November 30, 2010 / 1:15 PM / 7 years ago

UPDATE 2-Popular may consolidate US operations

* To continue to restructure U.S. ops

* Expects U.S. ops to break even in “next couple of years”

* Will implement initiatives to broaden retail base.

By Jochelle Mendonca

BANGALORE, Nov 30 (Reuters) - Popular Inc (BPOP.O), the largest Puerto Rican lender, said it was exploring strategic alternatives to make its U.S. operations profitable, including selling out of some regions on the mainland.

“We are probably too small to be covering the entire land, so it probably makes sense to concentrate our footprint into a smaller region and then, may be make an acquisition there,” Chief Financial Officer Jorge Junquera said at an investor conference.

Popular’s U.S. segment, which is spread across New York, New Jersey, California, Florida and Illinois, has been posting losses due to legacy assets tied to the mortgage and commercial sector.

Keefe Bruyette and Woods analyst Bain Slack said Popular could concentrate its footprint by tying up with smaller banks that might not be able to stand on their own

“If they sold out of the U.S., they’d lose the deferred tax asset (DTA). The best way to capitalize on the $1 billion DTA is to potentially sell part of the operation and do an acquisition,” Slack told Reuters.

    Popular has about $1 billion in deferred tax assets (DTA), or expected cash flow from future tax benefits, tied to the U.S. business and profitability in that segment would lower the company’s tax expenses, making a complete sale of the U.S. business unlikely.

    Junquera said Popular would continue to restructure its U.S. operations till it achieved profitability and that he expects the U.S. region to break even in the “next couple of years”.

    Popular, the parent of Banco Popular, has been trying to expand from a Hispanic bank to a broad-based community bank.

    In July, it changed the name of the bank from Banco Popular to Popular Community Bank to appeal to other demographic groups.

    The company’s shares, which have risen 7 percent since October when it reported its first profit in two years, were trading flat at $2.89 Tuesday afternoon on Nasdaq. (Reporting by Jochelle Mendonca in Bangalore; Editing by Vyas Mohan)

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