Popular, Inc.(BPOP) of Hato Rey, Puerto Rico, has seen its shares rise 25% year-to-date, closing at $2.26 Friday. A consensus price-target of $4.57 indicates 61% upside potential over the next 12 months.
Popular reported a second quarter net loss to common shareholders of $247.5 million or 29 cents a share, following a first-quarter net loss of $85 million or 13 cents a share, and a loss of $207.8 million, or 71 cents a share a year earlier.
Second quarter results included a one-time $192 million dividend on preferred shares, which were issued pending shareholder authorization of management's plan to issue more common shares. Upon approval in May, the new preferred shares were all converted to common, and the company raised a total of $1.15 billion in capital during the quarter, supporting its acquisition of the failed Westernbank Puerto Rico - one of three banks to fail in the territory on April 30.
Popular had $42.4 billion in total assets as of June 30 and was strongly capitalized following the second-quarter capital raise and acquisition of Westernbank. The $935 million in preferred stock held by the Treasury for bailout funds received through TARP was converted to trust-preferred securities which continue have a dividend rate of 5% through 2013, after which the rate jumps to 9%, so there will be pressure to redeem the trust preferred which could lead to another common equity raise down the line.
The nonperforming assets ratio was 6.55% as of June 30 and the second-quarter net charge-off ratio was 3.18%. Loan loss reserves covered 4.79% of total loans, well "ahead of the pace" of loan losses.
Shares were trading just above tangible book value and for 11 times the consensus earnings estimate of 20 cents a share for 2011, among analysts polled by Thomson Reuters.
Out of seven analysts covering Popular, six rate the shares a buy while just one has a neutral rating. Popular is very well positioned in its home market following the Westernbank acquisition. Keefe, Bruyette & Woods analysts Brian Slack has a $6 price target on the shares, citing "lots of earnings accretion opportunity on the horizon."
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