Doral: To New York from Puerto Rico

By Mara Der Hovanesian

Doral Financial (DORL ), Puerto Rico's largest mortgage originator, knows how to talk the talk--in Spanish. Doral, which does 50% of the island's home financing, is expanding on the mainland, angling for a bigger slice of the Hispanic market. Its New York-based thrift, Doral Bank FSB, has just opened a second office, in Washington Heights, and has plans for one in Astoria. The branches are targeting New York's huge Puerto Rican community. They'll have bilingual reps and extended weekend hours to accommodate working families. "The Hispanic market is underserved by city banks, and there's some distrust in the community," says Mark Alpert of Deutsche Bank Alex. Brown. "But given Doral's brand recognition, they may be able to crack the market here."

Doral, which also operates 27 commercial banking offices in Puerto Rico and one in Miami, has enjoyed three decades of consistent profitability, low credit risk, and enormous competitive advantages, says Alpert. Its stock has already surged 60% so far this year, hitting a 52-week high on Aug. 14. But Albert, whose firm oversaw a secondary offering in July of 4.4 million shares at $32.50 each, says it has more room to run. His target is 45. "It's still undervalued," he says, noting that Doral's return on equity is 23%, vs. 14.9% for most banks. In July, Gary Gordon of UBS Warburg raised his price target and earnings estimates for Doral. He estimates 2001 earnings per share will be $2.60, compared with First Call Consensus estimates of $2.58. His 2002 estimate of $3.20 also beats the consensus figure of $3.07.

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