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) -- Investors considering

Popular, Inc.

(BPOP) - Get Popular, Inc. Report

should have a long-term view of the shares, as the company consolidates its acquisition of Westernbank and emerges as the banking leader when the Puerto Rico economy eventually recovers.

Popular was included in


list of

10 banks with at least 50% upside potential

based on consensus mean price targets among analysts polled by Thomson Reuters, but after a detailed analysis, only handful of the bank stocks featured, including Popular,

Tennessee Commerce Bancorp



Center Financial

( CLFC) and

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Riverview Bancorp

(RVSB) - Get Riverview Bancorp, Inc. Report

had either already returned to profitability or took advantage of the banking crisis to gain an edge on the competition.

Popular did just that when it acquired the failed

Westernbank Puerto Rico

in April, picking up 46 branches and $9.4 billion in assets with the

Federal Deposit Insurance Corp.

, agreeing to absorb 80% of losses on $8.8 billion.

The FDIC publishes deposit market share data each year, as of June 30. While June 2010 market share reports are not yet available, Popular's main subsidiary,

Banco Popular de Puerto Rico

has a 27% share of deposits on the island territory as of June 30, 2009. With the addition of Westernbank's deposits, the market share would have been roughly 44%.

The company raised $1.15 billion in common equity during the second quarter, and while a costly one-time $192 million dividend on convertible preferred shares fed a second-quarter net loss to common shareholders of $247.5, new investors are looking at a much stronger company.

Popular's investors do face a degree of "TARP overhang" since $935 million in preferred stock held by the Treasury for bailout funds received through the Troubled Assets Relief Program was converted to trust-preferred securities which continue have a dividend rate of 5% through 2013, after which the rate jumps to 9%. If profits aren't sufficient to generate the capital needed to redeem the trust-preferred shares, another capital raise is possible, but the shares are quite cheap, trading right at tangible book value 7 times the 2012 consensus earnings estimate of 39 cents a share, among analysts polled by Thomson Reuters.

The way to play Popular is to begin a position, look to build it on the dips in the hysterical environment for bank stocks, and hold it for a number of years, waiting for the bank to start rocking along with the Puerto Rico economy.


Bank Stocks: Be Careful with Consensus Price Targets>>

Large Banks Breathe Easy on Basel >>


Written by Philip van Doorn in Jupiter, Fla.

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Philip van Doorn


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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.