TPI Composites files for Chapter 11 bankruptcy, plans delisting from Nasdaq
Investing.com -- On Tuesday, Fitch Ratings affirmed the Long-Term Issuer Default Ratings (IDRs) of BankUnited, Inc. (NYSE:BKU) and its bank subsidiary, BankUnited, N.A., at ’BBB’. The Short-Term IDRs for both entities were also affirmed at ’F3’. The Rating Outlook was revised to Stable from Negative, and the Viability Ratings (VR) of BKU and BankUnited, N.A. were affirmed at ’bbb’.
The revision of the Rating Outlook to Stable is attributed to improvements in BKU’s reserve coverage and a stabilized funding and liquidity profile, despite the bank’s reliance on wholesale funding. Fitch anticipates that BKU’s solid financial performance will manage the potential higher-for-longer rate environment and credit normalization at its current rating level.
BKU operates in two large markets, providing geographic diversity. It maintains a moderate risk profile with good diversity in lending categories and geographies, and has plans to enter new markets. The bank’s commercial real estate (CRE) concentration represents 25% of the loan portfolio, which resides below Fitch’s mid-tier peer group median as a percentage of risk-based capital.
However, BKU’s profitability remains weaker than its peers. The bank continues to lag on core profitability metrics due to higher cash balances in response to 2023 regional bank volatility and high-cost deposits. Its lower revenue diversity also leads to less non-interest income to offset weaker margins.
Fitch views BKU’s capital levels as adequate, particularly considering its weaker earnings profile compared to peers. Its common equity Tier 1 ratio of 12.01% at year-end 2024 was well above the peer median. Fitch expects BKU to continue to manage capital conservatively, in terms of both modest loan growth and total payouts.
BKU’s funding profile improved with growth in noninterest bearing deposit accounts, following some turbulence in early 2023. However, noncore funding, including brokered deposits, remains elevated compared to peers. The bank maintains appropriate contingent liquidity through borrowing capacity at the Federal Home Loan Bank and the Fed Discount Window, as well as unencumbered securities.
BKU’s holding company VR is equalized with BankUnited, National Association’s VR due to sufficient liquidity management. BKU’s common equity double leverage was below 120% at 3Q24 and BKU maintains sufficient liquidity buffers at the holding company to meet more than a year of upcoming cash outflows.
BKU’s senior unsecured debt ratings align with its Long-Term IDR, as default on these obligations equates to a default of the bank holding company. BKU’s subordinated debt rating of ’BBB-’ reflects one notch for loss severity. BankUnited, National Association’s long-term uninsured deposits are rated one notch higher than the bank’s IDR, as U.S. uninsured deposits benefit from depositor preference.
BKU has a Government Support Rating (GSR) of ’ns’, indicating that the probability of support is unlikely. IDRs and VRs do not incorporate any support. BKU’s ratings would be sensitive if BKU were to record impairments other than temporary impairments or mark-to-market losses in these securities such that it could represent two quarters of earnings. Positive rating momentum would likely result from improved earnings and profitability, including net interest margin expansion above peer median, increased non-interest income in relation to total revenue and an improvement in profitability.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.