BPOP,BPOPO - Earnings call transcript Q2 2021

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Operator

Good morning, and welcome to the Popular, Inc.

Second Quarter 2021 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Paul Cardillo, Investor Relations Officer. Please go ahead.

Paul Cardillo

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

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

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

Ignacio Alvarez

and Good call. for you morning, the joining thank

strong was $XXX which The million. another achieved of second quarter net income in quarter we

reflect federal risk the turn in the and prudent Slide economic management. Our also rebound sources revenue and diversified X. They our stimulus. to activity continued of results of Please level unprecedented reflect

of for costs. lower was higher provision income deposit our net lower million same losses $XX expenses. of Our the lower the from quarter-over-quarter higher income first interest a lower quarter quarterly was and million credit quarter, was and than last million by driven in The portfolio XXXX. quarter The driven than $XXX compared by net variance higher the revenues to income increase in $XX investment and benefit

net trends higher with the were card increased and Credit income lower recoveries. quality debit quarter to due credit in of noninterest Our NPLs and volume positive transactions.

a million various we a for to shareholders. dividend an to on of continued of our common program. update an paid turn per July In increase capital metrics. Slide $X.XX. $XXX late repurchase business entered April, share, to During share on we Please X And the $X.XX X, quarter, we into accelerated return

Rico more Puerto on March in and channels our in continues by reach Our continues customers. quarter platform million customer to X.X since through captured our among nearly Adoption be digital Mi the than unique XX,XXX our base XX% second to increasing XXXX. by XX% million year-to-date and Active retail customers in X.X We grow, grown digital XX,XXX have strong. the second by of to exceeds deposits channels. quarter users Banco of

website, at $X.X In loans than on across rounds. to We lease to the As Rico, and loans lower by to slightly billion to Banco compared originations improve, place trend Similarly, restrictions to significantly quarter X% relaxed macro billion the to by volume market. the in originated of business vaccinated the housing that million XXXX. have and end quarter been the debit the loans and X the have XX,XXX of XX% expected, totaling both the as over in most years quarters have compared and XX have or update second of that XX or population XX% vaccination compared the second activity were Slide either or loans Puerto and remains XX% on by been loan customer in the quarter, X, XXXX. clientele, higher, quarter COVID-related to to X million Of building volume XX% least compared trends compared progress make quarter recent and second second forgiven the front. Popular Popular's the continued to to population current quarter BPPR last XXXX. in to of island. the $XXX an round X.X by or XX% the we card the of mortgage have June. the Within Rico. originated of credit million sales strength close of old as upon dollar has have to continued XX% the second originations According increasing the and originated XX,XXX see at and of The quarter were XX% Auto in years by all the X% at one over nearly of have of increased momentum the last on funded these adjusted by PPP levels. respect seen received PPP continue X.X to CDC increased turn eliminated. environment pre-pandemic nearly funded solid past of the $X.X year, old than compared or Puerto XX% compared levels round million to been we quarter over seen $XXX in first In With dollar for X. Puerto continued more to or but trends loans dose. higher we in XX,XXX program, Please Rico in round

the XXXX to hospitality still time the consumer in are more units have quarter. much sales auto with was with strong. of remained comfortable Year-to-date the the continues more have With Cement has of during to May strong months The and X than popular hurricanes. demand compared for sales tourism and XXXX island Rico seeing than world following auto of higher XX% have mainland same limited, the than sector be of from to the sales XXXX. New in sales somewhat that sales XXXX in reflect second doubled level more sales extraordinary. a residents the first up been Year-to-date, rebuilding become that destination Puerto same when through were traveling. continue period XX period the the in improvement we're XXXX travel

month, stimulate Level the contracting Wholesale rates Rico of X should up in nearly assessment In CDC moderate. June, has its help occupancy Rico the risk COVID were in this Puerto improved demand action to travel earlier island. of the Additionally, This or to dramatically. Puerto picked XX%. further

last record XXX% to at has rapid same only compared a and on the Additionally, up and than passenger Year-to-date, level In XX% June, XXXX. pace. available room XX% than higher the compares $XXX traffic month XXXX. June X% down ago traffic was traffic is and a of compared per was highest June year to to higher the improve in the continued revenue year is in of $XXX, to Airport reached XXXX. month

fact, since XXXX improved, now employment In the below of was levels X% and of week seen arrivals the highest in pre-pandemic level during since June to passenger since airport levels. are by Cruise privatized traffic are Total was recommence Employment December has by X% XXXX. still first it August. have but June increased the ships nonfarm at XXXX. scheduled

results the quarter. for second extremely are the We with pleased

very over to situation the the our now recovery, about on may Carlos economic more details we but economic attentive the call to continue optimistic the be how financial results. turn for to I'll We impact outlook. remain evolving health

Carlos Vázquez

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

by deck. to details $X As provided an $X $XXX appendix driven press increased by to usual, as increased million, first lower slide seasonality from were the million expenses from by the card Today's lower additional million investment $XXX quarter release expenses compensation income and provision other earnings offset the the balances million $X.X a in positive was million. income Noninterest slightly quarter. cost increase from the in program quarter. $X second deposit variance of million for the and $X.X This on primarily costs. the the million The compensation reserve than These down Net higher our benefit was as interest variances million, QX, $X million of is lower versus million information QX. primarily first business. second to due operating advertising on $XX of costs. expense results positive million QX. portfolio a expand income, in lower for was benefit million by $X the $XXX in million recorded The from MSR mortgage were million primarily transactions equity quarter, interchange along the $XX various million entirely mortgage Lidio a Contributing investments method, by with by due to earnings quarter-over-quarter customer $X higher operating of was valuation decrease resulting these servicing by will to were Total $XX matters. a almost credit was well partially offset a held higher increased of $X net plans variances. of from reward lower QX. plus fees employee under quarter card due higher other driven $X.X credit-related variance of million, banking million release to in in credit smaller This $X.X negative mostly in

prior increase. million XXXX, year we $X be to than our full million higher quarter of $XXX factors to estimate. $XXX the contributed now expenses A number average this quarterly per For million, our to expect

increased as higher We due expect business continued competition talent. outperformance well be to to for compensation as expense

materialize projects the in and the and first were And activities technology that processing half should higher the half. in second we finally, of Some costs. delayed also expect year

tax effective to for Our Puerto compared of Rico. This the primarily to higher XX% XX% quarter income rate due was first a taxable quarter. in was increase in proportion the

the a to average balances, a basis majority increase across increased Slide due to Puerto in the due taxable now prior the lines. retail was XX%, billion $XX from X. grew X.XX% increase the X.XX% and million, points fee in QX to QX, the upon portion the PPP-related more a forgiveness. was $X.X the recognition for quarter. remaining primary to quarter. mix, PPP million business investment round higher believe approximately lower NIM deposit X.XX%, million The of basis fees from rate million unamortized deposits of $XXX $XX points The billion. by additional loans tax $XX of first securities. The $XX.X by to of due accelerated market remaining yield increase The costs on X approximately income most all in XX our was slower than government and equivalent and $XXX an in PPP between portfolio first We quarter. to portfolio the interest middle by low-yielding we is day by of of the of PPP million. spread this to $X our XX%. XX to by quarter. compared But $XXX of loans XXXX, third $XX.X next quarters which in expect our NII basis turn QX. and equivalent compared is investment basis, effective quarter margin to first money income The NIM higher a be taxable a decreased million in total as balances lower quarter. decrease reduction in deposits. basis For decreased by lower $X income the This and the result to Deposits due loan of income billion the million higher The growth to majority will Please X be of was were XX% similar PPP million is an of million and fourth a points. Rico range increase drivers loans in this was year. in million X.XX% On round forgiven during of yield commercial last $X.X year yielded by XX% asset of of $X.X second meaning

high of asset margin continued of The PPP mix result rate to the expect depend to on continue towards We ultimate of year-end. recover but will forgiveness our will deposits, drop should QX due loans. in levels and

balances quarter, governments. the These just reflect Puerto over state CARES deposits billion, Act roughly of local most As stimulus, assistance of $X recent were public end $XX including of second increase the billion last and to from an the quarter. federal Rico

debt expect Act, to Jobs driven advanced to continue return by over the restructuring funds the down come to time, and sector current public and of balances of the debt from service. We public deposit CARES outlays

million million Our $XXX balances increase lease by a This due in auto an loans, in decreased was in ending PPP million offset $XXX partially and the decline quarter. decline portfolio. loan by $XX to the of

million. First approximately round round by $XXX second were dropped loans disbursements million, PPP while $XXX

the of PPP, Excluding million. loan impact $XXX balances by grew

the since and demand portfolios portfolio loans leases, flat our quarter. in have either and net growth We continue other auto see to loan first or while are decreased strong

will limited resulting unprecedented demand to as by We of as levels continue forgiveness well expect be loan balances PPP impacted client from liquidity.

resulting we As economic to turn loan loans. to PPP not expect outpace should Slide next do X. such, demand materialize overall growth expected the Please forgiveness when until growth from year of

strong relative peers mainland and regulatory Our capital remains requirements. well-capitalized levels to

April, accelerated QX ratio million to basis XX a common X QX, actions. share XX.X%, transaction. Tier In points primarily in Our entered from repurchase down into due equity corporation was capital the $XXX

will The As a stock final of reduction million accounting for $XXX recognized scheduled result, price depend surplus. the shareholders' close stock the approximately program to we the the treasury ASR, million the in treatment in on QX. and equity as capital in of of a during term average $XX

transaction. $X.XX increased of QX this by in because EPS Our

will remainder future to the opportunities in We capital XXXX during continue manage periods. and explore to of our

not common further we this However, stock expect do dividend or repurchases increases year.

planning to XXXX an have webcast. normal returned no actions resulting capital in than schedule our We this hopefully XXXX later capital announcement our Popular's year, January of

Our the primarily the stockholders' the quarter, equity decreased to of due in ASR. million $XXX impact

value share tangible $XX.XX. our income, per share This book increase and driven on investments our net was by lower to unrealized However, $X.XX quarterly higher count. increased cumulative gains the by

second tangible turn With Lidio. the on to return XX.X% I Our equity call quarter. that, in the was over

Lidio Soriano

you, morning. Thank Carlos, and good

discuss this $XX in $XX were increase million, million metrics. by in increased the Rico, that $X related million offset delinquency resulted credit by ratio by improving due relationship overall continued to to inflows. $XX quarter, part to held NPLs million, in in $XX decreased part X.X%, consumer of an the In mostly trends, by to decreases economic client. strong versus NPL resulting NPL of portfolio. significant decreased lower single XX total $X higher $X coupled by prior second NPL non-COVID-related U.S., to $X by flat sale. due to part to million construction the loan for continued inflows NPLs, quarter, the quarter. by during offset improvement as to in inflows was Puerto This from credit $XX of the held offset quarter inflow mainly X NPLs This quarter, million. previously was million excluding due credit million and loan, $XX XX the turn driven early the prior offset to $XX at NPLs Compared in for was that to an increase by increase of These mortgage the exhibit NPLs corporation recovery. the decreased $XXX Rico, resolution the million from lower U.S., to decrease mainly NPLs Please to million, loan assets of by sale. the part a NPLs lower lower $XX commercial a million the days metrics transferred a end turn a construction by Nonperforming of costs, mortgage by During quality decreased $X Slide the and in a with million, environment. driven in low mainly to in mainly NPL mainly of In NPL inflows held NPL In Puerto million of an increase by million, commercial relationship. renewal its loans process inflows, reached $X million driven first Please current of was quarter. included in the Slide mentioned discuss portfolio consumer The

the in average net Turning recovery or to results resolution related million loans point basis nonperforming Slide were above-mentioned a of amounted of XX X basis million held net in of The to point quarter. charge-offs the aided or of quarter $X.X charge-offs the Net of negative compared recovery the for by annualized portfolio an previous million the $XX to XX. $X.X to relationship.

to million by net charge-off charge-off reserved the loan. quarter-over-quarter. the decreased million by a charge-off by of and resolution NPL of In charge-offs the this, million million and million basis net relationship, by pre-pandemic have the lower is a net net charge-off net levels. Excluding U.S., due driven mortgage lower Rico, been million, Puerto $X.X would ratio $X quarter charge-off to $X.X construction $XX prior In primarily included lower by trend previously than decreased lower net the $X.X $X.X commercial as point, X which charge-off related

decreased for prior to to in X.X% X.XX% slide. improving quality driven loans credit losses discussed allowance for portfolio's mainly our million, allowance Our million from from qualitative hospitality releases $XX losses by the portfolio decreased $XXX by the in as ratio to of The in credit and credit held quarter. following reserve,

Payment by prior credit quarter. losses were the details turn in in to mortgage of Excluding credit held compared was as loans, to X.XX%. allowance guaranteed Please portfolio well The driven for the flat quarter. to on previous credit is losses this Slide our the Program XX of to drivers ratio as the and when and changes losses. Variances decreased to variance outlook quality loans NPLs discuss XXX%, ratio allowance for $XX for allowance to economic million credit portfolio mix. qualitative The by reserves Protection and

more the is given government's the ability also federal assistance. strains recovery we uncertainties virus to around adverse evident, consider impact outcomes Rico and the utilize strong of Puerto a new available While

the result, highest test-free a we baseline scenario. assign to followed scenario a continue pessimistic by probability more to As the

macroeconomic in and shows the previous GDP variables compared of with improvement forecast being drivers. a economic largest GDP The uses unemployment Our estimates. slight growth when the a XXXX scenarios both and number the unemployment baseline current rate rates to

the However, revisions Puerto credit conducted revisions to indicators Planning increases for losses Rico ACL allowance million. to contributed Board the These $XX historical caused in by to increase Rico. macroeconomic in Puerto by

improving During environment from $XX decrease to by prompted million Portfolio and in improvements the caused Total the we and mix. government quarter, the economic our include million. quality $XX reserve qualitative portfolio ACL our portfolio by aided changes second exhibited by metrics changes economic environment. quarter, in the our credit performance. released during improved To quality, loan credit summarize, stimulus fluctuations volume and the an

to portfolios concluding call to remarks. his the economic like exposure Ignacio risk continue With pandemic-related the for monitor you. to in Thank would the I changes of will outlook. We turn the that, and to over

Ignacio Alvarez

Thank you, your updates. Carlos, Lidio for and

levels deposit and capital the for consumer continued by actions. improved of our half driven record XXXX quality, credit were first earnings, strong, results Our solid growth

outlook. optimistic the economic are about We

amount factors Rico recovery in the faster we sectors federal positioned considerable a activity impact coming funds for COVID, combined now dispersed, to to of yet to to related addition start be such should of consumer significant at years, activity. that pace. many are improved has expect will Puerto we The a stimulus generate hurricane and of have In well these still flowing unprecedented economic benefit the level which confidence from and

forward team in again. We are together our entire looking to having the office

a back be and that supervisors the safety begin Managers health workforce will in improvement Day. sound colleagues remotely. remainder in our after our bring facilities, will the mid-August in working we in to office of and progress return still our conditions will Labor vaccination Given to are returning the process, protocols and general and

be arrangement. however, employees we and annual will, highlights a and commitment, as We Corporate eligible sustainable our to our offering our operate second June, hybrid achievements It initiatives work In a company. Sustainability ethical released progress Report. responsible, in

We all in of we the leading to and, Puerto serve. we have responsibility are the Rico's fact, mindful as institution banking communities

positive a have impact levels on to we we have commitment to expand continue transparency our We stakeholders. around firm our practices, our all of a ESG continue working and will ensure

can You report find our website. our on

questions. now to are your answer ready We

Operator

[Operator Instructions].

Our Brock first comes question UBS. from Vandervliet of

Brock Vandervliet

could you talk see. more loan you If growth what about and

Carlos, could that I'm growth what together expecting clear and toward of you're help or you utilization to lack appears the data Anything us book. kind next to could you're origination multiple trying talk I of very about triangulate. Maybe in put if the economic resurgence a not growth be until of it year. think, I pipelines. loan guess economic points pointing

Carlos Vázquez

pretty originated on doing I growth first think on a are that our the good bankers loan loans. comment Well, job is Sure.

loans we take of by grew $XXX million. PPP actually out this you quarter, If in the effect

good liquidity. bankers -- a we has clients average that's balance have, nice than though high job, pointing average in one, our by of client is more their Popular keep since that still doing with retail number grown of commercial year. even The of growth start. last loan to levels a The pretty 'XX very reason February XX% net So are and we

on So And business. our liquidity of average other significant has a a flow their normal client is the of amount accounts. just our

it, X, That's probably Brock, whatever the is a year-end. right -- If ballpark. assume is you away around by left think in which of for moment, $XXX goes PPP million, the that

so amortization book old is We somewhere in still schedule have number. doing It's amortizes like of $XX the a And mortgage it's organization our it's our is million fact $XX despite million. quarter, a the our so quarter. excess a negative about normal of that very probably $XXX million that Westernbank portfolio well, large

those other of X -- So when lot a pieces obviously. take you moving along there's pieces,

the about down million. natural flow back You have alone a portfolio -- come come will that $XXX on

they and bank if is a more. So doing some to growth, that job, then make the net bang-up up. do have they up our But that make

thinking we our significant we're our still So that the about have a liquidity and a of of the of the 'XX fact to natural amount overcome combination clients is reason with still runoff book.

I now than our other which when one start we guess is 'XX. wrong. probably the up shows earlier will this early that think in Now hope the hope But way is growth going that I be these we're balances right that. best

Brock Vandervliet

economic hood been of Okay. efforts loan some a seeing? I haven't C&I lines result the And the terms that the appreciate of color. of side anything that in under we're open on drawn credit yet new to pickup of as

Ignacio Alvarez

activity think is we're pretty this The Ignacio, sorry. I is seeing activity the normal. --

I more, area think you're in probably clients, think, our seeing again. says, clients existing see existing have Rico I'd of activity interest you'd I investor as is Carlos many more X our say have lines. Puerto -- The of many

available we're than of properties, for because credit business like buying seeing lines. most our So more of have new acquisition liquidity, think and more commercial I loans they or like of said, have I activity clients, plenty lines buying

But need really more don't acquisition are seeing they So the activity new front. lines. we on

Operator

is next from question of RBC. The Gerard Cassidy

Gerard Cassidy

or you're is going think back that, And you tie in growth? stimulus liquidity, the the stimulus something that therefore, that customers. to consumer the to government it the on checks? driving addition programs, liquidity else deposit coming deposit is is there levels side, higher Is nice meaning deposit then were and on we the Can PPP? you Or seeing to still levels? that these that primarily growth well, What as about deposit driving liquidity? ex comment do making the Carlos, your

Ignacio Alvarez

This is Ignacio.

came a into a no stimulus there's had mean gas. travel. that of spend commuting, also think do things. I that money. their the directly I they and They They to all. weren't didn't doubt other on didn't couldn't couldn't big effect. money they lot people have accounts They really the so it a ability while, spend payment people's think I saved for

number building I was that liquidity. think, of a things were up people, there So

So I would the a expect was liquidity in to is going actually of to bank that buildup that this special because a But still forward, to my continue surprise. going lot period. there's money not

hear and You banks. a but they they're that, lot refrigerators doing by have of in the stories about and, still cars people money buying we know way, the

Carlos Vázquez

Yes.

Gerard Cassidy

Do Carlos. you ahead, go --

Sorry.

Carlos Vázquez

debit can Gerard, credit -- continues the you at actually the when client see look up our go that you cards. usage activity of our to and

they few a continuing spend them before. but probably to months will are money, that it So take

spends in client thing that a they chance a think a is, their that, remember account better-than-not retail commercial there's that spends interesting us, a to money a -- with becomes client other client of have of deposit The the about when when us. the money account in

there a in the deposit while simply moving is may back see moving, some and you reduction net -- forth. our balances So a money not is because secular it's effect that

a the right? things. little is goes there another a X of account flip the So that from in states, of money the If too. that true. of also client to here goes to bit of it Walmart, Now flow But is side the spends it's combination type

Gerard Cassidy

of or the permanent? use they sense of because say, guys on a and inventory we've determination liquidity, with Are higher Any run going like levels out they you're that to just permanently auto what there officers temporary? your Where, business. and could not be line margins? these have levels come when something just any let's be yet is through your clients, when could that this yet go and dealers, to very lower And shift and in auto your obviously this that higher you now big good. Very talk permanent

Ignacio Alvarez

inventory I Now I I -- they tell I heard clients. I think happen. that's don't to relatively can low part because getting more inventory. that. large been haven't get I you. can't going mean have levels out in are well, more see to think I But

are levels I for again, reduce competitive think going very people there once market be to margins. pressure off the to their

And mean, you're clients don't I will level so through think was many went in difficult also I of -- our where liquidity set. a I period -- tough when expect I king, it a situation. right,

because will hold they're the more always them think waiting are think take And whether see is decide will many I they think growth liquidity loan then recovery also, why to think expect I if you in hold. invest Carlos I to see we going later saying, and probably business. experience about more of But need want real. And expand. they miss to that's this So on people to not to to

they're increase capacity stretching just now, it. right So to demand have to their capacity, generate not some to their the stretch that's there. At point, they're going

for. waiting we're what that's So

Gerard Cassidy

positive in status. think some noticed it due of the Maybe first on the I in question, color how question, as the the part of baseline, that. in did for that quarter And rate us you assumption days your is? type credit unemployment trends to this this if that 'XX that credit is back we're found outlook hearing first for Rico. baseline unemployment it the the then which all what I rate the about economic Rico X.X%, And went Lidio. quarter, a I and XX on went past loan quarter to caused performing a for color construction could on The large follow-up you some And what give second, maybe go good. nonaccrual Very And was also X%. mentioned large that considering quarter, Puerto the now is the third then you allowance, on then Puerto second in in in was maybe

could So questions. if you you address those mind, don't if

Lidio Soriano

all Let me if beginning with first... or the I see three can remember

Gerard Cassidy

you. help I'll

Lidio Soriano

Okay. Gerard. Thank much, you so

-- non-COVID and products It in mentioned to who's company remarks, a get approved. trying off patent, related. I while FDA prepared its main is also get nonperforming product went As related new the relationship was to the have pharmaceutical they issues

X issue really the that's that company. So behind

related The second was question to...

Ignacio Alvarez

construction The loan.

Gerard Cassidy

loan. construction The

Lidio Soriano

relationship we into the that restructured was given a mentioned of process the but went while it this maturity. within we And our at therefore, in days was policy, within As in end the nonaccrual, quarter. the past XX -- or entered last renewal the webcast, refinanced

it why that's went So back current. to being

So relates it as as know, services Moody's as technical it use a then unemployment. to extent, you estimate unemployment delinquency. the was, you're aware, to rate, we or to call administrative And it let's certain

look baseline, true actually you XXXX. up went when though XXXX, it's even down it that think I at it went in the in

Rico went supportable look it improvement you a quarter-to-quarter actually overall was economic when we to X from down. -- overall at Puerto period, looking unemployment for recent other. rate from whole forecast that slight That's one mentioned the the for So why the --

Operator

next The Twerdahl Piper Instructions]. Alex is [Operator Sandler. with from question

Alex Twerdahl

some timings loan Just whether CDBG wanted the come that expectations. we the large more for you expect fair projects some different see to potentially I of construction rather being disbursements next of couple you by go Is that money my online in the back somewhat potentially guys some to the obviously, sponsored to projects understanding growth would could construction there's about meaningfully quarters some than and this of and components could, that for that know, expectations don't the Can get you across share the loan expect of talk year? impact those that's banks? those something disbursements and And can your balances you of that. of potentially

Ignacio Alvarez

Ignacio. FEMA The is This Yes. process quite complicated. is Yes.

a through will highway some state number be the such of gambit they that of that to some that handle be public done. So run projects road, authority, there's PREPA, as are across now the the LUMA done going which is And a by be funds. large will will

not for All where signed Authority the have the off them people many through XXXX construction and see permitting to the they finally sign Sewer disbursements going projects I to and lot go go FEMA now, these bidding is that of have have -- you're to will and FEMA. contract. tell And signed although and year has the through Aqueduct a be They process. they approved because be have municipalities. through always of and will a Some budgets that on design still that a to process. requires some

be stage. of more to are on think is big going think I fund, going that I obviously, be federal a the out we'll And dollars don't sort that. there'll because, of people architects see terms in and dollars. dollars XXXX out working There'll preparatory So

just of lengthy see going way see some big projects, projects, until works. requires the not XXXX, you'll the stage. bidding every And I But that's outlays think process because municipal to in outlay. It's the It a the you're smaller-scale big process.

work. have architectural You bid for to the

to the have construction for bid work. You

You permitting standard do in for gold permit. probably the Rico, we not the have to Puerto process. set Unfortunately,

that So complicates everything.

The in is market residential find you more I to will time. you think don't construction. land. sector, I So very That private construction the Again, residential home, think, -- hot. takes see got

but You -- permits. I construction, think got now. little in it's very to in supply seen to There's get going the in the very, very very But will you you're is definitely side private housing side, the tight the residential I public very, not only think the right market see available.

land zoneable not partly available. lot you'll see a time. takes island, So there's developers. of That an being Again,

be of think get it So much in don't also the I see the about Yes. happening get time huge, construction, along. big until don't that there'll land think, takes together, be XXXX to private going permits. terms That's FEMA. coming the But But to but I disbursements. only the of

Alex Twerdahl

of When about like of be you some sort be? can us of a of for the sort projects how And might you what give component those would big big some the sense disbursements, to finance? BPOP willing magnitude talk

Ignacio Alvarez

to improvements the have authority a assigned improving but right? it $X assigned for in basis, project Authority power, has $XX the to that. billion Sewer project been Aqueduct for been by don't and I on has power billion the

had big are millions don't the in of dollars. but couple Highway, on I another those highway So highway, hundred have number projects.

financed what of is a have we is doing of that being lot federal most been by So funds.

Our to contractors who do financing has like biggest date participation not work. been but the financing the has been project

the So in have they and advance put they work before these of funds to reimbursed. projects, get many out

lines more much and bit So private little our projects. a the these draw down to have increase different. it's their construction anticipate what side, is clients we of will that on Obviously, to happen will

finance think I that public the on construction case. the will the side, But really We there. don't is

the type I of think the people the thing. financing that of architects, involved, be materials, we'll contractors, suppliers the more

to where of our be that's financing. spot traditional instead sweet think it's I going project

Alex Twerdahl

the that jumbo we And meaningful guys lot next the as look that a is Okay. market the more is residential about to in years? Understood. But way? residential -- market you to the about offset out coming more back could couple help A And something and hot that of of you're of runoff pretty heard that selling them. mortgage then are we've lot doing conforming loans a being what now. or right

Ignacio Alvarez

this, of I mean think I couple to for wasn't now mean, can things one we're jumbo very I big the there's there. problem there's a there I right is nonconforming. before. developed I filling have it -- and we we managing limit how demand We're we And a Lidio Carlos a to because it. think add Puerto there's are this but much Yes. incredible seeing a things playing in of our Rico, appetite up think I market of seeing do don't on think want really where heavily nonconforming. in we're

As $X probably housing are we're $X mortgages [ph], history. we million in you Dorado, these never $X that million, making heard, million, our -- did Mayagüez

never residential things in lifetime of from in Rico. So we have. big seen in million, so our $XX million, saw not is getting low balance our the much selling never risk we lifetime. market our could much But environment, there too now. make definitely how holding sheet, want seen we've our rate in adjusting that being the we is bet we risk mean kind tolerance helping. here that $XX I we've for It's in mortgages for apart -- really a hot our issue interest this of that, Puerto Houses biggest on to

Alex Twerdahl

Wow. other for me. A couple of questions

here out. of year? could GOs kind deposits, out there terms public chunks can other look something in I this time. over is deposit Just that sense billion reach a deposits. have resolution we eventually better $XX But of pin you the when the know flow flows, down chunks $X -- once any I that different of as Do those billion could guys I for way the about at any or later I slug we that mean, flow there to of have expect timing you come know

Ignacio Alvarez

pretty Well, fast. comes I money the think and out the -- biggest COVID chunks in goes

don't I $XX they're up And the be not talking only the has to I biggest this is have disbursements. the but of there's they billion, to other so going don't about plan to about part think of pay GOs, I adjustment. -- of So said $X -- plan think billion project needle I mover as adjustment. plan adjustment of that money The

So -- It's mover with deal has big have it's couple in going issue. deal ways. of already finally it's was insurance, in almost And which Recently, reached progress. Committee, One, United Progress and the will the most out. seem biggest a and States. very agreement chunk that's Unsecured on bankruptcy a reached were because They not to be which probably forever, very a complex is active also probably finally front. of money a big nmonoline with one making been proceedings aggressive. but it's an go to there's have Creditors big of perspective made was going a of that to the they history change taken the of the the most

That really there handle pensions forward, pensions. the of And a the X% claimed they move that. pension so -- you -- is issue of know, been were any with the above amount as very they in government. the that's has accept big it controversial going is you month, to They X not provision they a as So be $X,XXX how claim The will left there. reduced.

left. last of that pulse big the that's So the really is piece

the year So of the judge moving of is the people should that end calendar. we are by next have year because expecting most resolution the a that or early

think at least finally very so get not a the debt. possible involving -- we're looking sure done. will government PREPA I solution, either central at So I'm

we're optimistic So pretty that. about

can its that's of what that then a little the Rico secondly, funds. And once it will so a to its be investing expect then differently. you maybe funds going I Puerto And using it government can big funds of start on, knows or outflow think bit count

they they can have we'll now, money that more what as expect on, I know when handle So normal the on, them parking us. you so But don't to how know think enter see they perhaps where with count But change somewhat. where they they they're their count to literally, for can can a environment just happens. they right money

Alex Twerdahl

related the rates room of reduce are of whole guys lot it. And a thinking some is I whether can not that of the maybe Got talk but you the to or I on imagine that about to about sticking increase you're fees that? then terms paying, there sort not topic of deposits is mean you rates, and deposits. the in how opportunity there's to case

Ignacio Alvarez

to And deposit clients They're get got with getting because and because don't tranches we're asset. market. reputation nickel deposit already your I interest a low Yes. want don't careful paying. the -- deposit there just a you be is low you hurt to long-term dime a in as

-- you income the -- related nice quarter, rise other in think to don't saw improve. of fee as do I and our obviously, in and expect of we economy a picks the think cards. We I to credit debit So up terms this no. deposit fees, sources But fees saw

continue there. the time our will to business up the of and insurance and continue recognize value as insurance, over out to we I think people need go build

we definitely franchise. So risk fees. for of it's But looking -- not in cannot deposit the value are put our we

the So we -- especially with everybody else competing. fintechs,

think come providing we clients. don't what more really That's for. our we services value from I to it where from will by deposit a can So It strive will get fees. be other be fee

Carlos Vázquez

Yes.

bring hard Puerto It's is continue hard -- the it of to Alex, On cost -- to down. deposit, Rico correct. the you're

done total in deposit Popular down pretty Our which XX a few probably room of back. to deposit close of we've points, to We're bring still quarters is basis XX job. down from of costs good best-in-class. points now we cost cost There, But basis deposit total is have some a Bank. do to

more bit U.S. mind there's still So of that also room our little the in a portion it's a keep deposit in smaller But book.

even there total muted. of effect getting some savings will overall the be in So

Alex Twerdahl

come last so impact asked year the ASR. think the XX% final out My I a me, of about everyone I seen for question accounting already, just well, behind we've call $XXX seen which as come on understanding is the the the shares out of we've but of that then equity share million understands that the full the count. but And Great. of just only

where And an of at adjustment so that correct? should quarter we see bit we the the to impact be third much share equity. a further, end of see shouldn't count but the reduced an there could Is

Carlos Vázquez

Your understanding is correct.

it well. described You

Operator

Brock follow-up Vandervliet a is UBS. next of The question from

Brock Vandervliet

this Carlos, the walk us if million of you $XXX million could expenses -- kind guidance? on just million review like the $XXX what up from $XXX to changing back to $XXX looked million, What's there? guide quarter the around and

Carlos Vázquez

of sort list what be be. the to But things. to are going X tried I going main Yes. the components to are drivers

expect course First, to our normal of of business. we compensation do is Part that expenses up. go

For do increases year example, in our major July. in the we

company. affected So higher by overall of naturally, in personnel the the compensation year, we'll second have half of the the also The is expenses. performance

excluded the Rico. have for Puerto as quarters, that we real, if would is in and we're lastly, outperform competition of the as couple So from expenses continue we first to talent for increase compensation not And well. that

bank. also seeing to that with have for have employees, the offer what so offer we're existing So to to that they employees, want new stay and stay what our we affect happy to

second have So because those -- break in of bit front continue will on compensation of a gotten a we The contribute that our to we're people behind quarter, little little the we higher expense. all a hiring components the in to need. that actually also bit

You went down our that number seen of slightly. may have employees

need a expenses. we little show got the on have that that, higher up all again because should haven't we a quarter hire will in want break to expenses can reflect that that to second Hopefully, been we did compensation this not people the correct So hire. we able of maybe and and been line simply in bit

had some X/X There be timing. to the and quarter. are projects in expenses that is scheduled of every Second of we sort expense

And started delayed. or projects been those have some just expenses of haven't simply or

to activities continue. projects these are those related So that

So happen. we year. later just They're happening the to still expect activities in those

it's And normal course expenses. we So in business. a up end think higher will lastly, of a that of little bit

the up. be technology And go to stuff, go better other costs feel seems clients bank more transactions, to that our cost every regulatory and up. and like are processing cyber trend. compliance from your going up. that costs something As world, to will Between and technology there's And our in we keep exception that will do unfortunately, nothing continue will no

the overall combination will of our things those increase So all expense base.

know, As average quarterly number. you our expense on we normally describe an

our And be. expenses year. on the on the best by to now. we range we correct the means guess You in by we expenses necessity will best that second slightly what that's will that our of described is the and hope two have quarters We that guess are the of beat two the way. this hope right below were in quarters be do first above will year, that that but range We to better,

Brock Vandervliet

And credit. Okay. on separately just

see about Given the pattern thinking where ahead the net better net to reduce get reserving. looking much looking would historically seen than reserves? a the lower further flexibility you're you to trying we're Just you've how that are, charge-off to need perhaps you'd backdrop, conviction have understand at to what charge-offs and economic

Lidio Soriano

thing, is to Well, scientific X past. mean the it than slightly for reserve more I used be in

model So a lot it of is driven.

through trends be improve as to environmental expect improve, low-end to low, with the be we that, account as but feel can reserve. continue we credit and maybe into you credit losses -- continue mean, performance, factors. much of the and is in which to in continue and taking performance So we that we should said quality, allowance to losses to outlook -- economic comfortable terms the the latitude, trend XXXX credit as continues driven seen think have we into the quality reasonably not economic not lower have that XXXX. -- outlook certain past of how by for allowance continue I or the should grow progress Having continue If rest

Operator

like I session. Ignacio back to Alvarez turn remarks. question-and-answer over for the closing concludes This our conference to would

Ignacio Alvarez

October much. today call. Thank and Have us you joining our forward a look weekend. for updating great We on to you very our questions. in Thank for all progress you your

Carlos Vázquez

you. Thank

Operator

Thank has presentation. now conference you for The today's concluded. attending

now may You disconnect.

Paul Cardillo	IR Officer
Ignacio Alvarez	President, CEO & Director
Carlos Vázquez	EVP & CFO
Lidio Soriano	EVP & Chief Risk Officer, Corporate Risk Management Group
Brock Vandervliet	UBS
Gerard Cassidy	RBC
Alex Twerdahl	Piper Sandler

Popular (BPOP) 22 Jul 212021 Q2 Earnings call transcript