On Apr 3, 2013, we initiated our coverage on
) with a Neutral recommendation. The recommendation is based on
its organic and inorganic growth prospects, robust liquidity and
meaningful capital deployment actions.
However, rising expenses, significant margin pressures and
exposure to risky residential loans remain the major causes of
concern for this Zacks Rank #3 (Hold) stock.
Why the Neutral Stance?
Over the past 60 days, estimates revisions have remained
unchanged for 2013. However, estimates for 2014 have
slightly improved over the same period.
The Zacks Consensus Estimate for first-quarter 2013 is pegged at
44 cents. The Zacks Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) for the company is 4.55% for the first quarter. This, along
with its Zacks Rank #3, makes it likely for the company to report
a positive earnings surprise.
BankUnited has strong capital ratios well above the regulatory
requirements and it is anticipated that the company will continue
building capital with the help of its earnings in order to meet
the heightened capital requirements. Given BankUnited's strong
capital and balance sheet levels, the company is well positioned
to expand organically as well as through acquisitions.
In addition, the company has been meticulously enhancing
shareholders' value through dividend payments. We believe such
capital deployment activities will generate ample interest among
the investors about the stock.
Yet, elevated expenses mainly due to huge compensation costs
remain a major cause of concern for BankUnited. Further, as the
low-rate environment is not expected to improve in the near
future, we anticipate the company to experience significant
margin pressures in the near-to-mid term. In addition,
BankUnited's extensive exposure to residential mortgage loans
keeps us wary.
Other Stocks to Consider
Other banking stocks that are performing better than BankUnited
JPMorgan Chase & Co.
Northern Trust Corporation
). All these banks carry a Zacks Rank #2 (Buy).
BANKUNITED INC (BKU): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis
NORTHERN TRUST (NTRS): Free Stock Analysis
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