On Thursday, Popular (NASDAQ:BPOP) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Popular reported a strong first quarter with net income of $246 million and earnings per share of $3.78, marking significant improvements compared to the previous quarter and year-over-year.
The company highlighted strategic investments in digital channels and new product offerings aimed at enhancing customer engagement and expanding market reach.
Credit quality remained stable, with favorable trends in non-performing loans and charge-offs, though some increases in specific commercial relationships were noted.
Popular repurchased $155 million in common stock and paid a quarterly dividend, demonstrating a commitment to returning capital to shareholders.
The company provided guidance for 2026, expecting net interest income growth at the higher end of 5-7% and maintaining a focus on cost control and strategic investments.
Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to Popular Inc. First quarter 2026 conference call. At this time, all participants are in a listen only mode. After the speaker’s presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to the Investor Relations Officer at Popular Inc. Paul Cardillo. Please go ahead.
Paul Cardillo (Investor Relations Officer)
Good morning and thank you for joining us. With me on the call today is our President and CEO Javier Ferrer, our CFO Jorge Garcia and our Chief Risk Officer, Lydia Soriano. They will review our results for the first quarter and then answer your questions. first quarter and then answer your questions. Other members of our management team will also be available during the Q and A session. Before we begin, I would like to remind you that during today’s call we may make forward looking statements regarding Popular such as projections of revenue, earnings, credit, quality, expenses, taxes and capital, as well as statements regarding Popular’s plans and objectives. These statements are based on management’s current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these forward looking statements are discussed in in today’s earnings release and our SEC filing. You may find today’s press release and our SEC filings on our webpage at popular.com I will now turn the call over to Javier Ferrer. Thank you Paul and good morning everyone. Please turn to Slide 4 where we share highlights of our strong operating performance. In the first quarter we reported net income of 246 million and earnings per share of $3.78, up 12 million 25 cents per share from the fourth quarter. The improvement was driven by higher net interest, income margin expansion and lower operating expenses. Net income and EPS improved by 38% and 48% respectively compared to the first quarter of 2025. We continue to invest in our businesses and expand our capabilities in support of our strategic objectives. When we deliver for customers, our franchise strengthens and our shareholders benefit. Overall credit trends remain favorable with lower NPLs and improved NPL ratios. Quarterly net charge offs increased primarily due to a single previously identified commercial relationship. We also demonstrated our commitment to returning capital to our shareholders by repurchasing 155 million in common stock and paying a quarterly common stock dividend of $0.75 per share. Our ROTC was 15.5% up from 14.4% in the fourth quarter of 2025 and 11.4% a year ago. We are very pleased with these returns and remain focused on reaching our 14% through the cycle objective. Before turning the call over to Jorge, I will comment on the business environment in Puerto Rico. Business activity in Puerto Rico remained positive, supported by steady trends in employment and consumer activity. With manufacturing, construction and tourism leading the way. We’re closely monitoring ongoing geopolitical developments as sustained higher oil and commodity prices can impact our customer base. As of the end of the first quarter, we have not seen significant signs of economic stress. The labor market remains healthy with the unemployment rate at 5.6%, stable near historic lows. Three sectors have outperformed the broader labor market construction, transportation and warehousing and leisure and hospitality. Consumer spending remains healthy. Combined credit and debit card purchase by Banco Popular customers increased by approximately 5% compared to the first quarter of 2025. We continue to see healthy demand for homes in Puerto Rico. Mortgage balances at Banco Popular increased modestly during the quarter. Momentum in the construction sector continues to be solid, with public and private investment fueling high employment and strong activity. We’re optimistic that these trends will persist given the backlog of obligated federal disaster recovery funds. On the private side, real estate and tourism development projects and the renewed focus on reshoring to Puerto Rico by global manufacturing companies should continue to support economic growth on the island. The tourism and hospitality sector continues to be an important contributor to a Puerto Rico economy. Year to date through February, hotel occupancy increased to 83%, up from 76% in the same period last year. Over the same period, RevPAR increased 6%. Hotel demand averaged roughly 400,000 room nights, representing 10% growth versus the same months in 2025. Passenger traffic at Luis Munoz Marin International Airport was down 2% in the first quarter after a record year in 2025. JetBlue also announced an expansion of its San Juan Hubba with five new nonstop domestic routes beginning in the spring of 2026. Cruise activity has also been a meaningful tailwind after record Cruise arrivals in 2025. Arrivals accelerated sharply in the first two months of 2026, with year to date arrivals through February up 40% year over year. In addition, the Puerto Rico Tourism Company announced a strategic partnership with Royal Caribbean beginning in July of this year that would establish San Juan as the cruise line’s home port. Moving to our strategic framework, we continue to advance our three objectives. A growing number of initiatives are gaining traction simultaneously and the pace of execution is accelerating. One of our objectives is to be the number one bank for our customers by delivering exceptional service and products. A key part of that is making it easier for customers to engage with Popular through our digital channels. We recently launched an integrated marketplace within our digital app Mivanco, one of Puerto Rico’s most widely used mobile apps. The platform gives our retail customers access to exclusive Exclusive offers, discounts and benefits from a wide variety of merchants while enabling businesses, many of them small and medium sized, to reach a high volume of potential customers. This allows us to create meaningful connections between our retail and commercial customers and strengthens the value of banking with Popular, we also launched two new corporate credit cards designed to facilitate payments and optimize cash flow. Both have gained traction and driven purchase volume. In addition to our core retail and commercial efforts, we are advancing targeted segment strategies to improve service, enable more personal relationship based engagement and position Popular as the primary bank earlier in our relationship with our customers. A recent example is our newly launched program designed to meet the unique financial needs of doctors, dentists and veterinarians. The momentum behind these initiatives reflects the energy and focus of our teams. We are encouraged to see that execution translating into stronger results and we expect the benefits to become more visible over time. And with that, I turn the call over to Jorge for more details on our financial results.
Jorge Garcia (Chief Financial Officer)
Thank you Javier Good morning and thank you all for joining the call today. As Javier mentioned, our quarterly net income increased by 12 million to 246 million and our EPS improved by $0.25 to $3.78 compared to adjusted net income in the fourth quarter, which excluded a partial reversal of the FDIC Special Assessment Reserve net income increased by 22 million. These results were driven by better NII, higher NIM and lower expenses, partly offset by a slightly higher provision for credit losses. Our objective is to deliver sustainable financial results and we’re pleased to have generated a 15.5% ROE (Return on Equity) for the period. We will continue to use all levers to position the company as a top performing bank when compared to our mainland peers. Please turn to Slide 7. Net interest income of $670 million increased by approximately $13 million driven by fixed rate asset repricing and a higher balance of investments due to higher deposit balances and lower deposit costs at both banks. Net interest margin expanded 5 basis points to 3.66% on a GAAP basis. On a taxable equivalent basis, the margin improved by 11 basis points to 4.14%, driven primarily by lower interest expense including a meaningful reduction in the cost of Puerto Rico public deposits. Ending loan Balances were essentially flat at $39.3 billion, down about 38 million from the fourth quarter, driven primarily by lower balances at Popular bank due to paydowns in the construction segment and runoff from the exited residential mortgage business. At BPPR, modest growth in the mortgage and commercial segments were somewhat offset by weaker trends in auto lending. Given the slower demand in the consumer and auto segments, we expect consolidated loan growth in 2026 to be at the low end of our original 3% to 4% range. In our investment portfolio, we have maintained our strategy of reinvesting proceeds from bond maturities into U.S. Treasury notes and bills. During the quarter, we purchased approximately 1.9 billion of treasury notes with a duration of 2.6 years and an average yield of around 3.7%. Taking advantage of a modestly steeper curve, deposit balances ended the quarter at 67.6 billion, 1.4 billion higher than the fourth quarter. Retail and commercial deposits increased by 1.2 billion, driven by tax refund activity. On an average basis, total deposits increased by 1.1 billion or by 384 million when excluding Puerto Rico public deposits, Puerto Rico public deposits increased by 250 million to end the quarter at 19.7 billion. We continue to expect public deposits to be in a range of 18 to 20 billion. For the year, total deposit costs decreased by 12 basis points quarter over quarter to 1.56% with improvement in both of our banks. Excluding Puerto Rico public deposits, total deposit costs decreased by 5 basis points to 1.09%. At BPPR, deposit costs decreased by 11 basis points mostly as a result of Puerto Rico public deposits repriced lower by 31 basis points due to lower short term rates at popular bank. The 16 basis points reduction in deposit costs was primarily related to lower online savings, deposit costs and repricing of time deposits. Given positive deposit trends in Puerto Rico, we now expect 2026 net interest income growth at the upper end of our 5 to 7% guidance range. Please turn to slide 8. Non interest income was 166 million in line with Q4 and at the high end of our quarterly guidance with solid performance across most of our fee generating segments. Compared to the first quarter of 2025, non interest income improved by 9% driven by growth in debit and credit card fees of 14 and 6% respectively, as well as 13% increase in asset management and insurance fees, demonstrating our ability to benefit from our breadth of product offerings. We continue to expect quarterly non interest income to be in the range of 160 to 165 million. Please turn to Slide 9.. Total operating expenses were 467 million, a decrease of 6 million when compared to Q4. Excluding the FDIC reversal in Q4, operating expenses decreased by 22 million. The decrease was primarily driven by lower personnel costs as the fourth quarter included a profit sharing accrual of approximately 13 million. Along with the impact of fewer calendar days in the first quarter, this quarter also benefited from lower employee health care related costs. We also saw lower seasonal business promotion expenses and lower professional fees partly offset by higher technology and software expenses. Reflecting our continued investment in technology and transformation initiatives, we expect full year expenses to increase by 2 to 3% compared to our original guidance of 3%. We will continue to prioritize investments in our people and technology and continue to target expense efficiencies. Our effective tax rate in the first quarter was 16% unchanged from the fourth quarter. We now expect the effective tax rate for the year to be at the low end of our original 15 to 17% guidance range due to higher projected exempt income. Please turn to Slide 10. Tangible book value per share at the end of the quarter was $84.98, an increase of $2.33 per share driven by our net income and offset in part by our capital return activity. During the quarter, we repurchased approximately $155 million in common stock. We ended the quarter with $126 million remaining under our active repurchase authorization which we expect to exhaust during the second quarter. As we have said in the past, we seek to maintain an active repurchase authorization in place and we are targeting an update on capital actions before the second quarter earnings call. In addition to common stock repurchases, we also expect to continue evaluating capital optimization alternatives and pursue a dividend increase during the year. Of course, our plans are subject to market conditions, regulatory considerations and any required board approvals. With that, I turn the call over to Lidia.
Lydia …
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