Food delivery apps to blame for stressed restaurant loans: BankUnited
Call it the other Uber problem.
BankUnited in Miami Lakes, Fla., is seeing some stress in its loans to restaurant franchises, and executives say the culprit is an explosion of delivery options that has resulted in fewer people visiting restaurants and ordering high-margin items such as desserts and drinks.
During a fourth-quarter earnings call Thursday, Rajinder Singh, BankUnited's chairman, president and CEO, said the company is keeping tabs on its $360 million restaurant portfolio as more consumers order in using such services as Uber Eats, Grubhub and DoorDash.
“There is a lot of delivery happening. And when delivery happens, often the revenue model gets impacted because you're not ordering some of the higher-priced stuff," he said. “That change that is happening in the business model, coupled with tight labor markets … is putting pressure on the financials of our borrowers.”
Executives said some of those loans were moved to criticized or classified status during the quarter, but they did not provide an exact figure.
Other banks have reported issues tied to restaurant lending as the food-services industry struggles with competition, rising labor costs and declining foot traffic to shopping malls and big-box stores.
Singh said restaurant franchise lending is the only area of concern for the $32.9 billion-asset BankUnited. Other franchise businesses, such as fitness centers, are “doing extremely well,” he said. BankUnited is looking to increase commercial lending in the Atlanta metro area in 2020 and will launch a commercial card later in the year, he said.
Fourth-quarter profit at BankUnited rose by 70% from a year earlier, to $89.5 million. Like most other banks, the company increased its fee income, while its net interest margin contracted due to lower rates.
However, a loan-loss provision recovery helped boost its overall results as the company bounced back from prior troubles with its taxi medallion lending portfolio. BankUnited posted a recovery of $500,000 in the fourth quarter compared with a $12.6 million loan-loss provision a year earlier.
Earnings per share of 91 cents beat the average estimate of analysts polled by FactSet Research Systems by 18 cents.