BPOP $3.10 in comparison to others | BPOP Message Board Posts

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Msg  9 of 15  at  4/14/2011 5:12:07 PM  by


BPOP $3.10 in comparison to others

A take on DRL by Davejphys who favors FBP; DRL went up to 1.41 after overselling done
Look at the recent Fed Holding company report. They tabulate these ratios

Non-accrual + Restructured Loans + OREO divided by Tier1 Capital + ALLL.

Here is this ratio for the PR Bank Holding companies from best to worst

OFG 23%
SBP 62%
BPOP 64%
FBP 84%
DRL 203%
WHI 250% (now deceased)

DRL is now much worse than all the others except for WHI which was taken over. I expect they are going to get a Consent/C&D order and be forced to raise capital just like what happened to FBP. For DRL, Tier 1 capital +ALLL = $777MM. Even if they raise another $777MM, doubling this number, they will only have this ratio down to about 100% which is worse than where FBP is now, before their capital raise.

Can DRL raise $777MM in capital? Probably not. Even if they only make them raise $400MM, that will likely be done at about $0.80 and after a preferred conversion. Maybe they give the preferred 100 million shares (70% participation) and the new investor 500 million shares. That is about 700 million final shares bringing TBV down to about $1.70. So the new investor would be buying in at about half book and the prefs are getting about half par. This might leave the stock around TBV or $1.70. So this might be a survivable situation.

However, one should look at FBP for how problems can develop. And what if they have to raise much more than $400MM? Then they might have to offer the prefs a lot more and the dilution can really spiral out of control. Again, look at FBP. But DRL might be worse off than FBP because it has no core profitability. Also everyone who has put capital into DRL has lost. Maybe DRL just can't raise capital.

I would stay away from DRL. Looks like a value trap of the worst kind.

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