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BankUnited (BKU) Stock Gains 2.7% on Q2 Earnings Beat

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Shares of BankUnited, Inc. (BKU - Free Report) rose 2.7% following the release of its second-quarter 2017 results. Earnings per share of 60 cents surpassed the Zacks Consensus Estimate by 3 cents. Moreover, the bottom line increased 15.4% from the year-ago-quarter.

The results were primarily driven by higher net revenue, partially offset by escalated expenses. The company witnessed growth in loan and deposit, and a decline in provisions.

Net income for the quarter increased 17.1% year over year to $66.4 million.

Revenue Growth Partially Offset by Rise in Costs

Net revenue for the quarter came in at $269.5 million, surpassing the Zacks Consensus Estimate of $258.5 million. Further, the reported figure was up 10.8% year over year.

Net interest income climbed 11.8% year over year to $239.6 million, led by higher interest income, partially offset by an increase in interest expenses.

Also, net interest margin increased by 1 basis point year over year to 3.76%. Higher yields on loans and investment securities led to the margin expansion.

Non-interest income was $29.9 million, up 3.5% from the year-ago quarter. The rise was primarily driven by an increase in service charges and lease financing.

Non-interest expenses increased 11.3% from the year-ago quarter to $160.4 million due to a rise in all the components, except other non-interest expense.

Credit Quality: A Mixed Bag

As of Jun 30, 2017, the ratio of net charge-offs to average loans was 0.24%, up from 0.13% as of Dec 31, 2016. However nonperforming loans to total loans was 0.69%, down from 0.70% as of Dec 31, 2016.
Further, provision for loan losses for the quarter was $13.6 million, down from $14.3 million in the prior-year quarter.

Solid Balance Sheet & Capital Ratios

As of Jun 30, 2017, net loans totaled $20.1 billion compared with $19.2 billion as of Dec 31, 2016. Further, total deposits amounted to $20.8 billion, up from $19.5 billion as of Dec 31, 2016.

As of Jun 30, 2017, Tier 1 leverage ratio was 8.7% while the Tier 1 risk-based capital ratio came in at 11.9%. Further, total risk-based capital ratio was 12.7% as of the same date.

Profitability Increases

As of Jun 30, 2017, quarterly return on average assets was 0.94%, up from 0.89% as of Jun 30, 2016. Also, return on average stockholders’ equity was 10.33%, up from 9.83% as of Jun 30, 2016.

Our Take

BankUnited’s revenue growth is commendable. Also, the company’s consistent growth in loans and deposits, and higher profitability ratios are impressive. This testifies that BankUnited is well positioned to grow organically and through acquisitions, given its strong balance sheet position.

However, exposure to risky loans and continued margin pressure, due to a liability-sensitive balance sheet, could hurt the company’s financials.

BankUnited, Inc. Price, Consensus and EPS Surprise

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 Major Regional Banks

BB&T Corporation’s (BBT - Free Report) second-quarter 2017 adjusted earnings of 78 cents per share surpassed the Zacks Consensus Estimate by a penny. Results were driven by an increase in revenues and lower expenses. However, provision for credit losses increased, which was a headwind.

Comerica Incorporated’s (CMA - Free Report) second-quarter 2017 adjusted earnings per share of $1.15 surpassed the Zacks Consensus Estimate of $1.07. The results reflect higher revenues and lower expenses. Lower provisions and better credit quality were the other tailwinds.

KeyCorp’s (KEY - Free Report) second-quarter 2017 adjusted earnings of 34 cents per share were in line with the Zacks Consensus Estimate. Results were supported by revenue synergies from the First Niagara Financial Group acquisition deal (completed in Aug 2016) and higher interest rates. On the other hand, higher operating expenses and increase in provision for credit losses were the downsides.

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