A financial holding company offering a full range of financial services through its wholly-owned subsidiaries, Westernbank Puerto Rico and Westernbank Insurance Corp.
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0.35x book? It's money on the floor! The bank is no gem by any accounts but the price dip is way overdone.. it'll take some stretch in imagination to see an $18bn asset bank killed by an $80m charge (or even $160m for the chicken-littles), remote possibility in WHI losing the lawsuit either. So what if the bank takes the next one, two years to recoup all the direct & indirect losses? The stock HAS to recover to at least 1x book that all normal non-loss-making banks trade above after the dust has settled, a 300% gain over say 3 years can't be that bad. I've seen some other pitch mention excessive debt leverage.. what excessive leverage?? This is a bank we're talking about! At 10+% B1 ratios, WHI is as conservative as one can get! ROE sucks despite good 20+% CAGR credit growth (good in quantity at least), but to be fair Puerto Rico hasn't been the most conducive banking environment.
In short, the price will still face near-term pressure, but 0.35x book is just too insane to ignore.. For the relative-value nuts: loss-making banks in Thailand trade at 0.8x book (and Thailand is one of the cheaper markets in the world)
Hi cowmarx,
what do you think about WHI?
I just bought this morning 10k shares in 2.16 , i will buy 10k more in couple of days, is a brilliant idea? or very risk choice? my idea is sell it in 2 or 3 years in 10 per share.
Karry,
You've got your shares at a lower price, which must make your purchase more brilliant than mine!
I should warn you that i don't live in the US (i also don't dabble much in US-listed shares for obvious reasons), i've never been to puerto rico, and i don't even know the full names of some of the co.s i've rated on this site.
But i do own some shares in WHI that i bought purely on valuation grounds. I don't have much concern that WHI's existence will be threatened. They are very well capitalised. Tho I'm expecting dividends to be cut eventually since it would only be sound to fund divs with incoming cash.
In terms of price drivers, frankly i don't see a big one in the horizon YET. I'm hoping for a continued normalisation in the yield curve which will help -- WHI is holding on to a whole bunch of govt & agency securities that are yielding less than its funding cost (i assume they haven't been sold because they are tax-exempt). But conversely, if ST rates rise, WHI may have to shrink its balance sheet. The loan provisioning issue is however the big thorn, i don't think the audit outcome will be as bad as the price is suggesting, but we all know that when one worm is spotted, the market will assume the whole can is filled with worms.
So back to your question on whether you should add more.. all i can say is eventually we might hit the pay-dirt we expect, but don't put in more than you can.. after all, caveats in investing are as numerous as mine fields in myanmar.
Sorry for you guys who have lost money on this stock. I bought a few shares at about $0.50. Good news this week - I received a letter from WHI concerning the vote on a reverse stock split to get them in line with listing requirements. I assume this means they are also working on getting audited financial statements up to speed and not just sitting on their thumbs. CAUTION: VERY SPECULATIVE.