BankUnited (BKU) Stock Gains 2.7% On Q2 Earnings Beat
Zacks Investment Research | Jul 26, 2017 09:14PM ET
Shares of BankUnited, Inc. (NYSE:BKU) rose 2.7% following the release of its second-quarter 2017 results. Earnings per share of 60 cents surpassed the Zacks Consensus Estimate by 3 cents. Moreover, the bottom line increased 15.4% from the year-ago-quarter.
The results were primarily driven by higher net revenue, partially offset by escalated expenses. The company witnessed growth in loan and deposit, and a decline in provisions.
Net income for the quarter increased 17.1% year over year to $66.4 million.
Revenue Growth Partially Offset by Rise in Costs
Net revenue for the quarter came in at $269.5 million, surpassing the Zacks Consensus Estimate of $258.5 million. Further, the reported figure was up 10.8% year over year.
Net interest income climbed 11.8% year over year to $239.6 million, led by higher interest income, partially offset by an increase in interest expenses.
Also, net interest margin increased by 1 basis point year over year to 3.76%. Higher yields on loans and investment securities led to the margin expansion.
Non-interest income was $29.9 million, up 3.5% from the year-ago quarter. The rise was primarily driven by an increase in service charges and lease financing.
Non-interest expenses increased 11.3% from the year-ago quarter to $160.4 million due to a rise in all the components, except other non-interest expense.
Credit Quality: A Mixed Bag
As of Jun 30, 2017, the ratio of net charge-offs to average loans was 0.24%, up from 0.13% as of Dec 31, 2016. However nonperforming loans to total loans was 0.69%, down from 0.70% as of Dec 31, 2016.
Further, provision for loan losses for the quarter was $13.6 million, down from $14.3 million in the prior-year quarter.
Solid Balance Sheet & Capital Ratios
As of Jun 30, 2017, net loans totaled $20.1 billion compared with $19.2 billion as of Dec 31, 2016. Further, total deposits amounted to $20.8 billion, up from $19.5 billion as of Dec 31, 2016.
As of Jun 30, 2017, Tier 1 leverage ratio was 8.7% while the Tier 1 risk-based capital ratio came in at 11.9%. Further, total risk-based capital ratio was 12.7% as of the same date.
Profitability Increases
As of Jun 30, 2017, quarterly return on average assets was 0.94%, up from 0.89% as of Jun 30, 2016. Also, return on average stockholders’ equity was 10.33%, up from 9.83% as of Jun 30, 2016.
Our Take
BankUnited’s revenue growth is commendable. Also, the company’s consistent growth in loans and deposits, and higher profitability ratios are impressive. This testifies that BankUnited is well positioned to grow organically and through acquisitions, given its strong balance sheet position.
However, exposure to risky loans and continued margin pressure, due to a liability-sensitive balance sheet, could hurt the company’s financials.
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