Popular's (BPOP) improving return on tangible common equity and stable credit outlook support further upside, even with the shares trading near a 52-week high, BofA Securities said in a note Tuesday.
The bank is on track to deliver an about 14% return on tangible common equity in 2026 and 2027, the brokerage said, as it raised its 2026 earnings per share estimate to $14.53, about 2% above consensus, on stronger pre-provision net revenue and net interest income.
"The historical valuation range is antiquated," the note said, pointing to a roughly 25% premium over pre-pandemic averages, citing the continued disbursement of federal disaster relief funds and a stabilized fiscal environment in Puerto Rico as key tailwinds.
Net income is forecast to grow at a 16% compound annual rate through 2026, outpacing local peers, while capital returns, including an estimated $480 million of share repurchases in 2026, are expected to add to earnings per share, the report said.
Despite broader industry concerns, Popular's credit quality has outperformed expectations. Its management recently narrowed its net charge-off guidance to 55 to 70 basis points, down from previous historical targets of up to 125 basis points. The brokerage attributed this to tighter "underwriting standards" and a more diversified loan portfolio.
BofA Securities upgraded the stock to buy from neutral, and raised its price target to $156 from $141.
Shares of the company were up 2% in recent Tuesday trading.
Price: 139.46, Change: +2.77, Percent Change: +2.03
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