Popular trades at $126.19 and has moved in lockstep with the market. Its shares have returned 13.4% over the last six months while the S&P 500 has gained 11.5%.
Is BPOP a buy right now? Find out in our full research report, it’s free.
Why Does Popular Spark Debate?
Founded in 1893 as the first bank in Puerto Rico to serve the working class, Popular (NASDAQ: BPOP) is a financial holding company that provides retail, mortgage, and commercial banking services primarily in Puerto Rico and the mainland United States.
Two Things to Like:
1. Increasing Net Interest Margin Juices Financials
Net interest margin (NIM) represents the unit economics of a bank by measuring the profitability of its interest-bearing assets relative to its interest-bearing liabilities. It's a fundamental metric that investors use to assess lending premiums and returns.
Over the past two years, Popular’s net interest margin averaged 3.6%, climbing by 49.7 basis points (100 basis points = 1 percentage point) over that period.
This expansion was a tailwind for its net interest income, and while prevailing interest rates matter the most for industry net interest margins, banks that consistently increase this figure generally boast higher-earning loan books (all else equal such as the risk of those loans) or provide differentiated services that give them the ability to charge higher rates (pricing power).
2. Growing TBVPS Reflects Strong Asset Base
Tangible book value per share (TBVPS) serves as a key indicator of a bank’s financial strength, representing the hard assets available to shareholders after removing intangible assets that could evaporate during financial distress.
Popular’s TBVPS increased by 5.1% annually over the last five years, and growth has recently accelerated as TBVPS grew at an incredible 27% annual clip over the past two years (from $49.09 to $79.12 per share).
One Reason to be Careful:
Net Interest Income Points to Soft Demand
Markets consistently prioritize net interest income over non-recurring fees, recognizing its superior quality compared to the more unpredictable revenue streams.
Popular’s net interest income has grown at a 6% annualized rate over the last five years, worse than the broader banking industry and in line with its total revenue. Its growth was driven by both an increase in its outstanding loans and net interest margin, which represents how much a bank earns in relation to its outstanding loan book.
Final Judgment
Popular’s merits more than compensate for its flaws, but at $126.19 per share (or 1.3× forward P/B), is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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