Activist investor Raging Capital Management LLC called upon Popular Inc.'s leadership to increase capital returns and consider a sale of the company.

In a letter addressed to the Hato Rey, Puerto Rico-based bank's board of directors, the activist investor demanded "timely and aggressive action to unlock shareholder value." Raging Capital Management owns 614,225 shares of common stock, or 0.63% of outstanding common shares, according to S&P Global Market Intelligence data. In a statement, Popular said it will review the letter and maintain an "open and constructive" dialogue with its shareholders.

The activist's letter called Popular one of the most undervalued but overcapitalized banks in North America. The investor asked the board to double the current dividend payout ratio and adopt a stock repurchase plan of at least $1 billion to be executed over the next two years.

Doing so would "materially boost" Popular's annual earnings power to over $8 per share and increase its return on equity to more than 15%, the activist investor wrote.

In a report, Sandler O'Neill analysts Alexander Twerdahl and Jeffrey Kitsis said the requests are "nothing new." The analysts expect the company to announce an updated capital return plan with its fourth-quarter earnings release and make progress on the buyback and dividend requests in 2020.

The activist investor also called for the board to explore all strategic alternatives and retain a nationally recognized investment banking firm.

Alternatives the activist investor suggested include exploring a spinoff of the company's 16% stake in EVERTEC Inc.; a spinoff or stock-based merger of Popular Bank; or a sale of the entire company.

Divesting the company's EVERTEC investment or selling Popular Bank would result in an earnings hole, the Sandler O'Neill analysts wrote.

In a research report, Compass Point analyst Scott Valentin said he is unsure large banks would have an interest in entering Puerto Rico. He noted that the U.S. territory has seen some recent exits with banks selling operations to OFG Bancorp and First BanCorp., both based in San Juan, Puerto Rico.

The Sandler O'Neill and Compass Point analysts each wrote that regulators might be limiting management from increasing capital returns.

"We often get the sense that management is as frustrated with its inability to return more capital as some shareholders are," the Sandler O'Neill analysts wrote.