BankUnited (BKU) Beats on Q2 Earnings as Revenues Improve

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Shares of BankUnited, Inc. BKU have gained 1.9% following its second-quarter 2018 earnings release. Earnings per share of 82 cents surpassed the Zacks Consensus Estimate of 79 cents. The bottom line also compared favorably with the prior-year quarter's figure of 60 cents per share.

Results were primarily driven by an increase in revenues and lower provisions. Moreover, the company's overall loans and deposit balances remained strong. However, higher expenses were the undermining factor.

Net income for the quarter was $89.9 million, up from $66.4 million recorded in the prior-year quarter.

Revenues Improve, Costs Rise

Net revenues for the quarter were $287.2 million, which outpaced the Zacks Consensus Estimate of $285.6 million. The top line also increased 6.6% year over year.

Net interest income summed $255.3 million, increasing 6.5% year over year owing to higher interest income, partially offset by rise in interest expenses.

Net interest margin contracted 16 basis points year over year to 3.60%.

Non-interest income was $32 million, increasing 7% from the year-ago quarter. The upside was driven by an improvement in almost all components except net income from resolution of covered assets and other income.

Non-interest expenses increased marginally from the year-ago quarter to $161.2 million, primarily due to rise in employee compensation and benefits costs, telecommunications and data processing costs, and depreciation of equipment under operating lease.

Credit Quality: Mixed Bag

As of Jun 30, 2018, the ratio of net charge-offs to average loans was 0.21%, decreasing from 0.38% as of Dec 31, 2017. Also, provision for loan losses in the quarter under review was $9 million, down from $13.6 million in the prior-year quarter.

However, non-performing loans to total loans was 0.86%, up from 0.81% as of Dec 31, 2017.

Solid Balance Sheet & Capital Ratios

As of Jun 30, 2018, net loans totaled $21.7 billion, marginally up from the Dec 31, 2017 level. Total deposits amounted to $22.2 billion, increasing from $21.9 billion as of Dec 31, 2017.

As of Jun 30, 2018, Tier 1 leverage ratio was 9.7%, while Tier 1 risk-based capital ratio was 13.4%. Further, total risk-based capital ratio was 14.0% as of the same date.

Profitability Ratios Improve

At the end of the reported quarter, return on average assets was 1.17%, increasing from 0.94% reported in the prior-year quarter end. Also, return on average stockholders' equity was 11.69%, up from 10.33% at the end of the prior-year quarter.

Our Take

Supported by consistent growth in loans and deposits, BankUnited remains on track for top-line improvement in the future. Also, given a solid liquidity and balance sheet position, the bank is well poised to grow through acquisitions.

However, persistently increasing expenses and continued margin pressure (despite increase in interest rates) remain major near-term concerns.

BankUnited, Inc. Price, Consensus and EPS Surprise

BankUnited, Inc. Price, Consensus and EPS Surprise | BankUnited, Inc. Quote

BankUnited currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Performance of Major Regional Banks

BB&T Corporation's BBT second-quarter 2018 adjusted earnings of $1.01 was in-line with the Zacks Consensus Estimate. Moreover, the figure recorded 29.5% surge from the year-ago quarter. Results reflected slight increase in revenues and lower operating expenses. Also, the balance sheet position remained strong during the quarter under review.

Comerica Incorporated CMA reported adjusted earnings per share of $1.90 in second-quarter 2018, up from the year-ago adjusted figure of $1.15. Including certain non-recurring items, earnings came in at $1.87. The Zacks Consensus Estimate was $1.62. Higher revenues, lower expenses and improved credit metrics were recorded in the quarter. Rise in loans was an added tailwind. However, lower deposits remained an undermining factor.

KeyCorp's KEY second-quarter 2018 earnings of 44 cents per share surpassed the Zacks Consensus Estimate of 42 cents. The bottom line also compared favorably with earnings of 36 cents recorded in the prior-year quarter. Stable net interest income and higher fee income drove the results. Further, a decline in provision for credit losses, and improving loan and deposit balances acted as tailwinds. Nonetheless, an increase in expenses was on the downside.

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

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: BBT , CMA , KEY , BKU

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