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BankUnited (BKU) Q3 Earnings Beat, Stock Down on Provisions
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BankUnited, Inc.’s (BKU - Free Report) third-quarter 2022 earnings per share of $1.12 outpaced the Zacks Consensus Estimate of $1.01. The bottom line also grew 19.1% from the prior-year quarter. We had projected earnings per share of $1.02.
Results benefited from higher net interest income, a decent rise in loan balance and increasing rates. However, subdued fee income performance, a rise in expenses and an increase in credit costs acted as headwinds. These, along with bearish broader market sentiments, weighed on investors as the company’s shares lost 3.9% following the earnings release.
Net income was $87.9 million, rising 1.2% year over year. Our estimate for the metric was $73.9 million.
Revenues Improve, Expenses Rise
Net revenues were $258.9 million, jumping 17.4% year over year. The top line missed the Zacks Consensus Estimate of $262.09 million. Our estimate for net revenues was $261.6 million
Net interest income was $235.8 million, increasing 20.9%. The improvement was driven by higher interest income. NIM rose 43 basis points (bps) year over year to 2.76%. Our estimates for NII and NIM were $229.1 million and 2.69%, respectively.
Non-interest income was $23.1 million, down 9.4%. The decrease was mainly due to lower other non-interest income and lease financing income.
Non-interest expenses jumped 17% to $138.1 million. The rise was due to higher employee compensation and benefits costs, professional fees, technology and telecommunications costs, and other non-interest expenses.
As of Sep 30, 2022, net loans were $24.1 billion compared with $23.6 billion as of Dec 31, 2021. Total deposits amounted to $27.3 billion, down from $29.4 billion at the end of December 2021.
Credit Quality: A Mixed Bag
In the reported quarter, the company recorded a provision of credit losses worth $3.7 million against a recovery of $11.8 million in the prior-year quarter.
As of Sep 30, 2022, the ratio of net charge-offs to average loans was 0.16%, down 13 bps from Dec 31, 2021.
Capital Ratios Deteriorate, Profitability Ratios Improve
As of Sep 30, 2022, Tier 1 leverage ratio was 7.7%, down from 8.4% as of Dec 31, 2021. Common Equity Tier 1 risk-based capital ratio was 11.3% compared with 12.6%. The total risk-based capital ratio was 13.0%, down from 14.3% in the prior period.
At the end of the third quarter, the return on average assets was 0.96%, on par with the year-earlier quarter number. Return on average stockholders’ equity was 13.5%, up from 10.8%.
Share Repurchase Update
During the quarter, BankUnited repurchased 0.3 million shares for $10.8 million at an average price of $34.36 per share.
In September, BKU authorized the repurchase of up to an additional $150 million in shares.
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 higher provisions remain concerns.
BankUnited, Inc. Price, Consensus and EPS Surprise
Washington Federal’s (WAFD - Free Report) fourth-quarter fiscal 2022 (ended Sep 30) earnings of $1.07 per share handily surpassed the Zacks Consensus Estimate of 91 cents. The figure reflects a year-over-year jump of 48.6%.
Results were primarily aided by higher rates, robust deposits and improving loan balances, which drove net interest income NII. However, an increase in expenses, a fall in total other income and higher provisions were the headwinds for WAFD.
F.N.B. Corporation’s (FNB - Free Report) third-quarter 2022 adjusted earnings per share of 39 cents outpaced the Zacks Consensus Estimate of 36 cents. The bottom line reflects a 14.7% rise from the prior-year quarter.
The results were primarily aided by a rise in net interest income NII and solid loan demand. Higher interest rates supported growth in margins. However, increased expenses, lower fee income and rising provisions were the undermining factors for FNB.
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BankUnited (BKU) Q3 Earnings Beat, Stock Down on Provisions
BankUnited, Inc.’s (BKU - Free Report) third-quarter 2022 earnings per share of $1.12 outpaced the Zacks Consensus Estimate of $1.01. The bottom line also grew 19.1% from the prior-year quarter. We had projected earnings per share of $1.02.
Results benefited from higher net interest income, a decent rise in loan balance and increasing rates. However, subdued fee income performance, a rise in expenses and an increase in credit costs acted as headwinds. These, along with bearish broader market sentiments, weighed on investors as the company’s shares lost 3.9% following the earnings release.
Net income was $87.9 million, rising 1.2% year over year. Our estimate for the metric was $73.9 million.
Revenues Improve, Expenses Rise
Net revenues were $258.9 million, jumping 17.4% year over year. The top line missed the Zacks Consensus Estimate of $262.09 million. Our estimate for net revenues was $261.6 million
Net interest income was $235.8 million, increasing 20.9%. The improvement was driven by higher interest income. NIM rose 43 basis points (bps) year over year to 2.76%. Our estimates for NII and NIM were $229.1 million and 2.69%, respectively.
Non-interest income was $23.1 million, down 9.4%. The decrease was mainly due to lower other non-interest income and lease financing income.
Non-interest expenses jumped 17% to $138.1 million. The rise was due to higher employee compensation and benefits costs, professional fees, technology and telecommunications costs, and other non-interest expenses.
As of Sep 30, 2022, net loans were $24.1 billion compared with $23.6 billion as of Dec 31, 2021. Total deposits amounted to $27.3 billion, down from $29.4 billion at the end of December 2021.
Credit Quality: A Mixed Bag
In the reported quarter, the company recorded a provision of credit losses worth $3.7 million against a recovery of $11.8 million in the prior-year quarter.
As of Sep 30, 2022, the ratio of net charge-offs to average loans was 0.16%, down 13 bps from Dec 31, 2021.
Capital Ratios Deteriorate, Profitability Ratios Improve
As of Sep 30, 2022, Tier 1 leverage ratio was 7.7%, down from 8.4% as of Dec 31, 2021. Common Equity Tier 1 risk-based capital ratio was 11.3% compared with 12.6%. The total risk-based capital ratio was 13.0%, down from 14.3% in the prior period.
At the end of the third quarter, the return on average assets was 0.96%, on par with the year-earlier quarter number. Return on average stockholders’ equity was 13.5%, up from 10.8%.
Share Repurchase Update
During the quarter, BankUnited repurchased 0.3 million shares for $10.8 million at an average price of $34.36 per share.
In September, BKU authorized the repurchase of up to an additional $150 million in shares.
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 higher provisions remain concerns.
BankUnited, Inc. Price, Consensus and EPS Surprise
BankUnited, Inc. price-consensus-eps-surprise-chart | BankUnited, Inc. Quote
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
Washington Federal’s (WAFD - Free Report) fourth-quarter fiscal 2022 (ended Sep 30) earnings of $1.07 per share handily surpassed the Zacks Consensus Estimate of 91 cents. The figure reflects a year-over-year jump of 48.6%.
Results were primarily aided by higher rates, robust deposits and improving loan balances, which drove net interest income NII. However, an increase in expenses, a fall in total other income and higher provisions were the headwinds for WAFD.
F.N.B. Corporation’s (FNB - Free Report) third-quarter 2022 adjusted earnings per share of 39 cents outpaced the Zacks Consensus Estimate of 36 cents. The bottom line reflects a 14.7% rise from the prior-year quarter.
The results were primarily aided by a rise in net interest income NII and solid loan demand. Higher interest rates supported growth in margins. However, increased expenses, lower fee income and rising provisions were the undermining factors for FNB.