BankUnited Beats on Lower Expenses - Analyst Blog


BankUnited, Inc. 's ( BKU ) fourth-quarter 2013 earnings per share of 50 cents beat the Zacks Consensus Estimate of 46 cents primarily on the back of lower expenses. However, results lagged the prior-year quarter figure of 61 cents.

For the full year 2013, BankUnited recorded earnings per share of $2.01 versus $2.05 in 2012. However, earnings for the year surpassed the Zacks Consensus Estimate of $1.95.

Results were primarily aided by growth in non-interest income, partially offset by a decline in net interest income and higher operating expenses. Growth in loan and deposit balances was a tailwind for the quarter. However, capital ratios and profitability deteriorated.  

Net income for the quarter came in at $52.4 million, down 16.2% from $62.5 million in the year-ago period. However, for the full year, net income came in at $208.9 million, declining 1.1% from $211.3 billion in 2012.

Performance Details

BankUnited's total revenue was $194.5 million, down 6.4% year over year. For the full year, total revenue was $770.0 million, down 5.0% from $810.1 million in 2012.

Net interest income (excluding provision for loan loses) decreased 5.9% year over year to $164.3 million. The decline was primarily due a drop in interest income partially offset by lower interest expense. Moreover, net interest margin decreased 148 basis points (bps) from the prior-year quarter to 5.24%.

Non-interest income increased 6.4% from the prior-year quarter to $5.9 million. The rise was primarily due to higher income from resolution of covered assets, lower loss on sale of loans of as well as increased other fee income, partially offset by accretion of Federal Deposit Insurance Corporation (FDIC) indemnification assets.

Non-interest expense upped 7.0% year over year to $84.2 million. The rise mainly resulted from an increase in all the components except foreclosure and other real estate owned expenditures as well as deposit insurance cost.

Asset Quality

Asset quality was a mixed bag during the quarter. The ratio of total nonperforming loans to total loans was 0.39% as of Dec 31, 2013, down 23 bps from Dec 31, 2012.

Net charge-offs to average loans was 0.31% as of Dec 31, 2013, up 14 bps from 0.17% as of Dec 31, 2012. However, provision for loan losses increased substantially to $12.5 million from $1.0 million in the prior-year quarter.

Loans and Deposits

As of Dec 31, 2013, net loans, net of premium, discount and deferred fees and costs, were $9.1 billion, up 61.5% from $5.6 billion as of Dec 31, 2012. The increase largely came from rise in new loans, partly offset by reduced covered loans.

Total deposits were $10.5 billion, up 23.4% from $8.5 billion as of Dec 31, 2012.

Profitability and Capital Ratios

BankUnited's capital and profitability ratios deteriorated in the quarter. As of Dec 31, 2013, Tier 1 leverage ratio was 12.42%, compared with 13.16% as of Dec 31, 2012. Tier 1 risk-based capital ratio was 21.06% versus 33.60% as of Dec 31, 2012. Total risk-based capital ratio came in at 21.93% against 34.88% as of Dec 31, 2012.

The return on average assets came in at 1.41%, declining from 1.95% as of Dec 31, 2012. As of Dec 31, 2013, return on average stockholder equity came in at 10.84%, decreasing from 13.80% as of Dec 31, 2012.

Performance of Other Major Regional Banks

BB&T Corp. ( BBT ) and U.S. Bancorp ( USB ) surpassed the Zacks Consensus Estimate in fourth-quarter 2013. The encouraging results were primarily driven by a decline in provision for credit losses and lower expenses for both the companies.

However, Northern Trust Corp. ( NTRS ) lagged the Zacks Consensus Estimate due to higher expenses.

Our Viewpoint

Persistent top-line pressure, rising expenses and intensely competitive markets are expected to weigh upon the company's financials in the near term. However, given its steady balance sheet position, BankUnited is well poised to grow both organically and inorganically in the coming quarters.

Currently, BankUnited carries a Zacks Rank #4 (Sell).

BB&T CORP (BBT): Free Stock Analysis Report

BANKUNITED INC (BKU): Free Stock Analysis Report

NORTHERN TRUST (NTRS): Free Stock Analysis Report

US BANCORP (USB): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: BBT , BKU , NTRS , USB

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