) has obtained the regulatory approval to repay $935 million to the
U.S. Treasury that it had received under the Troubled Asset Relief
Program (TARP) during the financial crisis. To repay the dues,
Popular will use its internal funds and issue around $400 million
debt securities. Issuance of debt securities is, however, subject
to market conditions. Popular does not intend to issue any equity
for redemption purpose.
Notably, the TARP was set up as a $700-billion federal bailout fund
at the height of the 2008 financial crisis. The aim of this program
was to stabilize the financial system, restore economic growth and
prevent foreclosure. It authorized the U.S. Treasury to purchase
troubled companies' assets and equity with the fund. As the economy
started to turn around, many financial companies, which were
offered assistance through this program, cleared their Treasury
dues, either fully or partially. Popular is the latest addition to
this repayment bandwagon.
Following the redemption, Popular wants to reclaim the outstanding
warrant issued to the U.S. Treasury under the TARP Capital Purchase
Program in 2008. The warrant empowers the Treasury to purchase
2,093,284 common shares of Popular at an exercise price of $67 per
share for a decade. However, both redemption of capital securities
and repurchase of warrant are subject to the authorization of the
Once the TARP obligation is settled, we expect Popular to deploy
more capital in the form of dividend hike and share repurchase,
which will restore investors' confidence in the stock.
Currently, Popular carries a Zacks Rank #3 (Hold). Some
better-ranked southeast banks include
Capital City Bank Group Inc.
Middleburg Financial Corporation
Midsouth Bancorp Inc.
). All these stocks sport a Zacks Rank #1 (Strong Buy).
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POPULAR INC (BPOP): Free Stock Analysis Report
MIDDLEBURG FINL (MBRG): Free Stock Analysis
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CAPITAL CITY BK (CCBG): Free Stock Analysis
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