UPDATE 2-Popular up on $900 mln raise; FDIC-backed deals beckon

Tue Apr 13, 2010 1:59pm EDT

(Repeats for wider distribution)

* Mulling sale of Evertec unit

* Says Evertec, other ops valued at $1 bln

* FDIC-deal in near term - analysts

* Stock jumps 27 pct on heavy volumes (Adds analyst comments, updates stock movement)

By Anurag Kotoky

BANGALORE, April 13 (Reuters) - Shares of Popular Inc (BPOP.O) jumped 27 percent on heavy volume Tuesday, a day after the company said it was raising $900 million, giving the biggest bank in Puerto Rico ample cash to go for widely expected regulator-backed deals.

In a regulatory filing, the company also said it was considering a "strategic transaction" involving its merchant banking and technology unit Evertec and some other businesses, which could result in a sale.

The company has received a number of non-binding indications of interest for the unit, which suggests an average sale price for Evertec and the other businesses of about $1 billion, the company said.

"If we were to sell all of Evertec and these other businesses for consideration of $1 billion, we would increase our capital by approximately $750 million," the company said in a filing with the U.S. Securities & Exchange Commission.

Cantor Fitzgerald analyst Michael Diana said Popular is unlikely to sell the Evertec unit if it fails to win an FDIC-backed deal. However, if it manages to buy a failed bank, it may sell Evertec to repay federal bailout funds.

There is rising speculation in the market that the Federal Deposit Insurance Corp (FDIC) may take over operations of at least three of Puerto Rico's biggest banks, which are already under cease-and-desist orders. In such a case, Popular is seen as a strong contender to take over the failed banks. [ID:nSGE6340GZ]

"We believe Oriental Financial's (OFG.N) recent $100 million capital raise and these FDIC commercials, in addition to Popular's offering, point to a consolidation of the banking system in Puerto Rico in short order," FBR Capital Markets said in a note Tuesday.

The brokerage initiated coverage of Puerto Rican Banks on Monday, and added Popular to its top picks list, saying the company is well positioned to take advantage of seemingly imminent consolidation in the market.

B. Riley & Co analyst Joe Gladue upgraded Popular to "buy" from "neutral" and said after the latest offering, any further capital raise will help the company to tackle ongoing losses.

The parent of Banco Popular posted its seventh-straight quarterly loss as the company had to work around its credit problems to navigate the economic downturn. [ID:nSGE63B0M1]

"The trends in non-interest income and operating expenses were not far off of our expectations, but in this environment, a lack of bad news is good news," the analyst wrote in a note to clients.

Popular has operations in Puerto Rico, the United States, the Caribbean, and Latin America, according to its Website. It operates 177 branches in Puerto Rico alone.

Popular shares, which have more than tripled since hitting a 52-week low of $1 last July, were up 20 percent at $3.65 in afternoon trade on Nasdaq. They touched a high of $3.86 earlier in the session.

More than 117 million shares changed hands by 1750 GMT, compared with a 10-day moving average volume of about 15.6 million. (Reporting by Anurag Kotoky; Editing by Maju Samuel, Gopakumar Warrier and Unnikrishnan Nair)

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