BankUnited, Inc. (BKU): what the price assumes

In the published model solve dated 2026-Q2, anchored at $46.59, BankUnited, Inc. (BKU) is priced for 12.8% return on equity. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-07-29 · Exported: 2026-08-01 · Source: https://boothcheck.com/report/BKU

Headline

FieldValue
TickerBKU
CompanyBankUnited, Inc.
Sector / IndustryFinancial Services
Current price$46.59/sh

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basisfinancials
Price-to-book1.12x
Return on equity now8.8%

The implied return on book is non-physical at this price-to-book and is suppressed as misleading. The price sits beyond a 11.7% return on equity sustained for 40 years and is not resolvable as a sustainable-ROE point. The rarity read below is the honest signal.

Solve inputs: computed at a 11.9% cost of equity; ROE searched up to the 11.7% ROE ceiling.

Reconcile: at the x-ray's 9.3% required return this reads ~9.9%; the models below use their own rates.

How unusual the bet is: extreme

ReferenceValue
vs own history+1.04σ
cohort percentile (of 163 peers)26
sustained it ~10 years at this level67%
implied end-window share0%

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.17x3expensive
Earnings0.83x2justifies
Relative1.06x3expensive
Growth1.15x3expensive

Families that justify the price: Asset, Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.8%); the inversion above states its own rate.

Per-Model Detail (n=11)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth——no—
Bank Fair Value (P/TBV)—$35.051.33xyesTBVPS $40.81 × 0.86x (ROE (TTM) 9.0% / CoE 9.3%, g=5.0% (sustainable: 65% retention × ROE, 5% cap; not the terminal-growth assumption), credit 0.87% allowance/loans → ×0.91)
Relative ValuationRelative$39.601.18xyesP/E 10x (static sector reference · 2026-04), scenarios: 8.4x / 10.0x / 11.6x (bear / base = reference held flat / bull), EV/EBITDA N/Ax
Simple DDMGrowth$596.330.08xyesDPS $1.30, g=9.0% (sustainable: ROE (TTM) × retention; not the terminal-growth assumption), ke=9.3%
Two-Stage DDMGrowth$33.931.37xyesStage 1: 12% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$39.761.17xyesBV/sh $40.81, ROE (TTM) 9.0%, ke 9.3%
Two-Stage Excess ReturnAsset$39.251.19xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$40.681.15xyesRev $1.0B, growth 8% (input: historical growth; tapered), Terminal P/S: 2.9x / 3.4x / 4.0x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$43.961.06xyesEPS $3.59, growth 12% (input: historical EPS growth), PEG=1.03 (Fair)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings——no—
Residual IncomeAsset——no—
Graham NumberAsset$57.410.81xyes√(22.5 × EPS $3.59 × BVPS $40.81) — Graham's conservative floor
EV/EBITDA RelativeRelative——no—
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$99.270.47xyesEPS $3.59 × (8.5 + 2×12.2%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative——no—
PEG Fair ValueRelative$65.940.71xyesEPS $3.59 × (PEG 1.5 × growth 12.2% (input: historical EPS growth)) → PE 18.4x
Earnings YieldEarnings$38.811.20xyesEPS $3.59 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Share count CAGR (buyback)-3.1%

Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).

Bullet Takeaways

Bull Case

The structural advantage BankUnited has been assembling is not a product, a technology, or a geography. It is the right-hand side of the balance sheet. A bank's competitive position is settled by what its money costs, and for a long stretch this one paid too much for it. The 10-K puts the fix at the top of the strategic list: Continue to improve the funding profile - growth in core deposit relationships is paramount, with the specific instruction to Grow NIDDA particularly in national deposit verticals, middle-market and small business. Those initials mean checking accounts that pay no interest, which is the cheapest money a bank can hold.

The evidence that it is working sits in three readings taken a year apart. Net interest margin, on a tax-equivalent basis, ran 2.56% in 2023, 2.73% in 2024, and 2.95% in 2025, and the 10-K attributes the most recent step to balance-sheet repositioning and an improved funding mix. Underneath that headline sits the mechanic: average NIDDA grew by $844 million while average FHLB advances declined by $914 million. That is close to a one-for-one swap of the most expensive funding a bank can buy for the cheapest kind it can earn, and it is why the spread widened without the bank taking on more credit risk to get there.

Margin arithmetic on a balance sheet this size is unusually leveraged. The cost of running the branches, the compliance staff, and the technology does not rise when the spread widens, so an extra fifth of a percentage point on earning assets lands almost intact at the return line. That is the whole bull mechanism, and it does not require the loan book to grow at all.

The franchise underneath is a little more distinctive than the usual description of a Florida bank suggests. Our largest banking market is Florida, the filing says, but the bank also offers certain commercial lending and deposit products through national platforms and certain consumer deposit products through an online channel, which is how a 3.4 billion dollar company reaches middle-market treasury relationships well outside its branch map. One small disclosure tells you what kind of depositor management is chasing: We do not charge consumer overdraft or NSF fees. Banks that build earnings on penalty income do not write that sentence.

Capital is not the constraint on any of it. The 10-K reports that all capital ratios of the Company and the Bank exceeded the "well capitalized" levels under the regulatory framework for prompt corrective action, and roughly 50.9% of the latest fiscal year's earnings went back to holders through dividends and buybacks. That continued into the current year, with about 1.1 million shares repurchased during the second quarter of 2026 for an aggregate 50.1 million dollars. A bank buying its own stock near book value is retiring capital at roughly the price the market assigns it, which is a low-drama way to lift the return per share while the margin work continues.

Bear Case

The advantage being built on one side of this balance sheet is precisely what makes the other side dangerous. Commercial deposits are the cheap, relationship-based balances that made the funding repair possible, and the 10-K is unusually direct about what they also are: due to the design and purpose of FDIC deposit insurance, across the U.S. banking system and at BankUnited, a significant portion of commercial deposits are uninsured. Uninsured commercial money is the fastest-moving liability in banking. The margin improvement and the funding fragility are the same balances looked at from two directions, and only one of those views shows up in the earnings.

The filing also names the mechanism by which the gain reverses. If deposits are replaced with wholesale funding, then Higher funding costs reduce our net interest margin, net interest income, and net income. Every point of spread earned since 2023 came from moving in the opposite direction. There is no separate engine here to carry the result if that trade runs backwards, because the improvement was mix, not volume.

Set against what the price asks, the margin for error is thinner than a bank trading near book value suggests. Read the price the way a bank should be read, off book value rather than as a multiple of profit, and at about 1.12 times book it needs a sustained return on equity higher than even the strongest banks hold for long, high enough that the requirement never resolves into a single figure at all. The bank has recently been earning about 8.8%. If the return does not travel that distance, the adjustment lands on the price-to-book the market is willing to pay, not on the earnings catching up to it.

Credit got worse through 2025 before it got better. Non-performing loans finished the year at 1.54% of total loans against 1.03% a year earlier, and total non-performing assets rose to $377 million from $256 million. The commercial property book carries the specific vintage problem: the 10-K discloses approximately $106 million of rent regulated exposure at the end of 2025, and notes that 17% of the total CRE portfolio, with a weighted average coupon rate of 4.36%, is fixed rate. Loans written at that coupon do not reprice comfortably when they mature, and the borrower on the other side has to find the difference.

Scale is the quiet constraint on all of it. This is a bank competing for the same middle-market treasury relationships as WBS, which produced revenue of $2.93 billion over the trailing year against BankUnited's roughly 1.0 billion dollars. Deposit gathering carries fixed costs: the payments technology, the treasury platform, the relationship managers. Spread those over a smaller balance sheet and each relationship costs more to win. The second quarter of 2026 showed what that looks like in practice, with diluted earnings of $0.97 a share landing under a Q2 2026 consensus of $1.03.

Valuation

A bank is worth the return it earns on its capital, so the price is read against book value rather than as a multiple of profit. BankUnited changes hands at about 1.12 times book. Paying that asks for a sustained return on equity above what even the strongest banks hold for any length of time, high enough that the requirement never resolves into a single figure at all. The bank has recently been earning about 8.8%. The gap between those two sentences is the valuation question, and everything else in this section is an attempt to size it.

Lower the required return toward what the peer-multiple and book-value methods assume, and the picture turns over. On that footing the price sits about 17% above where the asset-value methods center, about 6% above peer multiples, and about 15% above the forward cash-flow methods, while the earnings-power methods land above the price altogether. Four families of method, none of them far from where the stock actually trades. The disagreement between the two readings is a disagreement about what a bank of this shape should be required to earn, not about the bank's own numbers.

The calculation built specifically for banks shows the same tension in one line of arithmetic. It starts from tangible book value of $40.81 a share and marks that down to 0.86 of itself, because a trailing return on average equity of 9.0% sits under the 9.3% charged as the cost of equity. Then it takes a second haircut for credit quality. That one is sized off the allowance held against the loan book, which stands a little under one percent of loans. The result finishes under today's price. Buyers are paying a modest premium to tangible book for a bank whose measured return does not yet cover its own cost of capital, which is a statement about expected improvement rather than about present earnings.

Two inputs from the filings carry that expectation. The 10-K reports that ROAE improved to 9.0% from 8.5% for 2025, and the margin behind that improvement widened to 2.95% from 2.73%. Regulatory capital is not the binding constraint on the plan, since all capital ratios of the Company and the Bank exceeded the "well capitalized" levels under the regulatory framework for prompt corrective action at both year ends. What the price underwrites, then, is continuation: the funding swap keeps working, the spread keeps widening, and the return climbs toward the bar.

Against the cohort the price-to-book sits in the lower half of the peer group, so the demanding part of this valuation is not the multiple. It is the duration of the improvement. History puts a rough base rate on it: of firms earning at that level, only about 67% held it for a decade. In the meantime the capital keeps coming back, with about 50.9% of the latest fiscal year's earnings returned as dividends plus buybacks and a share count that has been shrinking at roughly 3.1% a year since early 2022.

Catalysts

Second-quarter results, reported on July 22, 2026, delivered net income of $70.7 million and diluted earnings of $0.97 a share, under a Q2 2026 consensus of $1.03. The margin kept going the right way: net interest margin reached 3.06% from 2.99% in the first quarter. Average deposits rose $811 million from the prior quarter and $1.5 billion from a year earlier, and non-interest-bearing balances reached the highest level in the company's history.

Credit moved in the opposite direction from 2025. Non-performing loans fell $51 million, or 19%, from the first quarter and $152 million, or 40%, from a year earlier. The non-performing asset ratio came in at 0.66%, down from 0.79% in the prior quarter, and criticized and classified loans, up $7 million during the quarter, were down $170 million, or 14%, from a year earlier. A year of rising problem loans through 2025 has now been followed by two quarters of the trend reversing, which is the single most consequential change in the story since the annual report was filed in February.

Capital return continued alongside it, with roughly 1.1 million shares repurchased during the quarter for an aggregate 50.1 million dollars. The next print tests the part that matters most: whether the spread keeps widening once the easy funding substitution is behind it, since almost all of the gain so far has come from changing the mix of liabilities rather than from anything the rate environment handed over.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

2Q 2026 earnings release, July 2026 · 2Q 2026 earnings release and analyst consensus, July 2026

View the full interactive BKU report on boothcheck