Raymond James upgrades First BanCorp stock rating on strong results

Raymond James upgraded First BanCorp to Strong Buy and raised its price target to $27 from $26, citing solid Q1 2026 core results, including strong net interest margin expansion, well-controlled expenses, and improving asset quality. First BanCorp posted EPS of $0.57 versus $0.51 expected, an 11.76% beat, and declared a $0.20 quarterly dividend payable June 12, 2026. The bank also highlighted 6% year-over-year originations growth and continues to return capital with an attractive 3.4% dividend yield.

Analysis

FBP screens like a classic “cheap for a reason” bank, but the market is increasingly rewarding exactly the kind of balance sheet that can compound through a sticky-rate environment: high margin sensitivity, modest credit drift, and visible capital return. The key second-order effect is not just earnings growth; it is multiple re-rating as investors stop treating Puerto Rico exposure as a structural discount and instead price it as a constrained supply of local banking capacity with durable deposit franchises.

What is underappreciated is the operating leverage from reconstruction/onshoring-linked activity: even if headline loan growth looks mid-teens or below, fee mix, deposit betas, and utilization on commercial lines can continue to improve without requiring broad consumer strength. That creates a favorable setup for earnings upgrades over the next 2-4 quarters, especially if rates remain above pre-2022 norms and buybacks remain active. The risk is that consensus may be extrapolating a benign credit path too far; any normalization in tourism, federal reconstruction pacing, or Puerto Rico-specific public spending could hit growth expectations faster than NIM can offset.

On a relative basis, the cleanest expression is not an outright long if the stock has already run, but a long/short versus a lower-quality regional lender with weaker margin expansion and less capital flexibility. The contrarian angle is that this is more of a capital return story than a growth story, and the market often pays up for consistency once dividend growth and repurchases become visibly serial. The main catalyst path is another quarter of beat-and-raise plus continued dividend signaling; the main reversal path is an uptick in charge-offs or a fade in originations that exposes how much of the uplift is rate-driven versus true franchise expansion.

Key Decisions for Investors

• Go long FBP on pullbacks over the next 1-3 weeks with a 3-6 month hold; target a re-rating toward peer multiples as earnings revisions compound, with downside protected by the dividend and buyback support.
• Pair trade: long FBP / short a higher-beta regional bank with weaker NIM expansion and less capital return visibility for the next 2 quarters; the spread should benefit if investors keep rewarding profitability and payout discipline over raw loan growth.
• Sell cash-secured puts or use put spreads on FBP into any post-upgrade strength over the next 30-45 days; this monetizes elevated sentiment while keeping exposure to another beat-and-raise cycle.
• Add to FBP only if credit metrics remain stable on the next print; if net charge-offs or criticized assets move up meaningfully, reduce position size by 25-50% because the multiple thesis is more fragile than the earnings thesis.
• For income-focused portfolios, hold FBP as a dividend compounder for 12+ months, but cap position sizing: the stock’s upside is likely moderate unless the market fully closes the Puerto Rico discount.