Yahoo Finance BankUnited (BKU) Stock Up as Q1 Earnings Top, Provisions Fall
Shares of BankUnited, Inc. BKU gained 2.9% in response to better-than-expected first-quarter 2024 results. Quarterly 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 just-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%. The net interest margin (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%.
Our View
BankUnited’s efforts to grow fee income, along with higher interest rates, are expected to support revenue growth. However, an increase in expenses might hamper profits.
BankUnited, Inc. Price, Consensus and EPS Surprise
BankUnited, Inc. price-consensus-eps-surprise-chart | BankUnited, Inc. Quote
Currently, BKU carries 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
Commerce Bancshares, Inc.’s CBSH first-quarter 2024 earnings per share of 86 cents surpassed the Zacks Consensus Estimate of 80 cents. However, the bottom line decreased 5.5% from the prior-year quarter.
CBSH’s results benefited from a rise in non-interest income and lower provisions, which were partially offset by net losses on investment securities. Also, the company recorded a sequential improvement in loan balances in the quarter. However, a decline in NII and higher expenses were the major headwinds.
Hancock Whitney Corp.’s HWC first-quarter 2024 adjusted earnings per share of $1.28 beat the Zacks Consensus Estimate of $1.18. However, the bottom line compared unfavorably with $1.45 registered in the year-ago quarter.
HWC’s results were aided by an increase in non-interest income. Also, marginally higher loan balances were a tailwind. However, a decline in NII and higher expenses and provisions were the undermining factors.
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