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BankUnited (BKU) Stock Down 4.6% Despite Q4 Earnings Beat
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BankUnited, Inc.’s (BKU - Free Report) fourth-quarter 2020 earnings per share of 89 cents surpassed the Zacks Consensus Estimate of 71 cents. However, the bottom line was down 2.2% from the prior-year quarter.
Results benefited from rise in net interest income (NII), provision benefit and solid loan and deposit balances. However, fall in non-interest income, rise in expenses and lower interest rates were the undermining factors. Perhaps concerns related to low rates and faltering loan demand weighed on investor sentiments as the company’s shares lost 4.6% following the earnings release.
Net income was $85.7 million, down 4.2% from the prior-year quarter.
In 2020, earnings of $2.06 per share beat the consensus estimate but were down 34.2% year over year. Net income declined 36.8% to $197.9 million.
Revenues Improve, Expenses Rise
Net revenues of $228.646 million in the reported quarter beat the Zacks Consensus Estimate of $226.1 million. Also, the top line improved 2.5% year over year.
In 2020, net revenues declined 1.7% to $885 million. The top line marginally outpaced the consensus estimate of $884.3 million.
NII totaled $193.4 million, which improved 4.3% year over year. Net interest margin contracted 8 basis points (bps) to 2.33%.
Non-interest income was $35.3 million, down 6.6%. The decline was mainly due to lower net gain on investment securities, lease financing and other non-interest income.
Non-interest expenses rose 3.6% to $123.3 million. This was largely due to increase in almost all expense components except for occupancy and equipment, depreciation of operating lease equipment and other non-interest expense.
As of Dec 31, 2020, net loans were $23.6 billion, up from $23 billion recorded as of Dec 31, 2019. Total deposits amounted to $27.5 billion, up from $24.4 billion.
Credit Quality: Mixed Bag
The company recorded net recovery of credit losses of $1.6 million, up significantly from net recovery of $0.5 million recorded in the prior-year quarter.
However, as of Dec 31, 2020, the ratio of net charge-offs to average loans was 0.26%, up from 0.05% as of Dec 31, 2019. Also, the ratio of non-performing loans to total loans was 1.02%, up 14 bps year over year.
Strong Capital Ratios
As of Dec 31, 2020, Tier 1 leverage ratio was 8.6%, down from 8.9% as of Dec 31, 2019. However, Common Equity Tier 1 risk-based capital ratio was 12.6%, up from 12.3% recorded as of Dec 31, 2019. Moreover, total risk-based capital ratio was 14.7%, up from 12.8%.
Our Take
BankUnited’s efforts to strengthen fee income sources and a strong balance sheet position are expected to keep supporting profitability. However, due to near-zero interest rates, the company’s margins are likely to remain under pressure in the near term, thus, hurting the top line to an extent.
BankUnited, Inc. Price, Consensus and EPS Surprise
Commerce Bancshares Inc.’s (CBSH - Free Report) fourth-quarter 2020 earnings per share of $1.11 surpassed the Zacks Consensus Estimate of 95 cents. Also, the bottom line came in 26.1% higher than the prior-year quarter.
Zions Bancorporation’s (ZION - Free Report) fourth-quarter 2020 net earnings per share of $1.66 surpassed the Zacks Consensus Estimate of $1.01. Moreover, the reported figure represents a rise of 71.1% from the year-ago quarter’s number.
Washington Federal’s (WAFD - Free Report) first-quarter fiscal 2021 (ended Dec 31) earnings of 51 cents per share surpassed the Zacks Consensus Estimate of 42 cents. However, the figure reflects a year-over-year decline of 40.7%.
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BankUnited (BKU) Stock Down 4.6% Despite Q4 Earnings Beat
BankUnited, Inc.’s (BKU - Free Report) fourth-quarter 2020 earnings per share of 89 cents surpassed the Zacks Consensus Estimate of 71 cents. However, the bottom line was down 2.2% from the prior-year quarter.
Results benefited from rise in net interest income (NII), provision benefit and solid loan and deposit balances. However, fall in non-interest income, rise in expenses and lower interest rates were the undermining factors. Perhaps concerns related to low rates and faltering loan demand weighed on investor sentiments as the company’s shares lost 4.6% following the earnings release.
Net income was $85.7 million, down 4.2% from the prior-year quarter.
In 2020, earnings of $2.06 per share beat the consensus estimate but were down 34.2% year over year. Net income declined 36.8% to $197.9 million.
Revenues Improve, Expenses Rise
Net revenues of $228.646 million in the reported quarter beat the Zacks Consensus Estimate of $226.1 million. Also, the top line improved 2.5% year over year.
In 2020, net revenues declined 1.7% to $885 million. The top line marginally outpaced the consensus estimate of $884.3 million.
NII totaled $193.4 million, which improved 4.3% year over year. Net interest margin contracted 8 basis points (bps) to 2.33%.
Non-interest income was $35.3 million, down 6.6%. The decline was mainly due to lower net gain on investment securities, lease financing and other non-interest income.
Non-interest expenses rose 3.6% to $123.3 million. This was largely due to increase in almost all expense components except for occupancy and equipment, depreciation of operating lease equipment and other non-interest expense.
As of Dec 31, 2020, net loans were $23.6 billion, up from $23 billion recorded as of Dec 31, 2019. Total deposits amounted to $27.5 billion, up from $24.4 billion.
Credit Quality: Mixed Bag
The company recorded net recovery of credit losses of $1.6 million, up significantly from net recovery of $0.5 million recorded in the prior-year quarter.
However, as of Dec 31, 2020, the ratio of net charge-offs to average loans was 0.26%, up from 0.05% as of Dec 31, 2019. Also, the ratio of non-performing loans to total loans was 1.02%, up 14 bps year over year.
Strong Capital Ratios
As of Dec 31, 2020, Tier 1 leverage ratio was 8.6%, down from 8.9% as of Dec 31, 2019. However, Common Equity Tier 1 risk-based capital ratio was 12.6%, up from 12.3% recorded as of Dec 31, 2019. Moreover, total risk-based capital ratio was 14.7%, up from 12.8%.
Our Take
BankUnited’s efforts to strengthen fee income sources and a strong balance sheet position are expected to keep supporting profitability. However, due to near-zero interest rates, the company’s margins are likely to remain under pressure in the near term, thus, hurting the top line to an extent.
BankUnited, Inc. Price, Consensus and EPS Surprise
BankUnited, Inc. price-consensus-eps-surprise-chart | BankUnited, Inc. Quote
BankUnited currently carries a Zacks Rank #2 (Buy). 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 - Free Report) fourth-quarter 2020 earnings per share of $1.11 surpassed the Zacks Consensus Estimate of 95 cents. Also, the bottom line came in 26.1% higher than the prior-year quarter.
Zions Bancorporation’s (ZION - Free Report) fourth-quarter 2020 net earnings per share of $1.66 surpassed the Zacks Consensus Estimate of $1.01. Moreover, the reported figure represents a rise of 71.1% from the year-ago quarter’s number.
Washington Federal’s (WAFD - Free Report) first-quarter fiscal 2021 (ended Dec 31) earnings of 51 cents per share surpassed the Zacks Consensus Estimate of 42 cents. However, the figure reflects a year-over-year decline of 40.7%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>