Yahoo Finance BankUnited (BKU) Up 16% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for BankUnited, Inc. (BKU). Shares have added about 16% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is BankUnited due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
BankUnited Q1 Earnings Top Estimates as Provisions Fall
BankUnited’s first-quarter 2024 earnings of 64 cents per share surpassed the Zacks Consensus Estimate of 62 cents. In the prior-year quarter, the company had reported earnings of 70 cents. The reported quarter’s earnings included expenses related to FDIC special assessment.
Results were aided by an increase in non-interest income and deposits and a decline in provisions. However, lower net interest income (NII) and loan balance, along with higher expenses, were the undermining factors.
Net income was $48 million, down 9.3% year over year. Our estimate for the metric was $46.6 million.
Revenues Decline & Expenses Rise
Quarterly net revenues were $241.7 million, declining 1.1% year over year. However, the top line surpassed the Zacks Consensus Estimate of $239.84 million.
NII was $214.9 million, decreasing 5.7%. NIM contracted 5 basis points (bps) to 2.57%. Our estimates for NII and NIM were $215.9 million and 2.61%, respectively.
Non-interest income of $26.9 million jumped 62.5% from the prior-year quarter. The increase was mainly due to net gain on investment securities. We had projected non-interest income of $22.8 million.
Non-interest expenses rose 4.2% to $159.2 million. The increase was mainly due to a rise in employee compensation and benefits costs, deposit insurance expenses, and other non-interest expenses. The expenses included $5.2 million related to the adjustment to FDIC special assessment. Our estimate for non-interest expenses was $160 million.
As of Mar 31, 2024, total loans were $24.23 billion, down 1.7% from the prior quarter. Total deposits amounted to $27.03 billion, up 1.8%. Our estimates for total loans and total deposits were $23.73 billion and $26.65 billion, respectively.
Credit Quality Improves
In the reported quarter, the company recorded a provision of credit losses of $15.3 million, down 22.8% from the prior-year quarter.
As of Mar 31, 2024, the ratio of net charge-offs to average loans was 0.02%, down 6 bps from the Mar 31, 2023, level.
Capital Ratios Improve, Profitability Ratios Deteriorate
As of Mar 31, 2024, the Tier 1 leverage ratio was 8.1%, up from 7.4% as of Mar 31, 2023. The Common Equity Tier 1 risk-based capital ratio was 11.6%, up from 10.8%. The total risk-based capital ratio was 13.7%, up from 12.6% as of Mar 31, 2023.
At the end of the first quarter, the return on average assets was 0.54%, down from 0.58% in the year-earlier quarter. Return on average stockholders’ equity was 7.3%, down from 8.5%.
Outlook
For 2024, management anticipates a mid-single-digit increase in NII.
NIM is expected to reach in high 2s range by the end of 2024 and improve further in 2025.
Management expects a slight uptrend in deposit service charges in 2024.
Management expects high single-digit growth in deposits in 2024.
Commercial & industrial (C&I) and CRE loans are projected to grow in the high single-digits range in 2024. Residential loans are expected to continue to shrink almost at a similar pace as in 2023.
Non-interest expenses are expected to grow in the mid-single digits range. This excludes FDIC special assessment charge of $35.4 million incurred in the fourth quarter of 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, BankUnited has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, BankUnited has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
BankUnited is part of the Zacks Banks - Major Regional industry. Over the past month, State Street Corporation (STT), a stock from the same industry, has gained 6.3%. The company reported its results for the quarter ended March 2024 more than a month ago.
State Street reported revenues of $3.14 billion in the last reported quarter, representing a year-over-year change of +1.2%. EPS of $1.69 for the same period compares with $1.52 a year ago.
State Street is expected to post earnings of $1.98 per share for the current quarter, representing a year-over-year change of -8.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.4%.
State Street has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.
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