Stateside analyst firm notes Popular Inc, Oriental’s ’10 performances
Digital financial media company TheStreet.com this week included two local banks in its list of “Bank Stock Awards” winners, recognizing their respective performance improvements in 2010.
While Popular Inc. garnered TheStreet’s “Greatest Upside” risk distinction, Oriental Financial Group was recognized for having the “Best Growth in Non-interest Bearing Deposits” among U.S. banks included in a survey conducted among Thompson Reuters analysts.
Essentially, the list of winners represents banks ranked as having a daily trading volume of at least 50,000 shares that — because they are still trading below value — create investment opportunities.
Popular, rated a “buy” by several analysts, was identified as “having highest projected upside based on the consensus price target,” meaning that its investment value could increase beyond forecast levels.
Several elements are creating a positive scenario for Popular: its acquisition of Westernbank from the Federal Deposit Insurance Corp. in April, which placed it as a market leader with 38 percent of the island’s deposit share; and, the sale of 51 percent interest Evertec that generated an after-tax gain of $531 million. Furthermore, it has been able to tame its loan losses for the most part of 2010.
Popular’s “current valuation is providing an attractive opportunity to initiate or increase positions as the market continues to discount recent transactions that have enhanced franchise value (Westernbank) and provided clarity regarding capital (EVERTEC and common offerings),” said Adam Barkstrom, analyst for Sterne Agee.
Oriental Financial Group, meanwhile, saw a 131 percent increase in its non-interest bearing deposits, to $168.6 million as of Sept. 30, which represent free funding and a good source of fee revenue.
Although Oriental had its ups and downs in 2010, analysts saw its acquisition of the former Eurobank from the FDIC in April as a positive move. Also, the fact that its shares closed at $18.10 on Wednesday — when the awards were announced — represents an opportunity for investors, as analysts believe the price will increase.
Three out of five analysts covering OFG have rated its shares a “buy,” while the other two recommended investors hold the shares.