BPOP - Earnings call transcript Q2 2020

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Operator

Good day, and welcome to the Popular Inc.

Second Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note today's event is being recorded. to Officer conference of like Cardillo, to now Relations Investor Popular would turn over the Paul I Inc. Please go ahead sir.

Paul Cardillo

the thank be today answer Other management Ignacio results for Good call. your Lidio Soriano. Vázquez; questions. and you second available review us CRO, will Q&A joining team morning, our will on and With session. our us our our quarter is members Alvarez; CEO, the during of They our also CFO, Carlos for today's and then

Before statements these we could are set SEC like in that today's risks would forward-looking statements expectations to remind earnings call, we to you today's are from detailed Factors start, I based cause current that actual may that management's subject within and uncertainties. on filings. our make forth release on results are forward-looking to and and press materially are differ

our popular.com. call may today's filings press release and our turn the SEC our now at web on over Ignacio Alvarez. will You page CEO, to find I

Ignacio Alvarez

and morning, you the healthy call. are ones for thank staying joining that safe. loved your and and I hope you Good

initial as addressing slides in continues results, our like Rico first discuss by the the current related impact Before governor to business The curtail Puerto in of first I'd the two pandemic markets presentation. a of Puerto environment on of we disruption mandated XXth, the the to and quarterly strict outlined economic on helped lockdown the have Rico. Puerto significant serve the particularly The in March pandemic. Rico spread

were gradually months. and past in on reopened couple May XX, of were the As over of loosened largely many restrictions starting a that the the result, local economy place

revival activity started month As to in had see we the the in economy business a of June. especially reopened,

the July on recreational business governor impose the surge to led and the rollback and some activities restrictions inbound in positive XXth travel. and of announce on recent to hospitalization However, cases further

down which restrictions these restrictions. original segment, impact will on a of Employment of will smaller date unemployment and and was they stabilize. depend XXXX employment but April significant first economy during to to much Nonfarm of lockdown in claims X% The a rapidly June. of the significantly than last on portion by affecting length still the year, in severity in peak have improved April undoubtedly the April. While restaurant the deteriorated from hotel have compared to trends are the nearly to begun these week

second in been severely and second New the impacted quarter XXXX. lower XX% quarter were had auto to compared sales the lockdown the by as

month auto However, of June X% auto the decade than the best year in sales and period. higher past was the sales ago were

X% sales last than in the second XX% were quarter, the month second but cement of Additionally, June lower up year-over-year. quarter year's in

Our increased reopened. economy as customer spending the

results. quarter down year second the In April alone card While bottomed in Tourism, BPPR's debit were ago to second compared from for Hotel and sales the lower originations originations they XXXX par mortgage credit of quarter at higher to XX% the June second the of on however, increased were occupancy in while in quarter XX% Similarly period, month June X%. in first X% June than with were XXXX, were continued XXXX. quarter. lag. sequentially sales X% the

had were by increased primarily as tourism. internal lifted, by driven However, summer levels restrictions occupancy to XX% mid-June,

three-year the local Company, which XX% Tourism Rico Puerto the tourists. to hotel Xth of reached weekend, of according were July occupancy Additionally, XX% over

year-to-date International Rico fewer supplemental government Rico the the federal period $XXX received through Rico various XXXX. already same San recently result to $XXX will week. the Juan billion seeing in Puerto Puerto assistance reverse and this XXXX. are Airport, operator of relief restrictions. funds unemployment XXXX, June, than the stimulus Also, as million announced and is to federal we government per Local that arrivals fiscal decreased federal provide However, June stimulus. during June XX% XX% during in continue $XX to According trend by passengers to has Puerto a compared in positive of And inside pandemic. approximately it benefit program. Puerto receive are response of approved receive The residents in under the estimated to Rico the

that is scheduled currently So on July benefit to XX. sunset

ensure some operating customers. As taken reduced team, management our Most schedules. under employees are of and of we've operations though and of our a to our are measures still the safety the branches soundness open,

employees are regularly them keep We evolving business informed communicating our the to with and environment. of health

of significant base. alternative offer portion We work for to arrangements employee continue our a

on-premise a the safe to during quarter, Popular. part-time ensure return-to-work We I we to advisable. deemed have coverage protocol activity a at customers am experience to supporting care We health announce remain extended and our on that to established when happy transition enhancing focused back employees. their also

digital provided Mi options. banking for broad active digital and in monthly our in increase Puerto a relief to million We Banco since on XXXX users customers payment encouraged March lending online a seen have Rico, milestone. We've and our one significant clients. consumer platform commercial users active alternative surpassed XX% use We've very

we in through of first our deposits Additionally quarter, the in captured digital quarter. to XX% XX% second channels the compared

March our since continues by customers. million Finally increasing customer to most impressively, Puerto XX,XXX X.XX recent and to given base Rico's XXXX nearly trends, demographic grow,

funding Puerto and Act, Following in than and the billion United the more in the Rico, PPP approval, States the million in totaling Popular Mainland including $X.X secured businesses, for billion, passage medium-sized Virgin $X.X SBA's the million over program, for under $XX CARES $XXX Islands. loans, XX,XXX of small U.S.

were and loans PPP the XX% by in originated loans than less The loans $XX,XXX. supported persons originated we Puerto for XX% fact, date In employed these all of Rico. businesses XXX,XXX originated to of

more the businesses York in in than support XXX,XXX Home Loan Additionally, small Popular secured local New Rico of Metro has to Bank non-profit area. and U.S. Puerto in Federal grants

X. to actions we slide evolve. respond situation, to As to and rapidly turn this continue to continue plans changing our will Please

first our the the of caused the second reflect impact by results economic quarter pandemic. in disruption quarter, As the

was of million the quarter. income net in $XXX first million $XX higher the than quarterly Our reported

However, XX% from reported down in period. was ago the $XXX it million the year

the offset Credit by provisions. by were the our cuts Fed, by by Revenues loans, the driven and were quarter expenses. driven issuance decrease of impact in in down offset by rate Second lower quarter in the the The portfolio by partially balances. investment increase driven partially was stable. lower PPP cumulative interest deposit remained were income higher lower operating of costs deposit quality results interest trends net the and

financial I detail. the over discuss a result economic now in hand as of still pandemic, of However, to results call extent more future is full who will uncertain. the will the disruption, the Carlos,

Carlos Vázquez

Good X. Please slide to morning. Ignacio. you, turn Thank

$X.X These million in charges As equity interest quarter. transaction elimination primarily card of increase decreased deck. transaction $XX.X balances; service first, lower of deposit fees to usual, a million, press other $XXX the on quarter offsetting the Puerto appendix release service service million, items to in partially Also to credit for mostly cost and in Today's to gain is Non-interest and details personnel to due plans. And to million by million, the $XX.X quarter. income, Net the of related volumes provided higher reduction due $XX.X a million This $X.X lower to compensation million an million million. additional by, our QX, office volumes $XXX expense entry in by the late other was deposit employee lower information building. were second, an was a from from sale the charges fees second and related dropped of unrealized by in the the and income deferred first fees driven lower operating as net debit certain $XX.X Rico, the mainly income by in corporate has a decrease first by $XX contributing line. response offset the from variances slide million the increase earnings gain securities pandemic. to $X.X

$XX at For consistent our to of on the run couple reduction activity decreased But rate than the Professional years, and bonuses. around than reopening rate more Personnel client between reduction our and incentive in trend-like lower $XX from and prior results. processing parts prior driven million, to of levels. QX last depend lower speed difference million non-interest for due moving to million guidance contributed of expand $XX $X.X expenses fees expense is $XXX by lower decreased the $XX QX. the lot levels cost operating Total we technology return million lower and by $X.X by million resulting $X million, this compensation, run quarter. The the which rate income our costs quarterly of and commissions million transactions. in non-interest of between income per million, the lower had a quarter, million. million of was this $XXX A Provision to will million later. increase $XXX will of month. markets is with were potential $XXX Lidio which could

We the in to and the quarter, to expenses. cost personnel-related decreased legal rates from pandemic. promotion tax of announced Last professional & we due activity pandemic, related accounting expenses, various $X.X and expenses. savings initiatives response interest implemented lower other expenses also by OREO and affecting discontinued benefited to advisory, the business foreclosure we that million, fees, lower operating effect

be million. are for to reiterate achieve thereby $XXX expenses in our quarterly and expectation $XX million savings, We this average on track to of XXXX around

for tax effective the Our was XX%. rate quarter

interest the and segments retail on we currently expect our of investment from all was portfolios related saw cost. Federal of $X.X in portfolio loans. XX% and The yields of was COVID loan tax our only growth. both be second was rates and in as Puerto across million in the In turn benefited seen income. lower Rico. our initiatives. we of loan The deposits $XX net rate quarter, assistance the impact deposit in XXXX, $X For was The by many balances deposit decrease in between in offset was this customers billion in the PPP to effective partially driver This of billion portfolios. the This larger and in year XX%. by market primary reduction increase increase X. slide the investment driven in commercial, full balances to to lower Please increase portfolio Public, a

public of XX three of primarily to basis rates basis of points NIM reduction on Puerto were basis the in mainly due related in points. Our to Rico basis quarter, points NIM a deposit basis equivalent a deposits. by X.XX%, XX impact lower net market XX is On This a was costs QX. to interest decreased X.XX% margin the decrease factors. lower points, XX taxable

mid-March. First, of the decreasing points federal yields, on rates in the basis XXX impact investment loan funds our and

loans, PPP our margin. significant finally, accretive resulted in in mostly net short-term in the risk-adjusted fed in interest funds an this and securities. Second, and of a to although treasury return with invested night and asset compression And the income low-yielding increase net which in $X.X in interest average attractive origination are deposits, U.S. billion are

margin expect is steady rest demand XXXX quarter levels. to slightly be and but very mix, the improving for outlook from asset dependent deposit on This of the level. loan We second

of the Puerto end roughly deposits $XX $X As quarter, than QX. the billion about higher of second public billion, in Rico were

federal come expenditure in impact any agreements rate restructuring over deposit of expect government's the and We the balances the on the funds to of the increased of will of timing of dictate down as The will the and as timetable assistance, tax term. probably balance term, amount balances public reduction. debt lead long COVID-related to collections seasonal but these well near additional

in by grew our rest mortgage, demand driven the we June, leases, quarter. offset balances auto million on other to and of growth portfolios the of will of loan month demand. balances of higher-yielding and consumer partially card of the and In balances lower net loans the level by show The BPPR. and was depend XXXX loan repayment and balances loan average credit in lower the higher-yielding while duration of Our demand PPP seen in continue primarily performance levels personal have PPP the for loans by economy. lower-yielding at $XXX rebound in This strong loans the

guidance turn balance to loan As time. Slide this are X. such we providing Please at not

mainland with well well-capitalized as Our remain to requirements. relative to capital regulatory peers strong levels respect

for you at million XXth completed January per As common of agreement stock Popular which entered shares million was into received $XXX repurchase may May of on XX. year, this on we $XX.XX share. an recall XX.X share accelerated

published investment income, by and XX XX.X% Our The simplification April XXXX a Tangible $X increase common on this update ratios was of somewhat end from our capital gains by the book quarter rules reflect QX adverse down in This equity forma the ratio X, the our capital was dividend CETX very from per by last net pro we still XXXX. of X ratio CETX a points. relation almost severely with an Tier share calculation offset in slide, by lower of payments. position. loss quarterly results this In increased Popular's effective higher realized applying to XX.X%. driven capital reduced count we In test $XX.XX. XX.X%. repeat These of strong ratio robust stress our DFAST basis value share up

allowance second losses XX% XXXX, the our loss for estimate. our severely quarter of credit For of adverse represent DFAST

Our tangible in return equity was XX.X% average second quarter. the

of to will We continue double-digit pursue target on our return tangible.

Board in Directors required during not test stress our have completed third stress last and Popular for our our with to of run plan the summer, few While approval capital regulatory years, regulators publish or last is engaged us in test quarter the the of will we upon the year. capital upcoming year quarter. for of quarter first by be our the quarter the now delayed plans timetable disclose We expect that in discussions have capital to of This early one year. that allowed this process the developed on

to With Lidio. that, We will then a make discussions result capital-related turn quarter the to with we XXXX. engage As capital the our in I next in second call early of regulators year. announcements over expect

Lidio Soriano

Thank you, Carlos, and good morning.

the be Popular to global one Before would I credit view in see you X. crisis CECL financial since on Slide credit impacts based to like quarter, in for the crisis the trends highlight to discussing can XXXX. opportunity last take the the changes on risk number Popular's and which might Also tempted profile

We well being community lender with stronger a a shifted profile. with consumer shifted balance auto. Rico, risk to collateralized during In portfolio Puerto conservative from changes mix operate with are our risk the significant our more lower risk U.S. and loans, with different positioned a commercial a We losses our segments mortgage improved and and subprime believe lender diverse company we to economic niche profile profile. and mix. and exposures and we is also given sheet a successfully to In lower Popular construction in environment

XX. Turning number to slide

We are are our sensitive are certain segments this monitoring on crisis entire portfolio, on of impact the more yet highlighted portfolio the and loan slide. COVID-XX

have occupancy throughout hospitals, of the in the remained Puerto deferrals there downgrades exposure care in Office skilled level the mainly Rico mainly collections to exposure of facility. have the Within is customers' in numbers our strategies. while Rico to is of relates The been exposure multi-family. CRE this space of space, limited liquidity non-retail mainly and comprised segment. the to U.S. exposure health In segment, Puerto while office is our facilities U.S. the multi-family comprised Today, segment, and mainly stable nursing is pandemic.

have Within been and assistance number regions, orders downgrades operation. local federal shelter-in-place there limited activity requests curtailed the deferral of a has segment. both the have this supported and in portfolio. For industry this retail, Today of the non-essential

XX% XX% while have withstand past-rated to collection shopping has category of most shopping in rate. centers of Based are principles portfolio. rate, with portfolio strong our owned and collection an by in of both stable have Strip and occupancy pre-COVID an important disruption can on flow. downgraded the long-term centers that occupancy reported An As our significant financially malls occupancy XX% customers remained within experienced we cash regions short-term reported XX% part XX% and deferrals compared surveys, number a result, levels. a the

in losses periods these in even given Popular lockdown record Regarding over sales XX,XXX in sales of the has June had the significantly. Puerto dealer new segment decreased the reported resume subject collateralized to units auto to loans. the auto retail sold. segment was authorization during historically low prolonged the sales, with Upon activity nature and decreased order of Rico, this sales

The there the our deferral to in and number segment, residential. projects downgrades Regarding late-stage in the have loan-to-cost principally requests region. New majority nominal the York and limited higher-end completion, a of portfolio. construction this most is of of exposure of in U.S. and our been are exposure To-date, the in have low Metro

at $XXX Puerto stood due Our Rico. This This segment experienced end hotel of this destination has the experienced service the restrictions. mostly elevated mostly exposure levels our operate segment to and exposure at of had million a were portfolio. deferrals borrowers is lockdown quarter, in travel of carry million. have restaurant to food $XXX fast we total stress the through government's This At majority quarter number Rico until to our reopen beaches on prior the August the have common end. quick to not stress driven Through use as gradually resume XX. promotion plan shelter-in-place hotel the the out. the category continued the past the started To-date, areas. reopening will balances particularly renewed of in imposition of segment has downgrades by significant the has restriction or within and orders, of delivery part and of Restaurant orders. of Puerto

reopening the to recently then segment shared at a restaurants. the pace, restaurants to. me operate the As plants, with XX%, not segments within We especially To To-date are XX% exposed Once number then first a we to part downgrades capacity, national discuss not deferrals energy, back reopens, of the we XX% expect do current category. rebound XX%. have exposure have were to fully economy and went had service which finalize, faster government's quick to and this of to allowed the credits. material let we also significant airlines past four-phase or

number slide XX. Turning to

loan either continued extensions. relief to forbearance modifications deferrals, or to have customer provide our through We

April. peak New requests for modifications have declined their XX% from in

inflows. mainly number increased consumer decrease to NPL by end Rico continue the turn XX decrease $XX portfolio. portfolio increase driven discuss quarter. was driven $X XX% quarter of loans to held million relationship, by resumption Puerto million driven sales quarter, forbearance total activity. now of to representing payment, Puerto assistance U.S. was billion third non-performing been metrics. an by million, get the Non-performing a Rico, in period. the NPL to in in mortgage have customer the the to Please we loans excluding in coupled first compared in by X.X% in this total significant auto of million inflows XX OREO Rico increases March. number commercial modified collection in that while Please decrease previous inflows. in activities $XXX to to was NPLs $X restarted $XX driven of was $X $XX credit the Puerto decreased by XX% will discuss that which NPL the and the $X one the Of clarity, to million million, assets to slide loans of increased on by, mortgage of The XXX,XXX the accounts, NPLs by the have least make approximately NPLs slide mainly inflows At a We OREO portfolio. million to higher balance. driven by to in the driven loan The of percentage X.X%, turn have ratio and of suspended and The commercial Rico granted a by million. portfolio, $X.X In accounts mortgage at with portfolio Puerto the decrease quarter, single behavior mainly more inflows the since quarter, Compared of

to quarter, points of million. details, credit for at second loans previous million macroeconomic to compared X.X% was variance in loans X.X% losses. corporation in of increased allowance by, for The million were that compared allowance related portfolio for Analytics to by balances of on to quarter. the the driven in provision Moody's SX million to to the turn by for first ratio the was $XX loans by adopted outlook, quarter. XX%, The flat XX severe held January credit for changes felt, macroeconomic mainly the or impact, day credit SX or in in the scenario the to the drivers At the quarter. quarter losses on March numberXX, losses compared Variances XX a $XXX quarter credit XXXX. the allowance at the relatively CECL, in and the annualized remained in $XXX for to use, decreased has the one NPLs to driven or the flat adoption Please to losses quarter portfolio We portfolio to the representative opted remained held more and charge-offs average essentially allowance of impact In credit losses credit Popular the credit portfolio points million credit on allowance which The implementation, XX quarter, of prior the was end prior our first slide losses than first the scenarios slide on XXX% changes. by compared portfolio driven held from losses to when forecast. ratio basis Xst Since first changes quality. allowance of baseline scenario $XX discuss of amounted $XXX Moody the to more net the XXX%, to number to XXth, pandemic economic scenarios. for The We in XXXX. the that $XX scenario basis Turning was had second million time. portfolio economic quarter,

up in we it of quarter, has with now baseline what second pandemic. the are believe used the expecting caught terms economies scenario, Moody's For the impact most we as of

we first quarter variables our than use change to in Although, variable the competitive by million. is macroeconomic Moody's magnitude path decrease The to different the quarter for baseline comparable ACL SX of costs scenario, of scenario, $XX ACL is which economic calculation. second scenario changes the in the the

loans mainly Ginnie As increased repurchase PPP billion, driven the thus ACL to portfolio by by discussed And by government. Ignacio, loans, mainly subject had Mae balances and $X.X and options. U.S. impact, portfolios no insured by Carlos

balances million ACL a reduction of by $XX this, causing driven in loan by decreased Excluding loans, million. $XXX consumer

ACL our to credit second exhibited the charge-off caused we downwards To stable worse. million quality quarter, quarter. to increase, million. metrics the downgraded by net during approximately or The $XXX $XXX loan the During summarize, ACL and other portfolio substandard to changes

is pandemic profile to in successfully few to I disruption and the The the continue our and the payment of of of changes carefully the continue to in over Popular portfolio over the on full of change extent after the net for improvements economic risk to of evolved position will how and portfolio lapses. However, operate challenging concluding economic deferral like uncertain. monitor Management years remarks. the environment. the effects last risk, that, would to turn to period With delinquencies the exposure outlook charge-off pandemic-related his loan the call Ignacio

Ignacio Alvarez

Lidio the our Carlos for express know Thank their to you, situation. serve rapidly and employees banking and your update. adapt that a customers business, I act ability changing our creativity want quickly After we and XXX putting requires to their to to first. my in decisively we people for years commitment to and success gratitude

serve reality. communities these to have to thank payment and deferrals also the by battle trust professionals customers more organizations for to provided channels. their non-profit support continue also for adapting the XXX,XXX times and through this They care than like continued we their to new they difficult and I customers digital the our accelerated would We to providing pandemic. assistance health as of adoption

Puerto Our million active important more digital users market-leading than on platform. us our surpass banking digital in helped one milestone an offering Rico

deteriorates to to this will leading to are the recovery. economic health be that front remains the a difficult to very health are hamper aware businesses, situation will of future on which round economy. restrictions new tied obviously as continue performance uncertainty to Economic on the predict. If the We there much the developments of

our However, and ahead. lie the a balance strength liquidity levels in the and strong challenges serve position capital place us of clients to our to continue may that sheet of whether

answer ready Thank now are you. to questions. We your

Operator

with first ahead. today's Citi. [Operator comes Instructions] Thank you. go Arren Cyganovich question And Please from

Arren Cyganovich

if with somewhat was your you to wondering addressed more in talk looks about but you is Thanks. remarks not economic the used. happens why I the you that scenario that you new just earlier. the a recovery could decision baseline prepared it the in bit I'm more of a little to a know little like your it just double-dip I stick curious previously Moody's a as change lot total had? that the worse, recession

Lidio Soriano

was -- we was the based that we Yes. changing rapidly scenarios adjusted we felt enough the when mentioned, first catch we When -- scenarios, our were situation. Well They view had different. up. we to for quarter second we their down -- quarter Moody's not shut down doing the rapidly playing as

up. think happen the as quarter part growth XXXX. they will catch have much the I being I later scenario elongated later characterize into recovery type happens And most growth for in our than an U much second which -- of

think terms other. cumulative I are economic scenarios I think in different we from the the both the prepared one remarks, to mentioned as in in of past although similar the impact main variables to

Arren Cyganovich

somewhat much from really temporary Okay. you growth do -- would be view public of some wouldn't boost into you that And deploy to obviously how occurred, that you able earning in deposits. large as on the and higher deposit had the But general the level that has assets? that

Ignacio Alvarez

seen the to think like But the stimulus how past the these Well I opposed in lot it's in and the directly of public had they're trouble -- we've deposits predicting a system federal as from we've relief in liquidity generally, be going obviously to to predict deploying people. hurricane I future. the many to of payments payments hesitate went

PPP $X,XXX of liquidity We system. put for the loans a of lot between to -- system. hard the been a predict. the into and benefits unemployment us it's So there's The through the going lot liquidity

be money will Some of spent. obviously will that --

island goes with obviously you come things consume will off off when it us of and Some island. back

I yet think to it's flows get for difficult this very a time. us good handle at on those

going risk time. for longer out not is return taking So and very at and the this attractive

before feel get investment our better we a approach. to in trying fundamental we're So make changes

Arren Cyganovich

growth Okay. And lastly, pretty June. astounding card volume in the in then was

about think or said was XX% it I you XX%. up

Ignacio Alvarez

XX%.

Arren Cyganovich

the strong really driving pent-up of that really growth just because was lockdown? Was there? What demand the

Ignacio Alvarez

thing. pin I one hard was locked there But mean demand. People their pent-up were to in obviously it's up houses.

$XXX of pockets. I Rico they've was spending. think people minimum but mean many want were I to in wage in getting were wage the in checks checks getting people delayed their and retroactive. they of lives. first checks getting it were the in unemployment. out lot of they making we don't got China would week, first they time time the Yes, their states. coronavirus of Puerto when never saw for got Also a in the [ph] by getting $XXXX $XXXX have when started that in And I $XXXX They unnecessary were that got they close again, minimum the really checks on a some something they were money or were

of pent-up So in going back we People actually than demand. think demand system stores. to started And the picked anticipated. to restaurants money I a faster lot there's up consumer

to recent I we'll I surge faster But would how have that. lot a consumer than So came see have affects this back the thought. think

Arren Cyganovich

Okay. you. Thank

Ignacio Alvarez

Thanks.

Operator

Our from Sandler. today comes ahead. Please go Twerdahl question with Piper Alex next

Alex Twerdahl

Good morning.

Ignacio Alvarez

morning. Good

Alex Twerdahl

there they're the and view pessimistic reopen are hotels the taken we a the buckets? and of wondering at us in is the little you guys quarter the downgrades to that did during and are do trying I with if like that you associated that reserve trying economy opened, where more was downgrades Just some can about you was give point maybe the the what restaurants remain assumptions figure more and you of I'm downgraded what to them. this a were you the things or especially going out is to bit expectation color where when some And the higher on making slightly guess

Lidio Soriano

I think in past remarks the we downwards category. of the also quarter -- were the I the the during compared within that in as prepared most mentioned

had industry However, We or were or available that the worse. having million worse. substandard $XXX mentioned downgrade did downgraded $XXX prospect given to in which the -- given that said we information that million us, the segments substandard certain to about we of we there for

the it's current pretty liquidity the into As is we but always the company But to do of that terms more basis. the for on we in prospect take a based organization economic doing further we're how disruption account, the company We adjustment withstand position. ability things not and outlook. to making going-forward crisis the further by withstand The of ability uncertain. caused pandemic, are on think the the

Alex Twerdahl

could then And and much been that a I this on that that that. haven't other part maybe and pharmaceutical manufacturing information huge pharmaceutical repatriation medical even kind topic away is a on the for the of parts Rico, grow on in of of of Thanks idea have world. which following manufacturing economy lot Puerto call further already one based of from gotten think some device Okay. the us is

about talked On of us left that other give of bills? the things seen on in kind the for in can what's be trying in other know of capacity space out you sort figure one that like or much circulating kind more being are there I going that water we've how people could ground is of to thesis helpful any can bills any that hold. terms

Ignacio Alvarez

of have a you strength There's of said like there's bills people pharmaceutical a good proposed the number Well number for of idea island. of for Puerto the U.S. on Congress. a This administration of making the is going who opportunity the source Rico a

in be our worked more believe I things that gradual. that favor, think will the have impact but I

I production Obviously, with Puerto to the have that to continuing lines new China lines new think it's of with the the production a chance think going better world. Rico. concern change about not I and and logistics -- losing bringing we'll warfare

question how places shifting within to think from the and I the be going some States. will -- China So, U.S. and obviously and to is be they're production closer United other much the

the this keep and are a are Rico sometimes, at it's is to things beginning it's have the Puerto except think which major that devices of will pharmaceutical last week CooperVision what that shot. category. People them so a I've anecdotal southern think Medical expansion. week But to there's most because a seen so in not important. very the you lump I this pharmaceutical actually together to important two mind -- part very going I of a and far benefit is that get make announced of very in going the device. a island operation medical from large the or

the the at week. announced was beginning that of So,

anecdotally, good don't seen I things. you. I've So, concrete really more information to have I give --

Alex Twerdahl

questions. my for Thanks helpful. That's taking

Ignacio Alvarez

Alex. Thanks

Operator

Our go Securities. ahead. with today Joe Gladue next Alden from question comes Please

Joe Gladue

Hey good afternoon.

Joe Gladue

Joe. Hey

Joe Gladue

a ones. Just couple quick of

are has of come that this? when regarding PPP forgiveness to your guess and assumptions as to through Just or just most completed starts loans when what the wondering

Ignacio Alvarez

loan of forgiveness. that our most talked assumption clients our our what and XXX% be for it's clients get think the we've going most I to going to have I to from going to -- are -- are to go try

guideline So, the extended a they've XX out SBA now to period I clear the I within can think comes think you as funds soon the next with use weeks. as the to to you that do how it's going -- happen

the say of I will at year -- would it think of end by least. So, I third quarter the year. the end happen

Carlos Vázquez

the a good year. be will end of a chance by the part It's of the gone all portfolio significant

Ignacio Alvarez

Yes.

So…

Joe Gladue

any do some the of chunks, off you to more two or in the I -- those funds All what just both gradually, in the touched lot seeing drawn just to far or past the on just down? you're the any any such. in deposits liquidity prepared know -- so think funds gotten have remarks month Have balance right. as and of insight in that and you are the come is and -- going questions. on being a some last you in or sheet in the off insight of the I coming that -- it how But the might is PPP that's you've

Carlos Vázquez

not Joe. clarity there is a I'm No, of lot sure

from the individual they at ends Some a of move in those government will bank. the bank is government at big account with by be to the of expenditures corporate or chunks the happening up But chunks. big lot what accounts a

do that. So, recapture we some of

moves the deposit see assistance, just deposits So, while a in overall not government, for drop the funds may same by example, big of because there transferred effect other in may to accounts. it our you chunk in be

of start to So, disbursing taken The a long government a get time it's actually has to money. hard handle it. assistance the

So, a money lot last or so. very to people in is the month that of getting new

of early So, clarity Hopefully the more the have quarter. it's days. end third by we'll very

Ignacio Alvarez

and I like. liquidity stimulus use looks federal what liquidity package it is on the it. the that not has or extended going businesses run new a and if have using of down that private start lot for that have it's new a to have substantially there's a got will they or to replacement the a on to Yes, depend the think benefits deposits done lot program A lot people go out or PPP unemployment liquidity not of

a also lot of I next So, stimulus going it's program. think to depend on this

Joe Gladue

I right. PPP went your on All to segments. the lending sensitive that appreciate loans question. information Last some Okay. of the

the borrowers have detail percentage the of from Do the you many one on benefited ask deferrals PPP -- or some how Just sense additional of programs what particular? of a in that. government

Ignacio Alvarez

we in programs our that? clients no don't I No, that? do have to think, obtained -- wants have do deferral PPP loans, we the he percentage we what know of

Lidio Soriano

that have information. don't I

Carlos Vázquez

we Sorry didn't...

Lidio Soriano

I don't think that... have we

Ignacio Alvarez

question time. that take Let's another

Lidio Soriano

we'll -- slide. you incorporate We'll Thank sensitive maybe for the time Yes. segment feedback. in next it the

Joe Gladue

All right. Well, thank you.

Lidio Soriano

you. Thank

Operator

question ahead. next Keefe Glen with Manna today go comes our And Please Bruyette & from Woods.

Glen Manna

Hi, good morning.

Lidio Soriano

Good you morning. How Glen? are

Glen Manna

Good. on for Thanks the you Lidio. the thank detailed Carlos, information NIM.

the that and the the if basically break could anticipation loans it for forgiven liquidity What respect -- PPP of is drop to prior your could is be loans end you to follow-up FTA? current was the given on loans, out rates, those in your quarter the PPP point comments Just I NIM move rate of by attributed that did And excess quarter? use also the basis this XXX% you then year. XX part with the could the that the the

Carlos Vázquez

because very funding invested. on assumptions breaking where the the funding to the was up hard make you it's as have as -- as far to new additional The far do drop, as Glenn

a there's good your from have intelligently to you make gazillion assumptions very to question So question, our part. answer your

shot result our the time change balance estimate the in asset things. a point increase and was the sheet. mix that or in We have this linked big drop a that of other the to two-thirds rates of and one-third or taken at the is in in And roughly at mix roughly other picture, NIM was

two-thirds, So, could call number, best you your assumptions different out can one-third. it's roughly with the Again do. but on that's we depending a

the is PPP on have the we as far X.XX... As yield that

Lidio Soriano

X XX.

Carlos Vázquez

X XX?

Lidio Soriano

XX. X

Carlos Vázquez

X XX Glen.

Glen Manna

a qualitatively, gave But back maybe just for I cycle? just know, just your could do And loans PPP Okay. and was to like is NIMs reached of some I'd year the but you trough slightly off. stable of big levels and they you moves rolling up little of this to like your half longer-term across thoughts from be the than the hear in guidance last that. that the maybe the and sooner industry, picture rapidity on the from this And did bit maybe the that think given fed, cycle a then, qualitative in

Carlos Vázquez

mean bank-specific I really Yes. will a be situation. that very

be more approach -- deposit environment may we also successful been are with one banks For in doing the as that other have -- cost cautious have results, tend saw There been like deposit the our the way to significant an way lot we example, in you in have that in moving we we the But we're in they uncertainty, the being we be down. aggressive that. on reduction cost. a

consideration. one that's So

the -- on all went different. deposit The may the in X. depending lag -- other Not your your the the effect book gets flowed down be rates our consideration deposit lag, deposit March the through your drop rates book on in when --

second not rate So in affect effect second the full the whole part of of the will quarter drop quarter. the

slightly from more So, we'll third -- the quarter. a benefit that in hopefully of

most specific, NIM So, more than of case, within by I a deposit know, -- would have like very of it assume. other end asset our of bank you of And In the the mix the seen will people as quarter, because the because lot things third does and rates. varies effect. levels

be case -- drivers So may are in there somewhat different. the our

Glen Manna

the could the to for may just in press said if rates start some you off on island I one you deferrals the we're re-deferral noticed through highlight policies on July now, on those maybe Lidio. deferrals. versus I July roll the also if going from were And you information to release I guess are the what through just in mainland? you on Thank deferral Okay. and that month seeing in the a September. of customers for then differences

Lidio Soriano

would I a couple say things. of

up-to-date thing of re-deferral first you I customers. asked you The in rates for provide our some I information mean, terms to have of don't

on market the our webcast. to details provide will we next So

differences, we the to some extent that offered to – mean in terms deferral say. crisis island past whole I two before. certain and gone In the we have think through a would are I to of of the there customer things programs have I

used having to advantage they're So and deferral taking it. programs of

deferral our say The really haven't as banking in part liquidity seen liquidity programs strategies. lot of other related have a customer use the Puerto is seen that. you In industry to I What portfolio, particularly of commercial Rico, part our we that will have utilization done their as item U.S. they line strategy. of

operation. hitting have just keep line their the within they to used So deferrals than cash rather

Ignacio Alvarez

would this pandemic evidence. there consumer he Rico, CARES products Yes. with I jurisdictions further relief. I – as in relief is But Rico had U.S. consumer jurisdictions, some Act, mandated then had do Ignacio. consumer was moratoriums most we were front Puerto on to Puerto impacted opposed mortgage. mortgage for had and the the then and add mortgage all deferrals to would been the obviously products. basically beyond that I know in had for basically add client state by had mandated no the All deferrals

difference. substantive major a that's So

Glen Manna

question. Okay. for very taking much Thank you my

Ignacio Alvarez

you. Thank

Operator

comes Please next with Capital Gerard Cassidy question RBC Today's Markets. Instructions] ahead. from go [Operator

Gerard Cassidy

morning, Thank Carlos, you? you. Ignacio and are how Good

Ignacio Alvarez

Good morning.

Carlos Vázquez

are Fine. doing? you How

Gerard Cassidy

own and whatever provisions and maybe going overlay, growth and losses be just adjust we provision elevated within I you to couple to a influences see should the continue forecast, need some Good. the the for forward? economy your with the Moody's now. go according outlook possibly talked CECL the for outlook a about on loan that stable for losses, for course If see you particularly Clearly on of for the you the which questions. provision reratings got loan then we loan provisions economic won't Moody's therefore, portfolio of essentially

Carlos Vázquez

stable – makes said economic a sense. Assuming big Yes. you is assumption forecast think I and a that what

Gerard Cassidy

Okay. I big assumption. know a that's

Carlos Vázquez

downgrades. mix and be Yes. loan change It charge-offs will growth and in

Gerard Cassidy

to on said already go your you've charge-offs since replace you the But wouldn't internal plan assuming have they be. according to what – charge-offs, should

Carlos Vázquez

grow in same the book if Only we time. the at

Gerard Cassidy

are nonessential gave deferral, then guys you for properties hotel types programs loan-to-value that question deferral in when typical look what's on, was the at us detail those second properties? the And you retail in of that the Okay. and the

Lidio Soriano

loan-to-value. to value XX%, today, I would know. say, underwrite don't we XX% I mean, loans typically I Guessing

XX%, So me underwrite I is tell current it's what because know are loan-to-values what typically the difficult value for XX%. don't we the But today. you equation to

Gerard Cassidy

eliminated? support don't And when York I if but deferral be happen? loans know, support have those fed New any of lastly, where their the will when you see. guys that Any have do talked I Fed, programs, the then you sense get reclassify when you that to the to don't from may idea

Ignacio Alvarez

They haven't communicated.

I given industry-wide think their basically they've that communications out. are communications the

been coming the from they've been have see don't reasonable I customers I have within prudent the I to open think – think, they've and you pretty parameters. that and Fed that any pressure clear in area.

Gerard Cassidy

place deferral the that. sign supportive, end for the any the the potential the if loans? a in the see. fed the have regulators then, accountants with guess off there just on to when you and still still kind as SEC is banks I documents, deferral versus conflicts is on is Through, the accountants guys, and the I year, just SEC all of to program of follow-up And not

Jorge Garcia

mean, and in I clarity. together have SEC – Jorge Garcia. is the This accounting rules. of any the of suspended come morning. the kind good regulatory Hi, adding haven't They

to have troubled et risk subject still classify that's the expect cetera, restructuring. conflict. TDRs you we're where as the to the that's evaluating really But and So would – you don't I debt where these

converging clarifying complying information with just how now that. And I and there is apply that's think to out certainly, it. the we're

Ignacio Alvarez

being end. not of federally have is programs end most programs uniform deferral the come Yeah. And that. mandated Act, But other we'll an than They expired. have to the – the the year. follow Act and CARES CARES most the mortgages generally Obviously, broad to extended deferral again, are for now

Gerard Cassidy

Thank right. you, All see. I guys.

Ignacio Alvarez

Thank you.

Operator

over And management question-and-answer back any final to I'd ladies session. to the turn and team the for remarks. this concludes the like gentlemen, conference

Ignacio Alvarez

your about and look joining quarter forward focus That's Take the our thing. sharing for October. you questions. continue We in Thank most to on third diligent your Please safety. to important care. be us the for today, and for health your results

Operator

attending call. conference you, for sir. thank all concludes presentation. today's We today's This Thank you

your disconnect day. a have You now and may wonderful lines,

Popular (BPOP) 23 Jul 202020 Q2 Earnings call transcript