BankUnited in Fla. announces plan to boost annual profit by $60M

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BankUnited in Miami Lakes, Fla., has unveiled a plan to boost annual profit by $60 million.

The $33 billion-asset BankUnited, reborn a decade ago when investors bought the failed institution from the Federal Deposit Insurance Corp., is looking to cut $40 million in annual costs and identify $20 million in revenue under a program set to run through 2020. The effort is expected to increase BankUnited's return on equity from 9.05% to 11% and its return on assets from 0.82% to 1%.

The anniversary of BankUnited's failure and recapitalization helped spur the initiative, Chairman and CEO Rajinder Singh said during a conference call to discuss quarterly results.

"Big moments like that make you stop and take a longer-term view," he said.

The company's funding costs have also risen sharply over the past 12 months, cutting into profitability.

Singh said the program will focus on enhancing customer and employee experiences while laying the foundation for future growth. Unlike typical cost-cutting programs at banks, he said, BankUnited's will not implement hiring freezes or spending cuts in areas such as technology.

Rather, the effort will be an organizational redesign that will focus on business units instead of geography.

The bank historically was built around far-flung operations in Florida and New York. As a result, the company has at times dealt with different cultures in each market, much like a bank built with numerous acquisitions, Singh explained.

The change will have some regulatory benefits, too. Having different parts of the company doing essentially the same work often led to slight variations in how tasks were accomplished.

"Then quality suffers, and that's not good on the regulatory front," Singh said.

Singh said about 55 people are working on the program, which "will fundamentally change who we are and make us a much stronger and better company."

BankUnited on Wednesday reported that its first-quarter profit fell by 23% to $66 million. Earnings per share of 65 cents was a penny better than the mean estimate of analysts compiled by FactSet Research Systems.

Net interest income decreased by 23%, to $190.9 million. The net interest margin compressed by 102 basis points, to 2.54%, after cost for interest-bearing liabilities rose by 73 basis points, to 2.10%.

Singh said deposit pricing pressure continues.

"I'd hoped that by now deposit pricing would have eased up," he said during the conference call. "It did feel like it was easing up for the first two months of the quarter."

But pricing jumped again in March.

Chief Financial Officer Leslie Lunak said deposit costs are expected to keep rising in coming quarters, though at a more moderate pace.

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