On Oct 9, 2013, we lowered our long-term recommendation on BankUnited, Inc. (BKU) to Neutral from Outperform. This was based on the company’s increased expenses. Nevertheless, the company is well positioned to grow both organically and inorganically based on its healthy liquidity level.
Why Downgraded to Neutral?
A rise in expenses remains a major cause of concern for BankUnited. Moreover, management expects certain operating expenses to increase further in the subsequent quarters owing to the company’s recent expansion plans. Additionally, as the interest rate environment is not expected to improve in the near future, we anticipate BankUnited to experience significant margin pressure in the near-to-mid term.
BankUnited is scheduled to announce third-quarter results on Oct 22. The Earnings ESP for the company is 0.00%. This, along with its Zacks Rank #3 (Hold), makes us less confident of a positive earnings surprise. The company’s second-quarter 2013 earnings substantially surpassed the Zacks Consensus Estimate.
BankUnited is an attractive pick for yield-seeking investors. Moreover, given the company’s strong capital and balance sheet levels, it is well positioned to expand organically as well as through acquisitions. Further, BankUnited’s robust capital deployment plans and increasing emphasis on the commercial loan portfolio will prove accretive to its overall growth going forward.
Other Stocks Worth Considering
Some better-performing finance stocks that are worth a look include Tower Financial Corporation (TOFC), Lakeland Financial Corp. (LKFN) and Park National Corp. (PRK). While Tower Financial carries a Zacks Rank #1 (Strong Buy), both Lakeland Financial and Park National have a Zacks Rank #2 (Buy).
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