Investment firm Piper Sandler has revised its price target for OFG Bancorp (NYSE:OFG) downwards to $43.00 from the prior level of $45.00, keeping a Neutral stance on the stock in the wake of recent market movements. This updated price target indicates a modest potential gain relative to the stock's current market price of approximately $38.98, with analysis from InvestingPro confirming the stock is trading close to its fair value.
The downward adjustment follows an 8% drop in OFG shares subsequent to the company’s recent earnings announcement, a reaction Piper Sandler describes as "extreme". This sell-off is believed to stem from a misreading of seasonal patterns related to the company’s auto loan portfolio. Over the span of the past year, the stock has experienced a decline of roughly 7.38%, according to InvestingPro data, which may reflect market concerns tied to this segment.
In its updated forecasts, Piper Sandler has reduced earnings estimates for 2026 by 6%. This revision aligns with OFG’s own guidance, projecting a net interest margin between 4.95% and 5.05%, alongside a forecast of around 1% net charge-offs. Despite this, the operating expense outlook remains relatively stable in the firm’s assessment.
When evaluating valuation metrics, the analysis notes that OFG Bancorp shares currently trade at approximately 1.3 times tangible book value and around 8.9 times projected 2026 earnings. These multiples are lower than those observed among KRX comparable peers, which stand near 1.7 times tangible book value and 10.9 times estimated earnings for the same period. This disparity largely relates to the company’s higher perceived risk stemming from its auto loan portfolio, accounting for roughly 32% of total loans.
Supporting this, InvestingPro figures show OFG’s current price-to-earnings ratio at about 9.19 and a price-to-book ratio close to 1.23, while offering a dividend yield of 3.08%. Notably, OFG Bancorp has an extensive history of consistent dividend payments, spanning 34 consecutive years.
Piper Sandler emphasizes that for a more bullish revision, it would require signs of improving credit quality, specifically reductions in auto loan delinquencies and net charge-offs from their peak levels recorded in the fourth quarter. This cautious outlook is tempered despite the bank’s strong adjusted return on assets forecasted at approximately 1.5% for 2026 and a robust return on common equity near 16%. Additionally, InvestingPro assigns the bank a solid overall financial health score.
Separately, OFG Bancorp’s fourth-quarter 2025 financial performance surpassed expectations, reporting earnings per share (EPS) of $1.27 against analyst estimates of $1.15—a 10.43% positive surprise. Revenues also slightly exceeded projections, totaling $185.4 million compared to the forecasted $184.17 million, underscoring the company's solid operational execution in the quarter.
Despite these encouraging financial results, the bank’s stock declined during pre-market trading following the earnings release, indicating investor caution. Financial analysts monitoring the firm note that these earnings beats reflect strong recent business performance, yet market sentiment remains mixed.