BankUnited's (BKU) Q4 Earnings Miss, Costs & Provisions Rise

BankUnited, Inc.'s BKU fourth-quarter 2018 earnings per share of 50 cents missed the Zacks Consensus Estimate of 60 cents. The bottom line also compares unfavorably with the prior-year quarter's adjusted figure of 86 cents per share.

Results were affected by higher expenses and provisions, and lower non-interest income. However, the company's overall loans and deposit balances remained strong. Also, rise in net interest income was a support.

Net income for the reported quarter was $52.4 million or 50 cents per share, down from $417.8 million or $3.79 per share recorded in the prior-year quarter. Prior-year quarter figure included certain non-recurring item.

For 2018, earnings per share of $2.99 lagged Zacks Consensus Estimate of $3.07. However it grew 12.8% year over year. Net income for 2018 was $324.9 million compared to $614.3 million in the prior year. Prior-year figures included certain nonrecurring item.

Revenues Improve, Expenses Rise

Net revenues for the fourth quarter came in at $328.4 million, surpassing the Zacks Consensus Estimate of $286.6 million. The top line also increased 15.1% year over year.

Net revenues for 2018 came in at $1.18 billion, outpacing the Zacks Consensus Estimate of $1.14 billion. The reported figure also witnessed 6.7% year-over-year growth.

Net interest income for the quarter totaled $295 million, increasing 23.5% year over year, backed by higher interest income, partially offset by rise in interest expenses.

Net interest margin expanded 49 basis points year over year to 4.01%.

Non-interest income was $33.3 million, down 28.4% from the year-ago quarter. The decline was mainly due to fall in net gain on investment securities and net gain on sale of loans.

Non-interest expenses flared up 53% from the year-ago quarter to $246.7 million, primarily due to rise in telecommunications and data processing costs, amortization of FDIC indemnification asset costs, and depreciation of equipment under operating lease.

Credit Quality: Mixed Bag

As of Dec 31, 2018, the ratio of net charge-offs to average loans was 0.28%, down from 0.38% as of Dec 31, 2017.

However, provision for loan losses in the quarter under review was $12.6 million, up from $5.2 million in the prior-year quarter. In addition, ratio of non-performing loans to total loans was 0.59%, down from 0.81% as of Dec 31, 2017.

Solid Balance Sheet

As of Dec 31, 2018, net loans were $21.9 billion, up 2.8% from the Dec 31, 2017 level. Total deposits amounted to $23.5 billion, up 7.3% from Dec 31, 2017 level.

Capital & Profitability Ratios Deteriorate

As of Dec 31, 2018, Tier 1 leverage ratio was 9% compared with 9.6% recorded at the end of the prior-year quarter. Moreover, Tier 1 risk-based capital ratio was 12.6% down from 13.5% recorded on Dec 31, 2017. Further, total risk-based capital ratio was 13.1% compared with 14% in the year-ago quarter.

At the end of the fourth quarter, return on average assets was 0.66%, down from 5.54% reported at the prior-year quarter end. Additionally, return on average stockholders' equity was 6.85%, significantly down from 59.33% witnessed at the end of the year-ago quarter.

Our Take

Supported by continued growth in loans and deposits, BankUnited remains on track for top-line improvement in the future. However, rising expenses might hinder the company's 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 has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Performance of Other Banks

Washington Federal's WAFD first-quarter fiscal 2019 (ended Dec 31) earnings came in at 65 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. The figure also reflected year-over-year growth of 10.2%.

Synovus Financial's SNV fourth-quarter earnings of 92 cents per share lagged the Zacks Consensus Estimate of 94 cents. However, the reported figure came in 27.8% higher than the prior-year tally.

Hancock Whitney Corporation's HWC fourth-quarter 2018 operating earnings per share of $1.12 missed the Zacks Consensus Estimate of $1.13. The reported figure, however, came in 30.2% higher than the year-ago tally.

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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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