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BankUnited (BKU) Down as Q4 Earnings Lag on Higher Provisions
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Shares of BankUnited, Inc.’s (BKU - Free Report) declined 1.6% following the release of its lower-than-expected fourth-quarter 2022 results. Earnings per share of 82 cents missed the Zacks Consensus Estimate of $1.11 by a considerable margin. The bottom line also declined 41.8% from the prior-year quarter. We had projected earnings per share of 96 cents.
Results were adversely impacted by subdued fee income performance and an increase in credit costs. However, higher net interest income (NII), a decent rise in loan balance, increasing rates and a fall in expenses acted as tailwinds.
Net income was $64.2 million, plunging 48.8% year over year. Our estimate for the metric was $65.8 million.
In 2022, earnings of $3.54 per share declined 21.7% year over year and lagged the consensus estimate of $3.83. We had projected earnings per share of $3.69. Net income fell 31.3% to $285 million.
Revenues Improve, Expenses Down
Quarterly net revenues were $269.9 million, rising 7.2% year over year. The top line also beat the Zacks Consensus Estimate of $268.4 million. Our estimate for net revenues was $268.1 million.
In 2022, net revenues grew 6.5% to $990.6 million. The top line, however, missed the consensus estimate of $998 million.
NII was $243.1 million, increasing 18%. The improvement was driven by higher interest income. NIM rose 37 basis points (bps) year over year to 2.81%. Our estimates for NII and NIM were $246.6 million and 2.78%, respectively.
Non-interest income of $26.8 million tanked 41.2%. The decrease was mainly due to lower other non-interest income and loss on the sale of loans.
Non-interest expenses plunged 21% to $148.5 million. The fall was mainly due to the absence of charges related to the discontinuance of cash flow hedges.
As of Dec 31, 2022, net loans were $24.7 billion compared with $23.6 billion as of Dec 31, 2021. Total deposits amounted to $27.5 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 $39.6 million compared with $0.2 million in the prior-year quarter.
As of Dec 31, 2022, the ratio of net charge-offs to average loans was 0.22%, down 5 bps from Dec 31, 2021.
Capital & Profitability Ratios Deteriorate
As of Dec 31, 2022, Tier 1 leverage ratio was 7.5%, down from 8.4% as of Dec 31, 2021. Common Equity Tier 1 risk-based capital ratio was 11.0% compared with 12.6%. The total risk-based capital ratio was 12.7%, down from 14.3% in the prior period.
At the end of the fourth quarter, the return on average assets was 0.69%, down from 1.39% in the year-earlier quarter. Return on average stockholders’ equity was 10.3%, down from 16.0%.
Share Repurchase Update
During the quarter, BankUnited repurchased 1.9 million shares for $64.7 million at an average price of $33.92 per share.
Our View
BankUnited’s efforts to grow organically, driven by higher loan demand and a strong balance-sheet position, are expected to support financials. However, higher expenses and higher provisions remain concerns.
BankUnited, Inc. Price, Consensus and EPS Surprise
Hancock Whitney Corporation’s (HWC - Free Report) fourth-quarter 2022 earnings of $1.65 per share surpassed the Zacks Consensus Estimate of $1.63. The bottom line rose 6.5% from the prior-year quarter’s earnings of $1.55.
Results benefited from higher NII, a rise in loan balance and increasing interest rates. However, lower non-interest income, mainly due to higher mortgage rates, was the undermining factor. Also, higher expenses and a rise in provisions were concerns for HWC.
Washington Federal’s (WAFD - Free Report) first-quarter fiscal 2023 (ended Dec 31, 2022) earnings of $1.16 per share surpassed the Zacks Consensus Estimate of $1.11. The bottom line reflects a year-over-year jump of 63.4%.
WAFD’s results were primarily supported by robust loan balances and an increase in NII. However, a substantial increase in provision for credit losses, rising expenses and a decrease in other income were headwinds.
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BankUnited (BKU) Down as Q4 Earnings Lag on Higher Provisions
Shares of BankUnited, Inc.’s (BKU - Free Report) declined 1.6% following the release of its lower-than-expected fourth-quarter 2022 results. Earnings per share of 82 cents missed the Zacks Consensus Estimate of $1.11 by a considerable margin. The bottom line also declined 41.8% from the prior-year quarter. We had projected earnings per share of 96 cents.
Results were adversely impacted by subdued fee income performance and an increase in credit costs. However, higher net interest income (NII), a decent rise in loan balance, increasing rates and a fall in expenses acted as tailwinds.
Net income was $64.2 million, plunging 48.8% year over year. Our estimate for the metric was $65.8 million.
In 2022, earnings of $3.54 per share declined 21.7% year over year and lagged the consensus estimate of $3.83. We had projected earnings per share of $3.69. Net income fell 31.3% to $285 million.
Revenues Improve, Expenses Down
Quarterly net revenues were $269.9 million, rising 7.2% year over year. The top line also beat the Zacks Consensus Estimate of $268.4 million. Our estimate for net revenues was $268.1 million.
In 2022, net revenues grew 6.5% to $990.6 million. The top line, however, missed the consensus estimate of $998 million.
NII was $243.1 million, increasing 18%. The improvement was driven by higher interest income. NIM rose 37 basis points (bps) year over year to 2.81%. Our estimates for NII and NIM were $246.6 million and 2.78%, respectively.
Non-interest income of $26.8 million tanked 41.2%. The decrease was mainly due to lower other non-interest income and loss on the sale of loans.
Non-interest expenses plunged 21% to $148.5 million. The fall was mainly due to the absence of charges related to the discontinuance of cash flow hedges.
As of Dec 31, 2022, net loans were $24.7 billion compared with $23.6 billion as of Dec 31, 2021. Total deposits amounted to $27.5 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 $39.6 million compared with $0.2 million in the prior-year quarter.
As of Dec 31, 2022, the ratio of net charge-offs to average loans was 0.22%, down 5 bps from Dec 31, 2021.
Capital & Profitability Ratios Deteriorate
As of Dec 31, 2022, Tier 1 leverage ratio was 7.5%, down from 8.4% as of Dec 31, 2021. Common Equity Tier 1 risk-based capital ratio was 11.0% compared with 12.6%. The total risk-based capital ratio was 12.7%, down from 14.3% in the prior period.
At the end of the fourth quarter, the return on average assets was 0.69%, down from 1.39% in the year-earlier quarter. Return on average stockholders’ equity was 10.3%, down from 16.0%.
Share Repurchase Update
During the quarter, BankUnited repurchased 1.9 million shares for $64.7 million at an average price of $33.92 per share.
Our View
BankUnited’s efforts to grow organically, driven by higher loan demand and a strong balance-sheet position, are expected to support 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
Hancock Whitney Corporation’s (HWC - Free Report) fourth-quarter 2022 earnings of $1.65 per share surpassed the Zacks Consensus Estimate of $1.63. The bottom line rose 6.5% from the prior-year quarter’s earnings of $1.55.
Results benefited from higher NII, a rise in loan balance and increasing interest rates. However, lower non-interest income, mainly due to higher mortgage rates, was the undermining factor. Also, higher expenses and a rise in provisions were concerns for HWC.
Washington Federal’s (WAFD - Free Report) first-quarter fiscal 2023 (ended Dec 31, 2022) earnings of $1.16 per share surpassed the Zacks Consensus Estimate of $1.11. The bottom line reflects a year-over-year jump of 63.4%.
WAFD’s results were primarily supported by robust loan balances and an increase in NII. However, a substantial increase in provision for credit losses, rising expenses and a decrease in other income were headwinds.