Release Date: April 23, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net interest income increased by $15 million, with a net interest margin expansion of 5 basis points to 3.4%, driven by lower deposit costs.
- Loan balances increased by $146 million, primarily in the commercial and construction segments.
- Deposit balances grew by $935 million, with contributions from both banks.
- Credit quality improved, with lower net charge-offs and early delinquencies.
- Tangible book value per share increased by nearly $4 to approximately $72, driven by quarterly net income and lower unrealized losses in the investment portfolio.
Negative Points
- Noninterest income decreased by $13 million compared to Q4, below the low end of 2025 quarterly guidance.
- Operating expenses increased by $3 million, primarily due to higher personnel costs.
- The economic outlook remains uncertain due to tariff volatility and recession concerns.
- Loan growth guidance was adjusted to the lower end of the 3% to 5% range due to economic uncertainty.
- The cost of deposits in the US remains high due to competitive pressures and a high proportion of time deposits.
Q & A Highlights
Q: With the macro uncertainty and tariffs, what are you hearing from clients about new investments in Puerto Rico, and how significant is the power grid issue?
A: Ignacio Alvarez, CEO, mentioned that the power grid is not a significant issue as Puerto Rico has become resilient to power outages. Many industries, especially pharmaceuticals, have their own power solutions. Jorge Garcia, CFO, added that Puerto Rico is a known entity for reshoring with a skilled talent pool and attractive financial incentives, particularly in the pharmaceutical sector.
Q: Can you update us on your thoughts regarding deposit flows and the seasonality of growth in the first quarter?
A: Jorge Garcia, CFO, expressed satisfaction with the deposit gathering efforts, noting historical seasonality related to tax refunds. He mentioned that current inflows are higher than in 2022 due to increased earnings and economic activity. While some clients may spend tax refunds, others might maintain higher balances due to economic uncertainty.
Q: Javier, how do you envision Popular under your leadership, and will it differ from the past few years?
A: Javier Ferrer, COO, sees Popular continuing as a leading financial institution in Puerto Rico, focusing on strengthening areas like payments and omnichannel experiences. He emphasized execution and building on the existing strategy, aiming for a 12% ROTCE by year-end and a sustainable 14% in the future.
Q: Given the strong capital levels, do you plan to increase share buybacks, and what is the process for increasing authorization?
A: Jorge Garcia, CFO, acknowledged the robust capital levels and the need for a cushion due to geographic concentration. He mentioned an active authorization for buybacks and a process involving internal stress tests and board discussions to increase authorization if needed.
Q: What are your expectations for net interest income (NII) growth, and what factors could influence the range?
A: Jorge Garcia, CFO, highlighted tailwinds from reinvestment in the investment portfolio and loan originations. He noted that deposit mix and costs are significant drivers of NII growth, and the team's efforts will impact where they fall within the 7% to 9% growth range.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
