August 27, 2008 / 3:35 PM / 11 years ago

UPDATE 1-Stifel cuts BankUnited to sell on capital concerns

(Recasts; adds details, share movement)

Aug 27 (Reuters) -BankUnited Financial Corp BKUNA.O was downgraded to “sell” by Stifel Nicolaus analyst who said the viability of the bank was “increasingly fraying” due to its inability to raise capital and a potential regulatory capital downgrade. On Monday, the Florida-based bank said its regulator, The Office of Thrift Supervision, may lower its capital rating to “adequately capitalized” if it fails to raise atleast $400 million of new capital.

“While the bank may yet be successful in finding private equity capital to forestall additional regulatory sanctions, we believe there is a good enough chance that this will not come to pass and therefore see the potential for further price degradation,” analyst David Bishop said in a research note.

BankUnited, which has been trying to raise capital for the last two months, has seen it shares tumble almost 80 percent this year due to mounting losses and liquidity concerns.

The regulator also adviced the company to limit asset growth and notify the regulators before about any management changes.

The analyst noted that a $400 million capital raise by the bank would equate to a net loss rate of about 5 percent on the total loan portfolio, on a pre-tax basis.

Shares of the company were trading down 15 percent at $1.22 in mid-day trade on Nasdaq. (Reporting by Anurag Kotoky in Bangalore, Editing by Dinesh Nair) ((anurag.kotoky@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: anurag.kotoky.thomsonreuters.com@reuters.net))

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