Recent results from Popular (NASDAQ: BPOP), Puerto Rico's largest bank, are showing why analysts rate the bank a solid Buy.
The midsized bank is steadily growing earnings, returning capital to shareholders, and hitting ratios that would make many other banks jealous. Shareholders are also likely to be pleased.
The stock is up more than 50% over the past 12 months and roughly 40% since the start of the year.
The question for new investors is whether the easy gains are behind it and whether there’s plenty more room for the bank to run.
Popular’s Earnings Momentum Still Backs the Rally
Popular’s rally has real fundamentals behind it. The bank's second-quarter results showed net income climbing to $278 million, up 13% from the first quarter and 32% year-over-year (YOY). Diluted earnings per share rose to $4.35, an increase of 41% from the prior year’s quarter, and well above analysts’ expectations.
At the same time, net interest income grew to $693 million as the bank held its net interest margin steady at 3.66%. Non-interest income advanced 7% to $181 million on stronger card and service fees. Both operating and interest expense declined over the year.
As a result, return on average tangible common equity reached 17.02% for the quarter, up 3.76 percentage points from a year ago, and to a figure that would stand out among even better-known names. And with a common equity tier 1 ratio of 16.08% and total risk-based capital of 17.85%, the bank also has plenty of room to keep lending and return cash to shareholders.
Indeed, it used that room in its recent announcement, saying it was seeking to raise its quarterly dividend 20% to 90 cents per share, and the board authorized a new $1 billion stock buyback program after largely working through a prior $500 million authorization.
Management also grew more confident about what lies ahead.
The company lifted its full-year 2026 net interest income growth target to 8-9% from a previous 5-7%. It raised its quarterly non-interest income outlook to $165 million to $170 million. And it trimmed its expected growth in operating expenses.
Popular’s Banking Footprint Gives It Multiple Growth Paths
All these figures point to a durable franchise. Popular remains the dominant bank in Puerto Rico, with assets near $79 billion, total loans of $39.7 billion, and deposits of $70.2 billion.
Its mix of consumer, commercial, and card lending across both Puerto Rico and the U.S. mainland gives it several ways to grow. Indeed, its mainland U.S. operations, which account for roughly 30% of its business, provide important diversification beyond its island banking franchise. And as the island's economy continues to normalize, Popular is positioned to benefit from steady loan demand and absorb a slowdown in any one segment.
Analysts Still See Upside, But the Gap Has Narrowed
Popular’s stock price has followed its trajectory through the year. Trading near $176 per share, the stock has climbed from the mid-$120s at the start of the year. With a price/earnings ratio below 12, the level remains below many comparable banks in the broader finance sector.
The dividend yield sits at about 1.70% based on the current quarterly payout of 75 cents, a figure that should improve once the proposed dividend increase takes effect.
Analysts have broadly taken notice, assigning a consensus Buy rating to the stock. With 13 analysts tracking the company, 12 have a Buy recommendation, with one analyst suggesting a Hold. Overall, the 12-month price target is $184.42 per share, leaving modest upside from recent trading levels. The highest price target for the next 12 months is $214, while the lowest is $156 per share.
Credit Noise Is Manageable, But Worth Watching
None of this means the story is risk-free. Credit costs are showing signs of sliding in the wrong direction. The net charge-off ratio rose to 1.05% in the second quarter, driven largely by a single $71 million charge-off tied to one resolved commercial relationship. Excluding that item, the ratio would have been a strong 0.33%.
Even so, management raised its full-year net charge-off guidance to a range of 65 to 80 basis points annualized, and the allowance for credit losses now stands at $785 million. Nonperforming loans as a percent of total assets are creeping up but remain manageable at 0.69%.
Beyond that, no bank is immune to certain macroeconomic factors and unexpected disruptions. And despite a string of recent, consistent growth, Popular has not avoided ups and downs through the years for various reasons.
Popular’s Leadership Shift Keeps Capital Priorities in Focus
Leadership change also adds another, though perhaps muted, variable at this point in the cycle. CEO Javier D. Ferrer is set to retire effective on Aug. 31, 2026, with current CFO Jorge J. García stepping into the CEO role and new CFO and chief risk officer appointments taking effect in September.
On the positive side, the promotions are all coming from inside the company, with executives already familiar with the balance sheet. But new leadership can still bring shifts in risk appetite or capital-allocation priorities that are worth watching.
There’s also a question of how much good news is already priced in. With shares trading close to the consensus target, there is not much expectation for a quick upswing. Then again, with short interest at a modest 3.06% of float, the market does not appear to be betting on a decline anytime soon.
Popular Still Looks Strong, But the Setup Is More Selective
In all, Popular makes a strong case for considering it as part of an investor’s financial-sector position. With high returns on tangible equity, strong capital levels, a growing dividend, increasing earnings, and an active buyback program, the company appears to have earned its current Buy recommendation.
Given the limited current upside, though, new investors may need to be more selective after such a strong run. Assuming a multiyear horizon and the ability to tolerate some credit-cycle noise, investors looking in the banking sector might consider whether Popular’s fundamentals still justify paying up near recent levels.
The article "Popular’s Earnings Beat Shows Why This Bank Stock Keeps Climbing" first appeared on MarketBeat.
