UBS Starts BankUnited (BKU) at Buy

UBS initiated coverage on BankUnited (NYSE: BKU) with a Buy rating and a price target of $37. Analyst David Eads said the company has a clear path to compelling earnings growth.

"We see BKU as a unique story among regional banks, with opportunities to deliver sustained growth at one of the highest rates in the industry, but moving past near-term earnings headwinds from the shrinking FDIC-assisted covered loan portfolio. Importantly, it's not just the loan growth that differentiates BKU in our mind, but the fact that this is combined with an attractive footprint and a top management team that gives us confidence that they can manage the growth with discipline," said Eads.

"With just under $20 billion in assets, BKU is big enough to be relevant, but well below the $50 billion CCAR threshold, and they have the infrastructure in place to support a much larger bank. This supports a growth outlook with manageable cost uplift, which we think should allow BKU to deliver highly attractive efficiency ratios, and could make it an attractive target if we see industry consolidation pick up," continued the analyst.

"After underperforming throughout 2014, BKU shares have recovered since 4Q14 earnings, reflecting clear signs that the bank is moving past its trough in NII and earnings. However, we see further upside potential given BKU's multi-year trajectory for earnings growth, which we believe should justify a multiple at least in line with similar high-growth regional bank peers," he added.

For an analyst ratings summary and ratings history on BankUnited click here. For more ratings news on BankUnited click here.

Shares of BankUnited closed at $32.70 yesterday.

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