BankUnited (BKU) Gains on Q4 Earnings Beat, Revenue Growth

BankUnited, Inc. 's BKU shares gained 3.1% as the company delivered a positive earnings surprise of 7.3% in its fourth-quarter 2016 results. The company reported earnings per share of 59 cents, surpassing the Zacks Consensus Estimate of 55 cents. Moreover, the bottom line increased 13.5% from the year-ago-quarter.

Better-than-expected results were primarily driven by higher net revenues, partially offset by escalated expenses. The company also witnessed improved loan and deposit balances. Moreover, a fall in provisions acted as a tailwind. However, profitability ratios remained mixed for the quarter.

Net income for the quarter increased 12.4% year over year to $63.3 million.

The company also reported full-year earnings per share of $2.09, outpacing the Zacks Consensus Estimate of $2.03. However, the figure declined 11.1% year over year. For 2016, net income came in at $225.7 million, down 10.3% year over year. The prior-year figure includes the impact of certain non-recurring items.

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Revenue Growth Offsets Higher Expenses

Total net revenue for the quarter came in at $256.8 million, surpassing the Zacks Consensus Estimate of $254.8 million. Also, the reported figure was up 10.6% year over year.

For 2016, total net revenue came in at $976.8 million, up 15.2% year over year. However, the figure lagged the Zacks Consensus Estimate of $986.2 million.

Net interest income climbed 12.1% year over year to $227.5 million, led by higher interest income, partially offset by an increase in interest expense. However, net interest margin declined 27 basis points year over year to 3.67%.

Non-interest income was $29.3 million, up marginally from the year-ago quarter. The rise was primarily due to higher net income from resolution of covered assets, lease financing, service charges and fees, net gain on investment securities available for sale and lower net loss on FDIC indemnification. These were, however, partially offset by lower net gain on sale of loans and other income.

Non-interest expenses were up 14.2% from the year-ago quarter to $156.2 million due to a rise in all the components, except occupancy and equipment, and other non-interest expense.

Mixed Credit Quality

As of Dec 31, 2016, the ratio of total nonperforming loans to total loans was 0.69%, compared with 0.43% as of Dec 31, 2015. Similarly, net charge-offs to average loans was 0.13%, compared with 0.10% as of Dec 31, 2015.

However, provision for loan losses for the quarter decreased 14.1% year over year to $8.5 million.

Strong Balance Sheet & Capital Ratios

As of Dec 31, 2016, net loans totaled $19.2 billion, compared with $16.5 billion as of Dec 31, 2015. Further, total deposits amounted to $19.5 billion, up from $16.9 billion as of Dec 31, 2015.

As of Dec 31, 2016, Tier 1 leverage ratio was 8.4% while the Tier 1 risk-based capital ratio came in at 11.6%. Further, total risk-based capital ratio was 12.4% as of the same date.

Mixed Profitability Ratios

As of Dec 31, 2016, quarterly return on average assets was 0.92%, down from 0.97% recorded in the prior-year quarter. Also, return on average stockholders' equity was 10.45%, up from 9.94% as of Dec 31, 2015.

Our Take

BankUnited remains well positioned to grow organically and through acquisitions, given its strong balance sheet position. Also, a change in deposit mix and increased proportion of commercial loans are expected to support the company's financials, going forward.

However, mounting costs due to higher funding and M&A activities will likely curb bottom-line growth in the near term.

BankUnited, Inc. Price, Consensus and EPS Surprise

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

BankUnited currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Performance of Other Major Regional Banks

The PNC Financial Services Group, Inc.'s PNC fourth-quarter 2016 earnings per share of $1.97 easily beat the Zacks Consensus Estimate of $1.86. Better-than-expected results were aided by rise in revenues. Also, continued growth in loans and deposits were among other positives. However, the quarter recorded higher expenses.

Driven primarily by interest income, Wells Fargo & Company's WFC fourth-quarter 2016 adjusted earnings of $1.03 per share outpaced the Zacks Consensus Estimate by 3 cents. The company witnessed improvement in loan and deposit balances, and interest income. However, higher expenses and lower non-interest income were on the downside.

Driven by impressive trading revenues, JPMorgan Chase & Co.'s JPM fourth-quarter 2016 earnings of $1.71 per share easily surpassed the Zacks Consensus Estimate of $1.42. Improved fixed income and equity trading revenues as well as a modest rise in mortgage banking fees and investment banking income drove the results. Further, higher net interest income, perhaps attributable to the rise in loan, supported the top line.

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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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