BankUnited (BKU)

Regional banking company BankUnited (NYSE:BKU) missed Wall Street’s revenue expectations in Q3 CY2025, but sales rose 7.3% year on year to $275.7 million. Its GAAP profit of $0.95 per share was 8.9% above analysts’ consensus estimates.

Company Overview

Born from the ashes of a failed Florida thrift during the 2009 financial crisis, BankUnited (NYSE:BKU) is a regional bank that provides commercial lending, deposit services, and treasury solutions to businesses and consumers primarily in Florida and the New York metropolitan area.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

BankUnited competes with large national banks like JPMorgan Chase, Bank of America, and Wells Fargo, as well as regional players including Truist, PNC, Regions Bank, and TD Bank in its Florida and Southeast markets. In the Tri-State area, additional competitors include Capital One, Valley National Bank, and M&T Bank, along with numerous community banks.

In general, banks make money from two primary sources. The first is net interest income, which is interest earned on loans, mortgages, and investments in securities minus interest paid out on deposits. The second source is non-interest income, which can come from bank account, credit card, wealth management, investing banking, and trading fees. Unfortunately, BankUnited’s 4% annualized revenue growth over the last five years was mediocre. This was below our standard for the banking sector and is a tough starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. BankUnited’s recent performance shows its demand has slowed as its annualized revenue growth of 2.4% over the last two years was below its five-year trend. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, BankUnited’s revenue grew by 7.3% year on year to $275.7 million, missing Wall Street’s estimates.

Net interest income made up 88.8% of the company’s total revenue during the last five years, meaning BankUnited barely relies on non-interest income to drive its overall growth.

Net interest income commands greater market attention due to its reliability and consistency, whereas non-interest income is often seen as lower-quality revenue that lacks the same dependable characteristics.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

BankUnited’s EPS grew at an astounding 11.3% compounded annual growth rate over the last five years, higher than its 4% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its efficiency ratio didn’t improve.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For BankUnited, its two-year annual EPS growth of 10.1% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, BankUnited reported EPS of $0.95, up from $0.81 in the same quarter last year. This print beat analysts’ estimates by 8.9%. Over the next 12 months, Wall Street expects BankUnited’s full-year EPS of $3.55 to stay about the same.

Banks profit by intermediating between depositors and borrowers, making them fundamentally balance sheet-driven enterprises. Market participants emphasize balance sheet quality and sustained book value growth when evaluating these institutions.

This is why we consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation. EPS can become murky due to acquisition impacts or accounting flexibility around loan provisions, and TBVPS resists financial engineering manipulation.

BankUnited’s TBVPS grew at a decent 5.4% annual clip over the last five years. TBVPS growth has accelerated recently, growing by 9.3% annually over the last two years from $32.88 to $39.27 per share.

Over the next 12 months, Consensus estimates call for BankUnited’s TBVPS to grow by 7% to $42.01, mediocre growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, BankUnited has averaged a Tier 1 capital ratio of 11.9%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, BankUnited has averaged an ROE of 10%, healthy for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This is a bright spot for BankUnited.

It was good to see BankUnited beat analysts’ EPS expectations this quarter. We were also happy its tangible book value per share narrowly outperformed Wall Street’s estimates. On the other hand, its net interest income missed and its revenue fell slightly short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 1.1% to $36.39 immediately after reporting.

Updated: December 4, 2025 at 11:33 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

BankUnited doesn’t pass our quality test. First off, its revenue growth was weak over the last five years. And while its expanding net interest margin shows its loan book is becoming more profitable, the downside is its anticipated efficiency ratio over the next year signals its day-to-day expenses will rise. On top of that, its weak EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders.

BankUnited’s P/B ratio based on the next 12 months is 1.1x. This valuation tells us a lot of optimism is priced in - you can find more timely opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $43.40 on the company (compared to the current share price of $44.50), implying they don’t see much short-term potential in BankUnited.