BankUnited (BKU) is a special situation stock positioned to grow approximately $1 billion per quarter, with benefits coming from recovery in the South Florida market as well as the company’s entry into the New York market, says David W. Darst, Managing Director at Guggenheim Securities, LLC.
“In 2009, [CEO John] Kanas and some private equity partners took over BankUnited from the FDIC, after the South Florida-based bank was sinking under the weight of subprime mortgages. They have since converted that franchise into more of a broad-based commercial bank with opportunities to grow, and they are hiring a lot of commercial banking lenders from larger banks,” Darst said. “There’s a very good recovery in the South Florida market now. On top of that, most of Mr. Kanas’ experience was in the New York market, which BankUnited re-entered this year with a couple more branches in Midtown Manhattan.”
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With these drivers in place, BKU is positioned to grow nearly $1 billion per quarter, Darst says, and if that rate is sustained the company is expected to double in size in three-plus years. Darst also is expecting to see earnings per share growth accelerate significantly in 2015, after the acquired bank earnings combine with new bank earnings in mid-2014.
“In the near term, the purchased assets from the FDIC are amortizing. Given the discount at which they made this purchase, they have a very high yield, so the net interest margin is going to be compressing. The growth is going to offset that margin compression, and you should begin to see the acquired bank earnings mix with the new bank earnings as you move into mid-2014. Earnings per share growth should really accelerate in 2015,” Darst said.
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