Since June 2025, OFG Bancorp has been in a holding pattern, posting a small loss of 1.3% while floating around $40.69. The stock also fell short of the S&P 500’s 14.4% gain during that period.
Is now the time to buy OFG Bancorp, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.
Why Is OFG Bancorp Not Exciting?
We're cautious about OFG Bancorp. Here are three reasons you should be careful with OFG and a stock we'd rather own.
1. Net Interest Income Points to Soft Demand
Net interest income commands greater market attention due to its reliability and consistency, whereas one-time fees are often seen as lower-quality revenue that lacks the same dependable characteristics.
OFG Bancorp’s net interest income has grown at a 9.2% annualized rate over the last five years, slightly worse than the broader banking industry and in line with its total revenue. Its growth was driven by both an increase in its outstanding loans and net interest margin, which represents how much a bank earns in relation to its outstanding loan book.
2. Projected Net Interest Income Growth Shows Limited Upside
Forecasted net interest income by Wall Street analysts signals a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect OFG Bancorp’s net interest income to rise by 1.4%, a deceleration versus its 4.6% annualized growth for the past two years. This projection is below its 4.6% annualized growth rate for the past two years.
3. Net Interest Margin Dropping
Net interest margin (NIM) serves as a critical gauge of a bank's fundamental profitability by showing the spread between interest income and interest expenses. It's essential for understanding whether a firm can sustainably generate returns from its lending operations.
Over the past two years, OFG Bancorp’s net interest margin averaged 5.5%. However, its margin contracted by 69.7 basis points (100 basis points = 1 percentage point) over that period.
This decline was a headwind for its net interest income. While prevailing rates are a major determinant of net interest margin changes over time, the decline could mean OFG Bancorp either faced competition for loans and deposits or experienced a negative mix shift in its balance sheet composition.
Final Judgment
OFG Bancorp’s business quality ultimately falls short of our standards. With its shares underperforming the market lately, the stock trades at 1.3× forward P/B (or $40.69 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at the most dominant software business in the world.
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