Raymond James upgrades First BanCorp stock rating on strong results By Investing.com

Raymond James upgraded First BanCorp to Strong Buy and lifted its price target to $27 from $26, citing solid Q1 2026 results, strong net interest margin expansion, controlled expenses, and modest asset-quality improvement. FBP reported EPS of $0.57 versus $0.51 expected, an 11.76% beat, and maintained a 3.4% dividend yield with an 8-year streak of dividend increases. The bank’s Puerto Rico franchise remains supported by reconstruction, onshoring, and military activity, while Raymond James also raised EPS estimates.

Analysis

FBP is a clean beneficiary of a higher-for-longer rate regime, but the more important nuance is that this is not just a spread story — it is a capital return story with operating leverage. When a bank is already earning above-peer returns and still trades at a discount, incremental upside tends to come from multiple re-rating more than from absolute EPS growth, especially if buybacks keep shrinking the float faster than loan growth can compound.

The second-order winner is likely the Puerto Rico credit ecosystem: reconstruction, reshoring, and military-related activity create a durable, locally concentrated deposit and lending flywheel that larger mainland banks cannot easily replicate. That makes FBP less sensitive to broad U.S. consumer softness than the headline loan-growth print suggests, while also limiting competitive intensity because the bank has a structural information and relationship advantage in-market.

The main risk is timing: if rate cuts or deposit beta normalization arrive faster than expected, near-term NIM expansion can plateau before the market fully re-rates the stock. A weaker consumer would also show up first in credit metrics with a lag of 2-3 quarters, meaning the apparent quality improvement could be the calm before a slower earnings revision cycle. In that scenario, the stock can still work on valuation, but the upside compresses from multiple expansion to a more modest carry trade.

Consensus is likely underestimating how much of FBP’s re-rating can be driven by capital return rather than operating momentum. A 3.4% dividend plus repurchases creates a floor under total return, and if earnings revisions continue upward, the discount to peers should narrow quickly; the market usually pays up for banks when growth and payout policy align, even if top-line growth is not exciting.

Key Decisions for Investors

• Go long FBP over a 3-6 month horizon; target a move toward peer multiple parity with downside protected by dividend yield and buyback support. Best entry is on any post-upgrade consolidation rather than strength-chasing.
• Pair trade: long FBP / short a basket of slower-growing regional banks with weaker capital return profiles. This isolates the Puerto Rico growth + capital return premium while reducing beta to the sector.
• If options liquidity is adequate, buy 3-6 month FBP call spreads to express multiple re-rating with defined downside; use strikes that monetize a move toward the revised analyst target zone rather than a full rerating.
• Trim/add discipline: if FBP closes the valuation gap quickly and approaches peer P/E on next earnings revision, take partial profits because the easy part of the thesis is the re-rating, not perpetual multiple expansion.
• Watch for a catalyst failure signal over the next 1-2 quarters: NIM compression, deposit cost acceleration, or any uptick in charge-offs. Any of those would justify reducing exposure even if headline earnings remain stable.