Popular Inc. is a diversified publicly owned bank holding company. The corporation's principal subsidiary Banco Popular de Puerto Rico has one of the largest retail franchise in Puerto Rico operating numerous branches and automated teller machines. The Bank also operates branches in the U.S. Virgin Islands the British Virgin Islands and New York. Popular Inc. has a market cap of $981.5 million; its shares were traded at around $3.48 with and P/S ratio of 0.3. The dividend yield of Popular Inc. stocks is 2.3%. Popular Inc. had an annual average earning growth of 24.1% over the past 10 years. GuruFocus rated Popular Inc. the business predictability rank of 2-star.
Highlight of Business Operations:The Corporation reported a net loss of $52.5 million for the quarter ended March 31, 2009, compared with net income of $103.3 million in the same quarter of 2008. Table A provides selected financial data and performance indicators for the quarters ended March 31, 2009 and 2008. As indicated in previous filings with the SEC, in 2008, the Corporation discontinued the operations of its U.S.-based subsidiary Popular Financial Holdings (PFH), and thus, the results of PFH are presented as part of (Loss) income from discontinued operations, net of income tax in Table A. The Corporation retrospectively adjusted certain information, principally that impacting the statement of operations, to present in a separate line item the results from discontinued operations from prior periods presented in this Form 10-Q for comparability purposes. The discussions in this MD&A pertain to Popular, Inc.s continuing operations, unless otherwise indicated.
The Corporations continuing operations reported a net loss of $42.6 million for the quarter ended March 31, 2009, compared with a net income of $99.2 million for the quarter ended March 31, 2008. The principal items impacting the continuing operations financial results for the quarter ended March 31, 2009, when compared to the quarter ended March 31, 2008, were as follows:
The discontinued operations of Popular Financial Holdings (PFH) in the U.S. mainland reported a net loss of $9.9 million for the quarter ended March 31, 2009, compared to a net income of $4.0 million for the quarter ended March 31, 2008. As of March 31, 2009, PFH holds a loan portfolio measured at fair value of $7 million and other miscellaneous assets, including other real estate. Refer to the Discontinued Operations section of this MD&A for further information.
Total assets amounted to $37.7 billion as of March 31, 2009, compared with $38.9 billion as of December 31, 2008. The decline was principally in investment securities available-for-sale by $1.0 billion, principally due to the aforementioned restructuring of the portfolio. Loans held-in-portfolio amounted to $25.2 billion as of March 31, 2009, compared with $25.7 billion as of December 31, 2008. The current financial environment has required the Corporation to strengthen its underwriting standards and ensure that it prices the loans appropriately. As a result of this challenging financial environment, together with caution being exercised by customers, and managements decision to exit selected businesses on the mainland United States, the Corporation has seen a reduction in the volume of loan applications. Total assets and loans shown in Table A for the period ended March 31, 2008, include $2.1 billion and $1.3 billion, respectively, pertaining to the operations of PFH.
Regulatory capital requirements for banking institutions are based on Tier I and Total capital, which include both common stock and certain qualifying preferred stock. Nonetheless, as overall economic conditions in general and credit quality in particular have continued to worsen, there has been an increasing regulatory and market focus on the tangible common equity of banking institutions. Tangible common equity equals a banking institutions total stockholders equity minus equity attributable to preferred securities and minus intangibles (including goodwill). Although the Corporations regulatory ratios remain well above the standard for a well capitalized banking institution, recent losses have reduced the Corporations tangible common equity substantially. The Corporations tangible common equity at March 31, 2009 totaled $989 million or 2.67% of total tangible assets (tangible common equity ratio), compared to $1.1 billion or 2.95% at December 31, 2008, and $2.6 billion or 6.29% at March 31, 2008. The Corporation will continue to explore options to increase its tangible common equity and its tangible common equity ratio.
In February 2009, the Board reduced the quarterly common stock dividend to $0.02 per common share from the previous $0.08 per common share. This reduction will help preserve approximately $68 million in capital per year. The dividend payment to common and preferred stock shareholders is reviewed on a quarterly or monthly basis, as applicable, and could be restricted due to capital levels. The Corporations issuance of senior preferred shares to the U.S. Treasury under the TARP Capital Purchase Program (TARP) also imposes restrictions on its ability to pay dividends under certain conditions.
Read the The complete ReportBPOP is in the portfolios of Richard Pzena of Pzena Investment Management LLC, Charles Brandes of Brandes Investment.