On Nov 26, 2015, we issued an updated research report on BankUnited, Inc. BKU. Consistent improvement in revenues continued to be the growth driver, while elevated expenses remained an undermining factor.
BankUnited, with a goal to provide personalized services along with a diversified range of products and services to customers, continues to focus on organic as well as inorganic growth. The bank is well positioned to grow, given its strong capital base.
Moreover, BankUnited continues to report appreciable growth in loan and deposits. The bank has been changing its deposit mix to ease top-line pressure along with lowering exposure to risky residential loans. This has resulted in a 12% increase in revenues in the first nine months of 2015 compared to the corresponding prior-year period.
Moreover, the loan growth momentum is expected to continue with management anticipating strong loan growth witnessed in 2014 to continue throughout 2015 in the range of $4.5–$5 billion.
On the flip side, the constantly mounting expenses remain a challenge for BankUnited. The 16% increase in non-interest expenses in the first nine months of 2015 emphasized on the need for better cost control. However, management’s forecast of high-single-digits rise in core non-interest expenses diminishes any hope to attain the same in the near term.
Though the bank’s net interest margin (NIM) continues to be under pressure owing to a still low interest rate scenario, the optimistic expectations from the impending interest rate hike and the bank’s efforts to be investor friendly by returning capital to its shareholders through dividends has helped it gain investors’ confidence. This is evident from the 31.4% year-to-date increase in the share price.
Analysts hold mixed views about BankUnited’s future prospects. Over the last 30 days, the Zacks Consensus Estimate declined by a penny to $1.83 per share for 2015, while it increased by a penny to $2.32 per share for 2016.
BankUnited currently carries a Zacks Rank #3 (Hold). Some better-ranked banks include BBCN Bancorp, Inc. BBCN, BofI Holding, Inc. BOFI and Central Pacific Financial Corp. CPF. All these stocks hold a Zacks Rank #2 (Buy).
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