Six months ago, I thought Puerto Rico's Popular (BPOP)
was one of the better bargains in the banking sector, even if the
company's elevated bad debt, outstanding TARP balance, and dependence
upon the weak PR economy made it a higher-risk pick. Since that piece,
shares have risen about 14% - not bad when the regional bank ETFs (iShares US Regional Banks (IAT) and SPDR S&P Regional Banking (KRE)) are both up less than 10% and fellow PR bank First Bancorp (FBP) has been flat, while Doral (DRL) has been crushed.
In
my view, Popular has continued to do what it needs to do to get back in
investors' good graces - leverage its leading market share to best
effect with loan yields and deposit costs, work down the bad loans, and
build up capital to repay the over $900 million in outstanding TARP
funds. Popular remains a credit repair story and probably deserves to
trade below tangible book value today, but ongoing credit repair could
take these shares into the mid-$30s.
Please continue here:
Popular's Credit Is Getting Better Faster Than Its Market's
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