NEW YORK (Reuters) - BankUnited Inc (BKU.N) shares rose as much as 9.3 percent in their debut on Friday, on speculation that the cleaned-up Florida lender will be one of the winners in the aftermath of the U.S. financial crisis.
BankUnited’s IPO is the first for a major failed institution taken over by private investors during the financial crisis. With its losses from crisis-era assets protected by the Federal Deposit Insurance Corp and new management at the helm, investors see the lender as a way to bet on the industry’s recovery.
The IPO’s success could bode well for the owners of other banks such as IndyMac -- now known as OneWest Bank -- that were bought by private investors during the crisis.
BankUnited’s private equity backers, which include Wilbur Ross’s WL Ross & Co, Blackstone Group LP (BX.N) and Carlyle Group CYL.UL, have seen their initial investment of $900 million nearly triple at the IPO price.
“While it was very nice and we are very happy to have the kind of results we got, I think the real exciting part of this story and the bigger returns are ahead of us,” Chief Executive Officer John Kanas said in a phone interview.
Kanas, a veteran banker, will control a stake worth more than six times his initial investment of $23.5 million, which he has recouped in the IPO.
The investors’ returns are in stark contrast to the FDIC’s estimated $5.7 billion losses on the sale of the assets of the failed Florida lender to the Kanas-led group.
The regulator, however, saved about $1.5 billion on BankUnited by not having to liquidate the failed bank. It is expected to get about $25 million from the IPO.
‘QUITE A FEAT’
Kanas, 64, said it was “infuriating” to see the FDIC criticized for the deal, pointing out that the agency invited more than 60 parties to the auction in 2009 and attracted only three bidders.
“While it is clear that we had a very good contract with the FDIC, no one was bidding on banks in those days,” Kanas said. “To attract a billion dollars in new capital to the industry at that time was quite a feat. The FDIC did a masterful job in managing the whole meltdown.”
BankUnited raised $783 million from the IPO. It sold 29 million shares at $27 each, up from an earlier plan to sell 26.25 million shares at $23 to $25 each.
“Investors are anxious for a positive bank story and one where they don’t have to worry about asset quality, which is certainly the case at BankUnited,” said Kanas, who was at the New York Stock Exchange to ring the opening bell.
BankUnited sold 4 million shares in its IPO, while existing stockholders sold 25 million. The underwriters have a 30-day option to purchase an additional 4.35 million shares from the original investors, who will still own the majority stake.
BankUnited shares closed up 5.2 percent at $28.40 after rising as high as $29.50.
The stock is trading at more than two times tangible book value, more expensive than its peers that trade around 1.8 times tangible book value, said Nick Einhorn, a research analyst at IPO research and investment firm Renaissance Capital.
“Because they have the (FDIC) loss guarantee, the question is more what they are doing now and how that’s going to pan out down the road,” Einhorn said. “The valuation is assuming they are going to have pretty strong returns on equity from the loans they are making now.”
Einhorn said BankUnited could do a secondary offering to fund expansion but also had other ways to raise money for acquisitions, including taking on debt and cash from maturing loans. As a public company, BankUnited now also has stock to use as currency to buy other banks.
BankUnited has had informal talks to buy other lenders in the region but nothing is planned, Kanas said, adding that BankUnited will look at both failed bank acquisitions and deals independent of the FDIC.
The bank has mostly rid itself of legacy issues, including by restructuring the branch system and changing the entire senior management, he said.
About a third of the bank’s employees are new, and it is also about to change technology to accommodate growth, Kanas added.
BankUnited is focusing on building commercial relationships rather than retail banking, and so it plans to branch selectively in densely populated markets in the Southeast and New York that are convenient to businesses, Kanas said.
“The slogging hard work is for the most part either complete or nearly complete, and now the rest is finding a way to leverage our excess capital intelligently,” Kanas said.
Reporting by Paritosh Bansal and Clare Baldwin; editing by John Wallace, Lisa Von Ahn, Matthew Lewis and Andre Grenon