Raymond James reiterates First BanCorp stock rating on strong earnings

First BanCorp reported Q1 2026 EPS of $0.57, beating consensus by $0.06 and Raymond James’ estimate by $0.02, with the beat described as broad-based. Core trends were solid: net interest margin reached 5.00%, ROA was 1.9%, ROTCE was 18.7%, and capital returns were 92%, while Raymond James reiterated an Outperform rating and $26 target versus the $23.93 share price. Loan growth was softer due to construction payoffs and consumer auto weakness, but originations rose year over year.

Analysis

FBP’s setup is less about the quarter itself and more about the sustainability of a very high-quality earnings profile in a still-benign credit environment. The important second-order read-through is that a Puerto Rico-centric lender with strong capital returns and a premium margin can keep compounding even without aggressive loan growth, which raises the bar for regional banks that still need balance-sheet repair or have weaker fee/capital return profiles.

The market is likely underappreciating how much of the stock’s multiple can be defended by capital efficiency rather than nominal growth. If NIM stays near current levels and credit remains orderly, the biggest upside driver over the next 2-3 quarters is not earnings acceleration but continued buyback/dividend support translating into per-share EPS leverage; that tends to work best in low-beta financials where the franchise is already viewed as “done.” The flip side is that this kind of name usually rerates only until the market starts pricing a plateau.

Contrarian risk: the beat may be mechanically rewarded, but the stock is already close to its range high, so near-term upside could be capped unless management signals loan growth inflects or capital returns step back up. Any normalization in margin, a worsening in consumer auto, or a shift in local credit conditions would hit sentiment quickly because the current valuation is implicitly assuming that unusually strong profitability is durable.

The cleaner setup is a relative-value expression, not an outright chase. FBP screens as a quality compounder versus lower-return regional banks, but the crowding risk is that investors rotate to cheaper banks if rates fall and spread compression becomes the dominant macro theme. That makes the stock attractive on dips, but less compelling as a momentum long after a strong run unless the next catalyst extends the runway.

Key Decisions for Investors

• Add FBP on a 1-2% pullback or post-gap consolidation, targeting a 6-10% upside over the next 2-3 months if management maintains NIM near 5% and capital returns remain elevated.
• Pair long FBP / short a lower-ROA regional bank ETF or a weaker peer with slower capital return execution for 1-2 quarters; this isolates franchise quality and reduces rate-beta risk.
• If already long, sell covered calls 1-2 months out against the position to monetize elevated valuation near highs; the payoff is favorable if the stock grinds but does not re-rate immediately.
• Avoid adding aggressively if loan growth commentary stays soft for another quarter; the trade becomes a multiple-defense story rather than an earnings-upgrade story, which lowers near-term upside convexity.
• Use a stop around a sustained break below the prior breakout zone; if credit or margin trends reverse, the market will likely de-rate the name faster than the earnings stream can absorb.