3. Oriental Financial Group (OFG) of San Juan, P.R., purchased the failed Eurobank, also of San Juan, from the FDIC on April 30. The acquisition included 22 branches, $785 million in retail deposits and $1.7 billion in assets, with the FDIC agreeing to absorb 80% of losses on acquired loans. The transaction grew Oriental's balance sheet 26% to roughly $8.2 billion.
Oriental also raised $200 million in a preferred share offering, with the shares subject to mandatory conversion to common stock, pending shareholder approval.
Sterne Agee analyst Adam Barkstrom estimates that after the conversion, Oriental's tangible book value will be $12.60 per common share. Shares closed at $13.25 Tuesday, down 21% in May, but up 23% year to date.Barkstrom said on May 3 that the shares were "fairly valued" at $16.72, or roughly 10 times Sterne Agee's "normalized" earnings estimate of $1.70. With shares dropping so much since that report was published and selling for just six times the 2011 consensus earnings estimate of $1.88 among analysts polled by Thomson First Call, Oriental Financial looks like a bargain. Oriental Financial has stood out among Puerto Rico banks through the real estate crisis, with the best credit quality by far, with a nonperforming assets ratio staying well below 2.5%, and very light loan losses. The company's low-risk acquisition of Eurobank has positioned itself for growth when the Puerto Rico economy recovers, and because the capital raise is behind it, patient investors should be rewarded.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV