) reported its third quarter 2012 earnings of 48 cents per share,
marginally beating the Zacks Consensus Estimate of 44 cents. This
also compares favorably with the year-ago earnings of 45 cents.
BANKUNITED INC (BKU): Free Stock Analysis
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SUNTRUST BKS (STI): Free Stock Analysis
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Better-than-expected results were primarily aided by augmented
top line and lower operating expenses. Further, the company
witnessed modest loan and deposit growth. Yet, during the
quarter, mixed asset quality metrics as well as marginal decline
in profitability and capital ratios were on the downside.
Net income for the reported quarter came in at $49.6 million as
against $45.6 million in the year-ago period.
BankUnited's total revenue was $196.0 million, marginally up from
$195.9 million in the year-ago quarter. Moreover, total revenue
surpassed the Zacks Consensus Estimate of $167.0 million.
Net interest income surged 8.2% year over year to $139.4 million.
The elevation was mainly attributable to higher interest income
and lower interest expenses. Yet, net interest margin dipped 91
basis points (bps) from the prior-year quarter to 5.39%.
Non-interest income stood at $25.7 million, declining 21.6% from
the prior-year quarter. The fall was primarily due to lower
accretion of discount on the Federal Deposit Insurance
Corporation (FDIC) indemnification asset along with reduced FDIC
reimbursement of costs of resolution of covered assets and lower
mortgage insurance income. These were partly offset by higher
income from resolution of covered assets, increased service
charges and fees along with a gain on sale of investment
Non-interest expense was $77.2 million, down 3.2% from $79.8
million in the year-ago quarter. The decline was mainly a result
of lower aggregate other real estate owned (OREO) costs, reduced
foreclosure expenses as well as lower professional fees. However,
these were partly mitigated by higher employee compensation and
benefits along with increased occupancy and equipment expenses
and rise in deposit insurance costs.
Asset quality witnessed mixed movements in the third quarter. The
ratio of nonperforming loans to total loans dipped 8 bps year
over year to 0.62%. Likewise, net charge offs decreased 37.6%
year over year to $1.9 million. On the other hand, provision for
loan losses increased substantially to $6.4 million from $1.3
million in the year-ago quarter. The hike in provision reflected
the company's new loan originations.
Loans and Deposits
BankUnited's total loans, net of discount and deferred fees and
costs, in the reported quarter increased to $5.3 billion from
$4.1 billion as of December 31, 2011. The augmentation largely
came from increases in new loans, partly offset by reduced
Total deposits for the quarter stood at $8.5 billion compared
with $7.4 billion as of December 31, 2011. The increase was
primarily due to the higher levels of demand deposits.
Profitability and Capital Ratios
BankUnited's profitability and capital ratios exhibited a
modestly cautious approach. As of September 30, 2012, tier 1
leverage ratio was 12.89% versus 13.06% as of December 31, 2011.
Likewise, Tier 1 risk-based capital ratio was 34.31% compared
with 41.62% as of December 31, 2011. Total risk-based capital
ratio came in at 35.64% as against 42.89% as of December 31,
The return on average assets was 1.56% in the reported quarter
compared with 1.67% in the prior-year quarter. As of September
30, 2012, return on average stockholders' equity came in at
11.41% down from 12.13% as of September 30, 2011.
Similar to BankUnited,
) third quarter earnings slightly outpaced the Zacks Consensus
Estimate. Improved top line, continued improvement in credit
quality and robust capital ratios were the primary highlights for
the quarter. However, escalating operating expenses slightly
subdued the results.
The third quarter earnings of
SunTrust Banks Inc.
) slightly lagged the Zacks Consensus Estimate. Though benefiting
from the actions embarked upon during the reported quarter,
overall results were not up to the mark. Total revenue (excluding
certain non-recurring items) declined while operating expenses
increased. Yet, stable asset quality and capital ratios as well
as a slight improvement in loan and deposit balances were the
We believe BankUnited's extensive capital deployment activity
makes it an attractive asset for yield-seeking investors.
Further, the company continues to grow organically with the
opening of new branches. Moreover, we are quite impressed with
the company's decent top-line growth as well as continuously
falling operating expenses.
Nevertheless, we are concerned about the impact of the prevailing
low interest rate environment, sluggish economic growth and
stringent regulatory landscape on the company's financials in the
BankUnited currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating.