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BankUnited's (BKU) Stock Gains 2.1% on Q1 Earnings Beat

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Shares of BankUnited, Inc. (BKU - Free Report) gained 2.1% following the release of first-quarter 2019 results. Earnings per share of 65 cents surpassed the Zacks Consensus Estimate of 64 cents. The bottom line compared unfavorably with the prior-year quarter’s earnings of 77 cents per share.

Results were aided by a decline in expenses and higher non-interest income. However, lower net interest income and higher provisions were the undermining factors. Notably, the company’s overall loans and deposit balances remained strong.

Net income for the reported quarter was $66 million, down from $85.2 million recorded in the prior-year quarter.

Revenues & Expenses Decline

Net revenues were $227.2 million, surpassing the Zacks Consensus Estimate of $219 million. However, the top line decreased 17.6% year over year.

Net interest income totaled $190.9 million, decreasing 23% year over year. This decline was due to a fall in interest income along with higher interest expenses.

Net interest margin contracted 102 basis points year over year to 2.54%.

Non-interest income was $36.3 million, up 29.5% from the year-ago quarter. This rise was mainly due to an increase in lease financing fees, net gain on investment securities, and deposit service charges and fees.

Non-interest expenses declined 21.7% from the year-ago quarter to $126.7 million. This decrease was due to a fall in almost all cost components except for professional fees, technology and telecommunications costs, and depreciation of equipment under operating lease-related expenses.

Credit Quality: A Mixed Bag

As of Mar 31, 2019, the ratio of net charge-offs to average loans was 0.10%, down from 0.28% as of Dec 31, 2018.

However, provision for loan losses in the quarter under review was $10.3 million, up from $3.1 million in the prior-year quarter. In addition, ratio of non-performing loans to total loans was 0.60%, up from 0.59% as of Dec 31, 2018.

Solid Balance Sheet

As of Mar 31, 2019, net loans were $22.2 billion, up 1.7% from the Dec 31, 2018 level. Total deposits amounted to $23.7 billion, up nearly 1% from Dec 31, 2018 level.

Strong Capital Position, Profitability Ratios Deteriorate

As of Mar 31, 2019, Tier 1 leverage ratio was 8.8%. Moreover, Common Equity Tier 1 risk-based capital ratio was 12.3%. Further, total risk-based capital ratio was 12.8%.

At the end of the first quarter, return on average assets was 0.82%, down from 1.14% reported at the prior-year quarter end. Additionally, return on average stockholders’ equity was 9.05%, down from 11.28% witnessed at the end of the year-ago quarter.

Our Take

Supported by continued growth in loans and deposits, BankUnited remains on track for top-line improvement in the future. However, rising expenses might hinder the company’s bottom-line growth in the near term.

BankUnited, Inc. Price, Consensus and EPS Surprise

BankUnited, Inc. Price, Consensus and EPS Surprise | BankUnited, Inc. Quote

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

Washington Federal’s (WAFD - Free Report) second-quarter fiscal 2019 (ended Mar 31) earnings were 63 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. The figure also reflected year-over-year growth of 10.5%.

Hancock Whitney Corporation’s (HWC - Free Report) first-quarter 2019 operating earnings per share of $1 surpassed the Zacks Consensus Estimate of 98 cents. Further, the reported figure was 11.1% higher than the year-ago figure.

Ally Financial Inc.’s (ALLY - Free Report) first-quarter 2019 adjusted earnings of 80 cents per share surpassed the Zacks Consensus Estimate of 79 cents. Further, the bottom line compared favorably with the prior-year quarter’s figure of 68 cents.

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