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10 Bank Stock Value Picks

5. Oriental Financial Group
Shares of Oriental Financial Group (OFG) of San Juan, Puerto Rico, closed at $10.74 Friday, declining 10% year-to-date, following a 1% decline during 2011.

The shares trade for 0.7 times tangible book value, and for 6.5 times the consensus 2013 EPS estimate of $1.65. The consensus 2012 EPS estimate is 84 cents.

Based on a quarterly payout of six cents, the shares have a dividend yield of 2.23%.

Oriental Financial Group had total assets of $6.4 billion as of June 30, with 30 branches throughout Puerto Rico.

The company on June 28 announced a deal to purchase the Puerto Rico banking operations of Banco Bilbao Vizcaya Argentaria, SA (BBVA) for "$500 million in cash, approximately a 3% premium to tangible book value." Oriental also announced that it had raised $84 million through a private offering of noncumulative convertible perpetual preferred shares with a coupon of 8.75%, with a strike price of $11.77, "as a first step in raising an estimated $150 million in Tier 1 capital." The company said it would pay for the remainder of the BBVA Puerto Rico purchase with "its own excess capital."

BBVA Puerto Rico had $5.2 billion in assets, with $3.7 billion in loans, $3.3 billion in deposits and roughly 950 employees, as of March 31. Oriental expects the merger to be completed by the end of the year.

KBW analyst Derek Hewett rates Oriental Financial Group "Outperform," with a $15 price target, and estimates the company will earn 40 cents a share for all of 2012, followed by EPS of $1.65 in 2013.

Hewett in July called the BBVA Puerto Rico acquisition a "transformational deal that allows OFG the opportunity to remix its balance sheet at a reasonable cost." The analyst expects the deal "to be highly accretive to EPS and we believe over time, OFG will shed its current discount valuation relative to U.S. mainland bank peers."

OFG Chart OFG data by YCharts

Interested in more on Oriental Financial Group? See TheStreet Ratings' report card for this stock.

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