BankUnited CEO John Kanas on Making a Major Buy During the Financial Crisis
April 23, 2011
In the recession of the early 1990s, New York banker John A. Kanas was in serious financial trouble. With a large mortgage payment and two children in college, he had to borrow $20,000 from a friend just to pay their tuition, Kanas told School of Business students, alumni and faculty during a presentation April 19 as part of the School's Executive in Residence program.
“When you are almost broke, you learn some valuable lessons,” said Kanas, who is chairman, president and CEO of BankUnited (NYSE: BKU). “You pick yourself up, wrap your arms around the problem and never, ever give up.”
Fortunately, a 1992 upturn in the real estate market helped Kanas get back on an even keel. He went on to build North Fork Bancorporation into one of the nation’s largest banks, selling it in 2006. In May of 2009, he led a private equity investment group that purchased the failed BankUnited’s assets for $900 million from the Federal Deposit Insurance Corp.
“The FDIC solicited bids from 63 institutions across the globe,” Kanas said. “But this was a scary time for the financial industry and only three bids were ever submitted. In retrospect, this was a good deal, but remember that those were difficult days and this was clearly a risk.”
In January, the Miami Lakes-based bank raised nearly $800 million in an initial public offering, making it one of the best-capitalized U.S. financial institutions. Kanas said the bank plans to grow aggressively in Florida and expand to New York in summer 2012.
Asked how he analyzes a potential acquisition target, Kanas said he looks at the bank’s relative level of credit and interest rate risk as well as the business benefits of expanding the current franchise. “You want to create strategic value for your institution that goes beyond the immediate economic advantages,” he said.
Overall, Kanas expects the U.S. financial industry to continue to consolidate, with the number of banks and thrifts falling from the current 7,000 to the 4,000-5,000 range. One reason is that many small institutions find it difficult to maintain profitability, including 250 banks in Florida that are facing financial stress. Consolidation, though, isn’t always a good thing, he says. “Centralization results in fewer choices for small business owners,” he explained. “Right now, about 107 banks control 80 percent of the U.S. market.”
Before his talk, titled “A Candid Perspective on the Economy,” Kanas spent the day with students, faculty and alumni as part of the School’s Executive in Residence program. And he offered some insight about what makes a successful CEO: Kanas cited the ability to make hundreds of decisions a week, and being able to overcome the inevitable mistakes. “Everyone who has achieved great success in life has also had great disappointments,” he said. “Just keep hammering away and if you are patient, work hard and are lucky, you’ll reach your goals.”
By Richard Westlund (MBA '83)