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BankUnited (BKU) Posts Q1 Loss as Provisions Jump, Stock Down

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BankUnited, Inc.’s (BKU - Free Report) shares lost 3.2% in response to dismal first-quarter 2020 results. Loss per share was 33 cents against the Zacks Consensus Estimate of earnings of 56 cents. Also, the figure compares unfavorably with 65 cents per share earned in prior-year quarter.

The results were hampered by a substantial increase in provisions and lower revenues. However, decline in expenses, and solid loan and deposit balances were tailwinds.

Net loss was $31 million versus net income of $66 million in the prior-year quarter.

Revenues & Expenses Decline

Net revenues of $203.9 million missed the consensus estimate of $216.7 million. Also, the top line declined 10.2% year over year. 

Net interest income totaled $180.6 million, which decreased 5.4% year over year. The decline was due to fall in interest income.

Net interest margin contracted 19 basis points (bps) year over year to 2.35%.

Non-interest income was $23.3 million, which plunged 35.7% from the year-ago quarter. Lower lease financing income and net loss on investment securities mainly resulted in the decline.

Non-interest expenses fell 6.2% from the year-ago quarter to $118.9 million. The decline resulted from fall in employee compensation and benefits costs, professional fees, as well as occupancy and equipment expenses.

As of Mar 31, 2020, net loans were $22.9 billion, down from $23 billion on Dec 31, 2019. Total deposits amounted to $25 billion, up from $24.4 billion recorded as of Dec 31, 2019.

Credit Quality Worsens

Provision for credit losses totaled $125.4 million, up substantially from $10 million in the prior year. The increase was mainly due to the impact of the CECL methodology and economic impact of the coronavirus pandemic.

As of Mar 31, 2020, the ratio of net charge-offs to average loans was 0.13%, up from 0.05% on Dec 31, 2019. However, the ratio of non-performing loans to total loans was 0.85%, down 3 bps from the prior quarter.

Capital Ratios Deteriorate

As of Mar 31, 2020, Tier 1 leverage ratio was 8.5%, down from the prior-quarter figure of 8.9%. Moreover, Common Equity Tier 1 risk-based capital ratio was 11.8%, down from 12.3% in the prior-year comparable period. Further, total risk-based capital ratio was 12.6%, down from 12.8% as of Dec 31, 2019.

Share Repurchase Update

During the first quarter, the company repurchased 3.3 million shares for $101 million. Notably, it has temporarily suspended the share repurchase program.

Our Take

Efforts to strengthen fee income sources and a strong balance sheet position are expected to support BankUnited going forward.  However, lower interest rates and uncertainty related to coronavirus-related economic impact are major concerns.

BankUnited, Inc. Price, Consensus and EPS Surprise

BankUnited, Inc. Price, Consensus and EPS Surprise

BankUnited, Inc. price-consensus-eps-surprise-chart | BankUnited, Inc. Quote

BankUnited currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Zions Bancorporation’s (ZION - Free Report) first-quarter 2020 net earnings per share of 4 cents missed the Zacks Consensus Estimate of 48 cents. The results included certain non-recurring items.

Washington Federal’s (WAFD - Free Report) second-quarter fiscal 2020 (ended Mar 31) earnings were 49 cents per share, missing the Zacks Consensus Estimate of 55 cents. The figure also declined 22.2% year over year.

Associated Banc-Corp’s (ASB - Free Report) first-quarter 2020 adjusted earnings of 28 cents per share comfortably outpaced the Zacks Consensus Estimate of a breakeven. However, the figure declined 46% from the prior-year reported number. Earnings in the reported quarter excluded certain acquisition-related costs.

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