9. Popular, Inc.
closed at $2.80 Wednesday, up 24% year-to-date.
Puerto Rico's largest bank owes $935 million in TARP money and converted the preferred shares held by the Treasury to trust-preferred shares in August 2009. While the company continues to pay a 5% dividend on the money owed to the government, the conversion lowered the company's accumulated deficit by $485 million because Popular assumed a discount rate of 16%, taking into account the much greater dividend rate it would pay if it had offered trust-preferred shares in the open market.
Popular acquired the failed
Westernbank Puerto Rico
on April 30.
The company 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.
The second-quarter loss included a one-time $192 million dividend on preferred shares, which were issued pending shareholder authorization 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.
Total assets were $42.4 billion as of June 30 and the nonperforming assets ratio was 6.55%, down from 7.43% the previous quarter but up from 5.87% a year earlier. The second-quarter net charge-off ratio was 3.18%, declining from 3.84% in the first quarter and 4.15% in the second quarter of 2009. Loan loss reserves covered 4.79% of total loans.
The company's Tier 1 leverage ratio was 8.79% as of June 30, and its total risk-based capital ratio was 13.86%. The tangible common equity ratio was 6.67%.
Shares trade just above tangible book value, according to SNL Financial, and 14 times the forward consensus earnings estimate of 20 cents a share for 2011. Moving out to 2012, the consensus earnings estimate is 39 cents a share, for a forward P/E of 7.2.
Out of seven analysts covering Popular, six have buy ratings and one recommends holding the shares. Sterne Agee analyst Adam Barkstrom rates the company a buy with a 12-month price target of $5.00, which implies 79% upside potential for the shares. In a September 1 report, Barkstrom said his firm believed the market was "providing an attractive opportunity to establish and/or add to current positions as the market is discounting recent transactions that have enhanced franchise value."