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BankUnited (BKU) Earnings Lag as Costs Rise, Revenues Up

Owing to higher expenses, BankUnited, Inc.BKU delivered a negative earnings surprise of 1.9% in the first quarter of 2016. Earnings per share of 51 cents missed the Zacks Consensus Estimate by a penny. However, the bottom line exceeded the year-ago quarter figure by 16%.

Bankunited Inc. (BKU) EPS BNRI & Surprise Percent - Last 5 Quarters | FindTheCompany

Results exhibited an increase in expenses, mostly offset by growth in revenues and lower provisions. Further, improvement in loans and deposits continued to be an upside.

Net income for the quarter climbed 18% year over year to $54.9 million.

Performance in Detail

Total net revenue in the reported quarter jumped nearly 19% year over year to $230.0 million. Moreover, it surpassed the Zacks Consensus Estimate of $227.7 million.

Net interest income rose 20% year over year to $206.8 million. The rise in net interest income reflected an increase in interest income, partially offset by higher interest expense. However, net interest margin declined 19 basis points (bps) year over year to 3.83%.

Non-interest income increased 12% year over year to $23.2 million. Reduction in net loss on FDIC indemnification along with higher lease financing and net gain on investment securities available for sale contributed to the rise. These were, however, partly mitigated by lower net income from resolution of covered assets, net gain on sale of loans and other income.

Non-interest expenses rose 24% year over year to $142.1 million. The increase was primarily due to a rise in all components, except telecommunications and data-processing costs as well as professional fees.

As of Mar 31, 2016, net loans summed $17.0 billion, up from $16.5 billion as of Dec 31, 2015. Further, total deposits amounted to $17.5 billion, up from $16.9 billion as of Dec 31, 2015.

Asset Quality

Asset quality remained strong. The ratio of total nonperforming loans to total loans remained stable on a year-over-year basis at 0.37% as of Mar 31, 2016.

Net charge-offs to average loans, also, remained flat on a year-over-year basis at 0.09% as of Mar 31, 2016. Moreover, provision for loan losses declined 54% year over year to $3.7 million.

Profitability and Capital Ratios

BankUnited's capital ratios continued to deteriorate. As of Mar 31, 2016, Tier 1 leverage ratio stood at 9.0%, down from 9.3% as of Dec 31, 2015. Tier 1 risk-based capital ratio came in at 12.1% compared with 12.6% as of Dec 31, 2015. Total risk-based capital ratio came in at 12.8% compared with 13.4% as of Dec 31, 2015.

Profitability ratios represented a mixed bag during the quarter. While the return on average assets fell 5 bps year over year to 0.91% as of Mar 31, 2016; return on average stockholder equity was 9.76%, up from 9.02% as of Mar 31, 2015.

Our Viewpoint

BankUnited's strong balance sheet and liquidity position will allow it to capitalize on available opportunities and grow inorganically. Additionally, emphasis on the commercial loan portfolio will likely accelerate growth.

Nonetheless, persistent margin compression, increasing costs and exposure to risky residential loans will keep the company's financials under pressure in the near term.

BankUnited currently carries a Zacks Rank #3 (Hold).

Performance of Other Major Banks

Among other major regional banks, Comerica Incorporated's CMA first-quarter 2016 results recorded a 19% negative earnings surprise on higher provisions and expenses. The company reported earnings per share of 34 cents, missing the Zacks Consensus Estimate of 42 cents.

Additionally, The PNC Financial Services Group, Inc. PNC which delivered positive earnings surprise in the trailing four quarters failed to keep the winning streak alive this time. The company's first-quarter 2016 earnings per share of $1.68 missed the Zacks Consensus Estimate by a penny.

However, driven by higher revenues, Northern Trust Corporation NTRS delivered a positive earnings surprise of 6% in the first quarter of 2016. Earnings per share came in at $1.01, easily beating the Zacks Consensus Estimate of 95 cents.

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PNC FINL SVC CP (PNC): Free Stock Analysis Report

COMERICA INC (CMA): Free Stock Analysis Report

BANKUNITED INC (BKU): Free Stock Analysis Report

NORTHERN TRUST (NTRS): Free Stock Analysis Report

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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.


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

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