Popular: Why the Bank Struggled in 2011
As 2011 comes to a close, it's a great time to look back at what happened to the stocks that interest you. By making sure you know the important things that a company accomplished -- as well as the setbacks it experienced -- you can make a better decision about whether it's a smart investment for your portfolio.
Founded in 1917 and based in Puerto Rico, Popular (NAS: BPOP) is parent to Banco Popular, a regional bank serving people and small- and medium-sized businesses in Puerto Rico and a handful of America's largest states.
Despite its name, Popular wasn't so popular with investors in 2011.
Stats on Popular
|Year-to-Date Stock Return||(53%)|
|Market Cap||$1.1 billion|
|Revenue, Trailing 12 Months||$1.2 billion|
|1-Year Revenue Growth||30%|
|1-Year Profit Growth||NM (loss of $81.9 million over past 12 months)|
|CAPS Rating (out of 5)||***|
Source: Motley Fool CAPS, Morningstar, and Yahoo! Finance. NM = not meaningful.
What happened to Popular this year?
Like many other banks, Popular has struggled since the credit collapse of 2008. But it was actually struggling for a few years before that, too, posting sizable double-digit losses from 2005 through 2009. It rebounded strongly in 2010, but has been halved this year.
One measure that many bank-sector investors have been watching is the provision for bad loans. Banks such as Fifth Third Bancorp (NAS: FITB) , Huntington Bancshares (NAS: HBAN) , Synovus Financial (NYS: SNV) , and Regions Financial (NYS: RF) have been improving their credit quality, an encouraging sign for investors.
Popular's progress on that front appears to be a little bumpy, with provisions for loan-losses falling some but then rising by $55 million in the last reported quarter. The bank blamed "weak economic conditions in Puerto Rico" that have been hurting mortgage portfolios. It's good that the bank is setting aside funds in case of bad outcomes, but it's not encouraging that it feels it needs to.
Popular is not for the faint of heart, as it's rather volatile, posting double-digit losses on several occasions this past year. To me, it doesn't appear to be the most attractive in its sector, either, as others have higher expected growth rates and pay dividends to boot. Still, the stock is trading at a major discount to its stated book value, and once the economy gets on firmer ground globally and in Puerto Rico and America, Popular may see improved performance, and investors may see its dividend reinstated, as well.
If you're thinking of buying into Popular or you already own it, learn more about it and be sure you're confident in its potential. If you've decided it's not one of your best ideas, then look elsewhere, such as in our free report detailing The Motley Fool's pick for the top stock for 2012. It's available for a limited time, so check it out today.
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At the time this article was published LongtimeFool contributorSelena Maranjianholds no position in any company mentioned.Click hereto see her holdings and a short bio. The Motley Fool owns shares of Huntington Bancshares and Fifth Third Bancorp. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.