BankUnited Getting A Bit Testy

BankUnited Financial (BKUNA), best known for ARM loans in Florida, apparently has had it with critics. Here's what Raymond James analyst John Pandle, who rates the stock an underperform, told his clients today:

BankUnited is hosting and analyst/investor meeting today and tomorrow. However, we were not invited to attend and executive management continues to ignore our phone calls and e-mail messages seeking information about several areas where we have fundamental concerns, including rapidly deteriorating asset quality, an acceleration of negative amortization growth on option ARM loans, lower loan sale gains, and subsiding margin expansion.

Notably, a company representative informed us on Friday that the presentations will not be webcast. While management's decision to exclude critics and limit access to the information presented may somehow satisfy the letter of the law as it relates to Regulation FD, it certainly violates the spirit of the law, in our view.

A spokeswoman says, "BankUnited does not comment on individuals who provide analyst coverage. BankUnited complies with Reg FD, as well as our other legal obligations, and will continue to do so."

Could it be that BankUnited, whose operations are focused in South Florida -- and could be described as a residential version of Corus (CORS), which lends to developers in Florida -- is in denial about the over-building? Or does it really think it won't be hurt by a glut of homes in its primary lending market? Don't know, because the company didn't respond to my email inquiries. (The person I needed to speak to wasn't in, but was available via email, I was told.)

But based on the company's last earnings release, it appears to be a little of both. According to the release:

We have not changed our goal of growing the company, even though our industry is experiencing a cyclical downturn, particularly in the housing markets, which will cause decreasing asset production and rising levels of non-performing assets. To achieve our goals we are implementing a multi-step program. We will increase assets by entering new markets and creating and refining products. Enhanced asset-retention programs will reduce prepayments. In addition, we will continue to build our Florida franchise through additional branch expansion and growth in our retail and commercial customer bases while maintaining an emphasis on controlling our costs of funds and deposits.

Branch expansion in Florida. Now?

Reminds me of the kinds of things NovaStar (NFI) would say when people would ask how it would avert the sub-prime crunch. Always sounds better on paper.

Comments

[Andrew Hor...:]

You have to know that something is going terribly wrong in Florida when we hear about crazy tax plans to eliminate the property Taxes in favor of increasing sales tax by 2.5%. This is just one more political game to create a stir and give some lesser know representative a bit of press. At least that is what it seems to be.

Forget the fact that tourism is such a huge part of the Florida economy and forget that this will be devastating to the Average Joe, the fact that they are even proposing this is a red flag that we may be approaching a real fall in the housing market in the sunshine state. Add to this the stupidity of the state by recently eliminating the Intangible Tax and one has to wonder where they think they are going to bring in sufficient revenue to pay for services and general costs of running the place!

Banks have long been quick to give out money without much due diligence as they have had the backup of the house as collateral. Once again, the short sight of the number crunchers did not take into consideration that there could be a reverse in housing prices. They also have been overly aggressive with creative loans to help provide money for overpriced housing.

Finally, why has no one ever looked at the maximum limit that any person can borrow to build? I though that over margin/leveraging was looked into back in the early part of the century when we saw that small market correction of the 30's. Now we may possibly see a similar fate to those that have loaded up on mortgages only to find the properties sitting with no occupants.

<b>Remember: Everything is cyclical. </b> There is no new investment paradigm. banks better wake up and smell the solid or they are going to be looking forward to bailout applications.

Andrew Horowitz, CFP
www.thedisciplinedinve...

2007 Feb 27 01:33 AM