&I loans are expected to grow in the high single-digits rate, especially in the second half of the year.
Commercial real estate (CRE) loans are anticipated to decline by low-single digits in 2021. NIM is expected to increase in 2021. However, management expects paycheck protection program (PPP) loan forgiveness to largely be a “first quarter 2021 event”. Thus, first-quarter 2021 NIM will likely get a lift from PPP forgiveness. Deposit service charges are expected to increase in 2021 and lease financing income will likely stabilize after some decline in the first quarter. Provisions are expected to be modest in 2021. But as demand for loans increases, provisions might rise in the second half of the year. NCOs are projected to exceed provisions while the reserve balance is expected to decline. The company expects technology-related costs to increase as it continues to invest in important initiatives. Overall expenses are expected to increase in the mid-single digit rate. Tax rate (excluding discrete items) is expected to be 25% in 2021. Dividend equivalent rights outstanding worth $3 million will expire in first-quarter 2021, which will likely add 2-3 cents per share to earnings on a quarterly basis. How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 7.4% due to these changes.
At this time, BankUnited, Inc. has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, BankUnited, Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.