NEW YORK — First BanCorp’s share price retreat has reopened debate among bank analysts over whether the San Juan lender is still trading below its intrinsic value or finally reflecting mounting macro-economic risks.
The parent of FirstBank Puerto Rico fell another 1.9% to $16.21 in early Monday trading, extending a two-week slide to roughly 12%. The pullback has shaved more than $350 million from market capitalization and pushed the stock’s forward price-to-earnings multiple to 7.4, the lowest since October, according to Refinitiv data.
“Even after the drop, First BanCorp screens cheap against Caribbean and U.S. regional peers that average around 9.5 times earnings,” said a New York-based sell-side analyst who asked not to be named because he is not authorized to speak publicly. “But investors are clearly demanding a higher margin of safety as loan growth slows and deposit costs creep up.”
First BanCorp reported net income of $97 million, or $0.52 a share, for the fourth quarter, beating the consensus by two cents. Management reiterated its 2024 outlook for loan growth in the mid-single digits and a net interest margin “in the low fours,” pointing to continued tourism and construction momentum on the island.
Still, several portfolio managers told SourceRated that the bank’s heavy exposure to variable-rate commercial real-estate loans could pressure credit quality if the Federal Reserve keeps rates elevated longer than expected. Non-performing assets ticked up to 0.79% of total loans at year-end, versus 0.61% a year earlier.
“The story is no longer just about valuation; it’s about the cycle,” said Maria Cartagena, financials strategist at Santurce Capital. “First BanCorp has cleaned up its balance sheet since the 2008 crisis, but the market wants evidence it can defend margins without reaching for risk.”
Executives appear determined to send that message. On Friday the board authorized a new $225 million share-repurchase plan—roughly 7% of shares outstanding—to be executed over the next 12 months. In a statement, Chief Executive Officer Aurelio Alemán said the buyback “underscores our confidence in the franchise and our ability to generate capital organically.”
Whether that is enough to re-rate the stock remains to be seen. Upcoming first-quarter results, expected in late April, will give investors their first glimpse of deposit behavior after the launch of high-yield savings products by stateside rivals. Analysts also are watching Washington, where regulators are weighing higher capital buffers for regional banks—rules that could curb future payouts.
For now, the debate over First BanCorp’s fair value is likely to remain as volatile as its share price.