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Here's Why You Should Hold On to Bank United (BKU) Stock Now
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BankUnited, Inc. (BKU - Free Report) continues to benefit from solid organic growth and steady capital-deployment activities. However, near-zero interest rates, high debt levels and mounting expenses are major near-term concerns.
BankUnited’s organic growth looks impressive. The company’s revenues witnessed a five-year (2015-2019) CAGR of 1.5%. With gradual increase in demand for loans and efforts to boost the fee income, the top line is likely to grow further. Also, the company has been changing the deposit mix to ease top-line pressure. Management has been strategizing on increasing low-cost deposits, which will likely provide some support to revenues.
The bank also has a decent capital-deployment plan. For the first time, the company hiked its quarterly dividend by 10% in February. Further, it has a share-repurchase program in place as well. As of Mar 31, 2020, the company had approximately $45 million remaining under the buyback authorization, which it has suspended till the end of June. BankUnited intends to utilize this amount for lending activities amid the coronavirus-related slowdown of the business. The company’s earnings strength will likely help it sustain the current level of capital-deployment activities.
Further, the Zacks Consensus Estimate for earnings has been revised 5.7% and 1.7% upward for 2020 and 2021, respectively over the past month.
However, the bank’s net interest margin (NIM) continues to be under pressure. Growth in NIM has been persistently muted for the past several years — 2.47% in 2019, 3.67% in 2018, 3.65% in 2017, 3.73% in 2016, 3.94% in 2015 and 4.61% in 2014. The company’s NIM is expected to remain under pressure due to the Federal Reserve’s accommodative monetary policy and lower interest rates.
Moreover, the company’s high debt level is a concern. As of Mar 31, 2020, BankUnited had total debt worth $5.57 billion, while its cash and cash equivalents totaled $766.7 million. The company’s both times-interest-earned of 2.9 and total debt to total capital of 67.2% at the end of first-quarter 2020 deteriorated on a sequential basis and compare unfavorably with industry averages. Thus, BankUnited has a higher credit risk and might find it difficult to meet debt obligations if economic situation worsens.
Also, shares of this Zacks Rank #3 (Hold) company have lost 42.1%, so far this year, compared with the 32.6% decline recorded by the industry.
State Street Corporation’s (STT - Free Report) Zacks Consensus Estimate for 2020 earnings moved 3.7% upward to $5.91 over the past month. The stock currently holds a Zacks Rank of 2.
The Bank of New York Mellon Corporation’s (BK - Free Report) Zacks Consensus Estimate for earnings moved up 2.3% to $3.54 in a month’s time for 2020. The stock currently carries a Zacks Rank of 2.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, SherazMian hand-picks one to have the most explosive upside of all.
This young company’s gigantic growth was hidden by low-volume trading, then cut short by the coronavirus. But its digital products stand out in a region where the internet economy has tripled since 2015 and looks to triple again by 2025.
Its stock price is already starting to resume its upward arc. The sky’s the limit! And the earlier you get in, the greater your potential gain.
Image: Bigstock
Here's Why You Should Hold On to Bank United (BKU) Stock Now
BankUnited, Inc. (BKU - Free Report) continues to benefit from solid organic growth and steady capital-deployment activities. However, near-zero interest rates, high debt levels and mounting expenses are major near-term concerns.
BankUnited’s organic growth looks impressive. The company’s revenues witnessed a five-year (2015-2019) CAGR of 1.5%. With gradual increase in demand for loans and efforts to boost the fee income, the top line is likely to grow further. Also, the company has been changing the deposit mix to ease top-line pressure. Management has been strategizing on increasing low-cost deposits, which will likely provide some support to revenues.
The bank also has a decent capital-deployment plan. For the first time, the company hiked its quarterly dividend by 10% in February. Further, it has a share-repurchase program in place as well. As of Mar 31, 2020, the company had approximately $45 million remaining under the buyback authorization, which it has suspended till the end of June. BankUnited intends to utilize this amount for lending activities amid the coronavirus-related slowdown of the business. The company’s earnings strength will likely help it sustain the current level of capital-deployment activities.
Further, the Zacks Consensus Estimate for earnings has been revised 5.7% and 1.7% upward for 2020 and 2021, respectively over the past month.
However, the bank’s net interest margin (NIM) continues to be under pressure. Growth in NIM has been persistently muted for the past several years — 2.47% in 2019, 3.67% in 2018, 3.65% in 2017, 3.73% in 2016, 3.94% in 2015 and 4.61% in 2014. The company’s NIM is expected to remain under pressure due to the Federal Reserve’s accommodative monetary policy and lower interest rates.
Moreover, the company’s high debt level is a concern. As of Mar 31, 2020, BankUnited had total debt worth $5.57 billion, while its cash and cash equivalents totaled $766.7 million. The company’s both times-interest-earned of 2.9 and total debt to total capital of 67.2% at the end of first-quarter 2020 deteriorated on a sequential basis and compare unfavorably with industry averages. Thus, BankUnited has a higher credit risk and might find it difficult to meet debt obligations if economic situation worsens.
Also, shares of this Zacks Rank #3 (Hold) company have lost 42.1%, so far this year, compared with the 32.6% decline recorded by the industry.
Stocks to Consider
Northern Trust Corporation’s (NTRS - Free Report) Zacks Consensus Estimate for the current-year earnings moved 1.5% north to $5.42 over the past month. The stock currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
State Street Corporation’s (STT - Free Report) Zacks Consensus Estimate for 2020 earnings moved 3.7% upward to $5.91 over the past month. The stock currently holds a Zacks Rank of 2.
The Bank of New York Mellon Corporation’s (BK - Free Report) Zacks Consensus Estimate for earnings moved up 2.3% to $3.54 in a month’s time for 2020. The stock currently carries a Zacks Rank of 2.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, SherazMian hand-picks one to have the most explosive upside of all.
This young company’s gigantic growth was hidden by low-volume trading, then cut short by the coronavirus. But its digital products stand out in a region where the internet economy has tripled since 2015 and looks to triple again by 2025.
Its stock price is already starting to resume its upward arc. The sky’s the limit! And the earlier you get in, the greater your potential gain.
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