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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