Spring 2014 -- Long Popular Inc. (BPOP)

8/11/2019 Spring 2014 -- Long Popular Inc. (BPOP)

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POPULAR, INC.NASDAQ: BPOPACTUALLY VERY UNPOPULAR RIGHT NOW `

SECTOR: HEALTHCARE

DON GREENBERG & RAVI PRAKRIYA

FIN 480 EQUITY VALUATION (PROF. LASSER)


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AGENDA

I. Firm Overview

II. Past Performance

III. Investment Thesis

IV. Qualitative Analysis

V. Valuation

VI. Catalysts

VII. Investment Summary

VIII. Questions


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FIRM OVERVIEW

Full suite financial services firm with operations in PuertoRico (BPPR) and North America (BPNA)

Puerto Rico: Largest financial services provider

North America: Targets dense Latino populations with tiesto Puerto Rico

9,437 Employees

Market Cap: $3.19B

P/E (ttm): 5.34x (Compared to peers: 10-15x)

Price/Book: ~0.85x


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FIRM OVERVIEW

BPPRLargest PR Bank

Popular Auto

Popular Mortgage

Popular Securities Popular Insurance

Popular Life RE (Reinsurance)

Popular Risk Services

Popular Insurance V.I. (Virgin Islands)

BPNAMidsize Consumer Banking

Mortgage & Commercial Lending

Popular Insurance Agency USA


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PAST PERFORMANCE

Significant underperformance to S&P 500 and BKX (KBWBank Index) over 10, 5 and 1 year time horizons

Outperformance YTD, and over past 6 months

Clear and continued dislocation from peer group indicatesdifferent drivers of price


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LENDING ACTIVITIES

BPPR

Loans Held-for-Sale: $108m

Covered Loans: $3B, 8% of assets of Popular

Loan Type Face Value % of PR Loan Portfolio

Commercial $6,500 0.41

Construction $161.20 0.01

Lease Financings $543.80 0.03

Residential Mortgage $5,400 0.34

Consumer $3,300 0.21

Total $15,905.00 100%


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LENDING ACTIVITIES

BPNA

Loan Type Face Value % of PR Loan Portfolio

Commercial $6,600.00 62%

Construction $44.90 1%

Legacy $211.10 4%

Residential Mortgage $1,300.00 22%

Consumer $615.60 11%

Total $8,771.60 100%


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AMBIGUITY FACTORS

Investors do not like to value consumer banks

Two money managers, contacted independently, simplytold us I dont look at consumer banks

Investors are averse to Puerto Rican markets

Puerto Rican Commonwealth downgraded to junk


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RISK FACTORS - MACRO

Puerto Rican Commonwealth downgraded to junk

Puerto Rican Debt issue in March, $3.5B, 8.73%


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QUALITATIVE ANALYSIS

Regional Bank Equity Research Coverage

Bulge-Brackets vs. Regional

Outside of Traditional Geographic Scope

Average Daily Volume < 1mm

Uncertainty, rather than risk

Puerto Rican Municipal Bond Market -- $70 billion

United States Municipal Bond Market -- $3.7 trillion

Market appears to be assuming exposure

BPOP is in fact significantly better capitalized and cheaperthan its peer group, while minimizing exposure to thePuerto Rican municipality and its credit


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VALUATION

Ticker Company name Price P/E Mkt Cap

Revenue

(mm)

Net

Income

Tier 1

Capital

Total

Capital

Leverage

Ratio

Tangible Common

Equity

BPOP Popular, Inc. 30.88 3.96 3.2 B 443.3 86.4 19.0% 20.6% 13.1% 9.8%

OFG OFG Bancorp 16.55 9.57 744.3 M 133.6 20.1 14.4% 16.1% 9.1% 7.6%

DRL Doral Financial Corp. 9.3 15.84 61.8 M 89.8 (58.1) 9.7% 11.3% 7.6% N/A

FBP First Bancorp 5.13 15.07 1.1 B 160.6 17.1 12.0% 15.5% 9.8% 8.7%

MTB M&T Bank Corporation 121.89 15.62 16.0 B 723.0 229.0 12.0% 15.7% 10.8% 8.4%

FITB Fifth Third Bancorp 20.51 10.63 17.5 B 993.0 319.0 10.4% 14.1% 9.6% 8.8%

WFC Wells Fargo & Co. 48.94 12.19 257.7 B 11,612.0 6,075.0 12.3% 15.4% 9.6% 9.6%

Popular, Inc. 30.88 3.96 443.3 86.4 19.0% 20.6% 13.1% 9.8%

High 15.84 11612.00 6075.00 14.4% 16.1% 10.8% 9.6%

Average 13.15 2285.32 1100.35 11.8% 14.7% 9.4% 8.6%

Median 13.63 441.76 124.56 12.0% 15.5% 9.6% 8.7%Low 9.57 89.82 -58.07 9.7% 11.3% 7.6% 7.6%


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CATALYSTS


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CATALYSTS

-1500

-1000

-500

0

500

1000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

AnnualEarnings(mmU

SD)

BPOP Earnings Trends


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QUESTIONS?

THANK YOU FOR YOUR TIME

Spring 2014 -- Long Popular Inc. (BPOP)

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