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  • factual_observer factual_observer Apr 24, 2010 12:08 AM Flag

    BPOP acquiring WHI branches

    Strong rumor on the island that BPOP will be acquiring part of the WHI branch network, overlapping branches not included. FDIC also required President and CEO of WHI to resign.

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    • respectfully disagree.

      I see huge upside, little downside.

    • When the acquiring bank receives the transferred deposits from the failed bank, the acquirer receives cash or other assets from the FDIC IN EXCHANGE FOR ASSUMING THE LIABILITIES. Just imagine the scenario if BPOP were to receive just a couple billion cash for receiving part of WHI's (core) deposits and then using that cash to redeem the TARP stock. Two birds killed with one stone.

    • Ah.. No. Liabilities don't throw off revenues unless you mean negative revenue.

    • These guys that are talking this down should just buy back in. We left them behind a buck ago . They cant see the 90 % fall and claim its to high right here. Go luck at bashing this all the way to 10 dollars this fall. Maybe they can comprehend a 800$ stock. Now that was high.

    • I bought WHI also and believe these companies will do well when the cycle returns. The run up is because they were significantly undervalued. Take a look at the charts real good. These are unheard of buys. Whats a double when they are down 90%. WHI was a 800 dollar stock. Now this is not rocket science..... The family owns WHI and are trying to buy it back cheap. I think BPOP will get one of the other banks.

    • OK, well, then those liabilities throw off revenue, right? So, wouldn't that be a positive since the branches (where these liabilities are) wer bought for par value of the liabilities?

    • I agree with davej on this one. Either BPOP, FBP, DRL or Scotiabank take the plunge next week or WHI will survive and be a pain in the bud with its maverick ways and/or WFC, BAC, JPMorgan Chase, RBC or Citi will and be a bigger pain to existing players going forward.

    • Sure. I am assuming that this news is in fact true. Maybe it is not. But if WHI survives, BPOP is priced fairly high. I would not be surprised to see BPOP make an offer to buy WHI next week. BPOP suffered immeasurably from the rise of WHI over the past 15 years. I am sure they put a very high premium on eliminating them as competition. They know that if WHI survives, they won't be weak forever, Eventually they will be competing strongly with BPOP for loans.

      Just consider the value to BPOP of WHI being eliminated even if someone like DRL buys them. The existence of WHI probably lowered loan yields for everyone on the Island by at least 10 bps. BPOP has $15B in loans in PR. That 10 bps costs them $15MM/year every year. Over just 10 years that is $150MM. That is just the value of eliminating WHI as competition. Then there is the value of the bank itself. They have $900MM of total equity on the balance sheet. The total market value of prefs and common is about $60MM. BPOP raised all this equity and now has to put it to work.

      Remember that WHI is inherently more profitable to BPOP that it is by itself. Under the BPOP umbrella, they will have lower deposit costs, lower FDIC premiums and lower expenses. Plus as I mentioned they will be able to raise loan yields due to the lower competition. I think they will make an offer for WHI next week. They will make an offer than WHI management cannot refuse because they cannot let this opportunity pass as they may never have it again.

    • I suggest you wait to read the official announcements next week before you continue speculating on how these developments favor BPOP both near and long term.

    • Yes. This is in the Vocero. But this is very bad news for BPOP investors who though they were getting the whole bank in an FDIC-assisted transaction. BPOP will have to settle with R&G and will have to win a bid against many competitors. So much for all this hype about BPOP getting all the spoils. What did I tell you guys earlier this week. There was no upside left. All the good news was priced in and none of the risk that BPOP would come up empty handed. BPOP plunged Monday. WHI survives. The real winners of course is not WHI shareholders who gets diluted but the new investor in WHI who will get a position of control for a few hundred million.

      • 3 Replies to davejphys
      • davejphys,

        What's there not to like? BPOP is coming out even stronger...

        For one, it would make no sense for BPOP to acquire all of the branches as there is heavy overlapping in some areas.

        And the money left over is either going to further acquisitions of R&G and/or to pay TARP.

        BPOP wins in every respect here; should trade solidly in the 4's with these bit of news unless the market misreads the favorable implications.

      • On the contrary, this is very good news. BPOP acquiring a good part of the WHI branch network brings with it the core deposits held at those branches, thereby pushing WHI's unhealthy brokered deposits to total deposits ratio even higher. The bottom line is that this weakens an already floundering competitor even more.

        Whatever portion of BPOP's successful capital raise is not used in this acquisition deal can be used to extinguish or reduce the TARP stock, which could add another $50 million to BPOP's bottom line.

      • I disagree completely. The acquisition of the branches and deposits gives BPOP additional capital base and is immediately accretive to earnings.

        Given the nature of the PR real estate economy and WHI's perceived lack of good underwriting, even with a loss share agreement with FDIC, WHI's portfolio was hardly a guarantee of success.

        I think that this is a home run for BPOP. They get all of the depository assets and none of the poorer quality lending risk of WHI in this acquisition.

        The FDIC will be holding the loan assets of WHI for a long time to come.

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