BPOP - Earnings call transcript Q2 2024

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Operator

Hello, and welcome to the Popular, Inc. 2Q Earnings Call. My name is Elliot, and I will be coordinating your call today. [Operator Instructions]

I'd now like to hand over to Paul Cardillo, Investor Relations Officer at Popular. ahead. go Please

Paul Cardillo

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

Before are would may that forward-looking expenses, as I plans structure we today's results statements risks cause on SEC Popular's set and revenue, These that could regarding filings. capital of and differ uncertainties. Factors to forth subject such release to you begin, as remind forward-looking based to like statements within statements well Popular call, earnings, expectations objectives. are make statements actual and our from on we and projections materially as taxes regarding these management's earnings are today's and current

our today's web popular.com. You may at page release our on SEC press filings find and

the now CEO, I Ignacio turn will to over Alvarez. call our

Ignacio Alvarez

Good call. morning, for thank and the you joining

returning the shareholders. Please actions of X. to a needs franchise of $XXX the second while serve am continue to our a million our in per first of share, quarter, turn evidence capital that customers dividend in for I the strength invest and position, pleased payable our stock announced highlights XXXX to our the Slide XX% quarter today common These authorization. $X.XX allows I we quarterly in also to to $X.XX Before report increase repurchase and our to common discuss from the dividend commencing which us with stock capital the

to pleased second achieving $XXX report of income million. are a quarter, We net strong

by the second net of higher and tax impact driven assessment in quarter million. increased FDIC the the quarter, by credit income matter income losses. provision and first on The lower results results were the special for for net the interest $XX withholding Excluding

quarter. Our ending loan balances increased the by million during $XXX

growth BPPR construction $XX almost of government decrease in driven segments. driven by Rico $XXX offset that by across approximately growth Deposit achieved million, increased a payoff balances in balances saw by Popular level loan loan loans. $XXX million growth million higher reflecting of commercial deposits. $X.X lending loan billion all Bank Puerto

basis a net interest X in points driven higher by reinvestment million costs. rate offset Noninterest to and increased balances partially million. income deposit mainly securities higher the Our average by margin increased $XXX repricing higher of environment. was interest X.XX% by and loan $X loans by of This to

quarter additional charge-offs, tax the Excluding expense, with and lower by in assessment increased Credit professional by fees quality associated inflows. million costs. NPLs trends period the prior improved the the and NPL $X expenses driven transaction-related expenses operating FDIC and net special with

credit our The Tangible portfolio. have lower increased income segments our consumer trends investment by net by losses unsecured in quarterly unrealized driven stabilized. $XX.XX and in share per book $X.XX Rico of the Puerto value

sales card Consumer compared Please healthy. quarter XXXX. by increased Combined to of debit to credit Slide X. second remained and the turn spending X%

loan to and continue auto be cars strong the Puerto Our for demand million compared new by Rico. first quarter increased to as lease in balances $XXX

Business to purchase Rico in BPPR quarter be sector continues at home trend increased reflected Mortgage tourism our to and total portfolio. by loan and primarily loans as in a consumer data. solid and strength employment, million remained the for activity activity retain balances economic by the of economy. hospitality source in local Puerto other FHA spending The positive in second the strategy $XXX driven in existing

by Juan compared of to quarter the second San Passenger International at Airport XXXX. in quarter second the X% increased traffic the

rate daily the first in the the average up slightly RevPAR same in period flat occupancy Hotel year compared year-over-year a of And ago. were was to year-to-date half XXXX.

federal a will is pace support of for disbursed. to several years. economic yet has activity have disbursement The they significant of we be committed funds accelerated, that amount that and of anticipate There these funds

well the of remain the future short, optimistic clients our In We primary and we where in pleased the the in quarter, year. and Puerto our credit interest Rico, market outlook about income balance net to support and the growth particularly helped to positioned metrics performance financial improved our our are with optimistic are continued loan improvement increase years. -- for coming support our during contribute for of

for to financial on now I Jorge On turn call note, our the results. details that more over

Jorge Garcia

and the joining Ignacio. you, today. for morning, Thank Good call thank you all

Ignacio reported million in higher we adjusted than quarter, the income stated, $XX $XXX period's prior million second net the As results. of

We expansion million. pleased the results, with and particularly are income the NII the increased of growth core interest Net NIM. by $XX the

this increased driven by margin by on and XX and securities commercial of interest and remains led basis saw in GAAP tax-equivalent auto improved Loan X all Puerto strong. a basis growth mortgage to net driven by by higher repricing lending, the across Our categories a X.X% underlying BPPR originations. The quarter basis we nearly Rico points growth where balances. basis year-to-date points activity loans on loan and economic

we U.S. the our to However, at continues of for market be year. anticipated beginning than the had demand credit the in less

towards deposits excluding to the result, were BPPR. X% in outflows now offset time original at expect we at Bank of public customer by as increases guidance. Consolidated Rico low flat loan Puerto were to X% deposits, our deposit end a be Popular As growth consolidated balances,

However, average the higher, deposits. were balances including customer during quarter noninterest-bearing demand

QX public tax end Rico Puerto related year-end of to $XX.X range. guidance deposit the typically $X.X and peak compared upper the end billion, is of At were the in above is and QX quarter, our receipts. up mostly billion the public balances deposits second to

$XX in the deposits our billion of of billion Normal rest we of By the for year. balances $XX near upper these to lower to trending XXXX, should expect annual result end guidance. seasonality the end the public be

$XXX accounts part managed government-related of rates, higher low-cost of NII, fiduciary million the by to balances services of market-linked While benefit our quarter the during were higher balances. the repriced public deposits higher group offsetting approximately contribute to in

the of shift XX%. result in our to mix expect slower now deposit loan along deposits toward higher-cost year-over-year we to with a in growth the be a the X% U.S., growth As NII of

was $XXX credit increase an income debit transaction Noninterest driven higher customer activity. card from $X of QX and million, card by million from fees primarily

million We continue income $XXX to to $XXX to expect quarter. approximately be noninterest million per

$XX very also During first to quarter, for in were metrics. improvement losses quarter. was see second lower than The credit the we credit the million continued the million $XX of provision pleased

or last expense. These The million to operational increased incentive taxes. driven were increase offset than expenses adjusted personnel which activity. fees quarter's awards Total and operating by the by client are expenses to higher million were operating losses was $XXX professional due for payroll tied related year $X reserves and expenses expenses, in due traditionally higher and during to transactional the lower of increases part quarter annual the higher first advisory

expect XXXX of total $X.XX We to a in billion billion. continue $X.XX range expenses to

from Our in rate for the exempt quarter XX% the the benefited quarter. certain tax income tax XX% and during as effective was we tax credit rate quarter a tax compared prior higher to adjusted

the driven Slide an a increase taxable for to points. was of XX%. Please yields continue tax by BPPR XX% We Net earning X.XX%, basis, by Bank. rate balances. to in X interest effective equivalent The NIM to X. partially expense basis the On due to public deposits on increase higher XX points. by of increased Popular asset at the offset year turn to expect This balances be margin time average range was at higher and was of and interest benefit deposits increased deposits basis

quarter, are Puerto portfolio benefits X.XX%. points tax This low-yielding the tax portfolio the exempt by short-term in to in to Rico. XX we improved the maturities of the that During as reinvested yield basis contribution are see T-bills in continued effective the of the securities investment

points to of total cost total deposits X.XX%. The public deposits. X increased total to the continued by by the BPPR, deposits proportion basis BPPR of at costs be impacted deposit In to

cost an deposit XX increase in a by when Bank, increased points points of reflected stabilization quarter. basis the X compared Popular basis significant to This At change during QX.

to continue expect rest of expansion NIM the XXXX. We throughout

capital levels Please Slide remain strong. X. turn Regulatory to

per points increase value $X.XX end Our QX. was an of XX Tangible quarter QX. CET the $XX.XX, ratio of basis from the of share XX.X% book increased per from at share by

to Return common tangible on basis quarter points XX.X%. improved equity the in by nearly XXX

to target a the by on sustainable continue XX% tangible We common equity return of XXXX. end

announced increase As share in Ignacio an $X.XX our mentioned, to of we common $X.XX. per dividend quarterly

the dividend QX repurchase in approve We in a payment quarter and Board for common stock expect $XXX declare of million authorization. XXXX first our and this to

financial performance. various execute open position timing will expect repurchases market repurchases conditions, and and capital We of the quantity be the The to the our to in factors, including market. subject stock

SEC We on activity our webcast will earnings filings. provide quarterly part updates as our of and

turn I call the over to With Lidio. that,

Lidio Soriano

quarter the portfolios. mortgage morning. for credit Thank and pre-pandemic Jorge, you, first metrics Rico's while continue quality portfolios with from Credit the consumer metrics good Puerto to corporation's below metrics and normalize reflect quality significantly credit to levels, commercial continue improved

loan in given pressures higher book. by and to our and performance, continue inflationary the changes interest closely of monitor [indiscernible] We environment macroeconomic the rates performance but on encouraged remain

and million decreased across a $XX a enter million at Slide NPLs inflows million. that while in inflow. to inflows real loan nonperforming driven inflows in segment higher to loan, remained OREOs $X by BPPR NPLs as single in portfolio million Popular by $XX $XX driven improvements of BPPR total segment. NPL in remained flat during activity total NPL, $X In driven million $XX quarter by Bank estate increased mortgage X%. of commercial ratio the million, million. the most by to NPLs by part Nonperforming BPPR return Bank, property. Inflows million Popular by by flat assets $X loans in last commercial $XX million reflecting commercial The by #X. of mortgage included of a sale the the a Turning decreased categories. NPLs decreased the by mortgage higher offset driven loans quarter by accrual offset loan by decreased BPPR, inflows, in by held $X decreased

driven by consumer charge-offs lower $X by of decrease driven million. Turning quarter. million loans average lower basis decreased $X or net million lower charge-offs held by $X to in lower million Net to auto charge-offs points Slide million the consumer commercial $X prior were in points million to $XX $XX million. amounted loans or XX XX in by personnel $X by annualized BPPR compared #X. The by and portfolio in Net by basis and

In Popular charge-offs $X lower to net consumer decreased charge-offs. by Bank, net due million

the first initial full our half performance year be now points. we basis for year Given near to half, charge-offs our net of end of the guidance expect credit of XX second to the outlook the low in and the XX

decreased macroeconomic losses offset as commercial million. $X loan changes Please for in credit the increases ACL by and million driven to BPPR, by qualitative remained $XXX reserves scenarios by #XX. higher in were turn the volumes, quality flat net to Slide and charge-offs. The allowance In changes higher loan

$X rating to NPLs improvements. reserves risk In commercial to by slightly improved Popular portfolio while from ACL XXX% XXX% driven in The Bank, loans quarter in ACL slightly corporation million by X.XX%, the previous the the portfolio to quarter. this from ratio for held the decreased to decreased of X.XX% ACL lower due to mainly ratio of

in to billion The in the the was provision losses, BPPR, $XX in lower quarter. was improvements compared compared $XX to quality Bank, $X million while expense of in million reflecting $XX $XX million to changes provision was first an benefit In quarter, for credit a million the loan of the scenarios. $XX provision and to macroeconomic losses Popular compared prior million

encouraged our the quality metrics remain improved by the quarter. second of loan credit during summarize, performance And To book. we

concluding that, I call to Ignacio turn his for the like remarks. would With to over

Ignacio Alvarez

updates. and Thank you, for Lidio Jorge, your

interest Our net results XXXX quality. first expanding interest credit improved margin net the were of and by for driven strong and higher half income

over We our transformation to on and are customers drive continuing better execute our serve time. to returns

of the We are unique about maximize am for investing franchise. in prospects our relationships opportunities optimistic talent and the year. and I the inherent our in with our clients technology to remainder deepen

Puerto continue positioned are activity positive, well Rico Business participate in is expected in coming to we be the generated economic trends years. that to to in and be the

to We to Puerto leading are proudly institution banking we the that serve. responsibility communities and mindful have we the as of Rico all the

our annual report. sustainability June, we released In corporate

environment continue We the focus protecting and progress, for on trust. promoting to opportunity providing

transactions Puerto largest approximately highlights the One in the to enough the needs of the to the Rico: of in included of sector report homes a farm Rico. financing of solar Puerto of that renewable in date produces X,XXX supply one energy the electricity

ensuring our with continued to for starts to opportunity their our dedication remains contribute to work. our in all commitment customers and providing Finally, want and to Popular I a community serve our great colleagues place success. thank

We questions. are now your to ready answer

Operator

first Our KBW. comes from Instructions] with [Operator Kelly Motta question

Kelly Motta

with It than to I quarter out at a I had sooner certainly would like start the expected. plan. came capital least

outlook Just this we've with and the capital wondering, anything out we your know thinking guys in how with that were about the position July? wondering, stepping the about waiting comfort out is of changed stock? run in you're where before be you terms in allowed come terms of thinking especially with constraining any should you're the Has on And in also in guideposts outlook the with the buyback, capital coming what ahead I had some with ratio clarity something. and viewing you your to for level

Ignacio Alvarez

We what appropriate the And analysis And book thought people group. capital investors. given we the management was from we on were went future. very worked amount, statement We of return. authorization our our circumstances. some $XXX and we a us hear our credit Yes. million conscious our Obviously, the wanted very Board through hard with on that is that and the where about we thought

our thought was that given increase dividend important. We the view also

the I think piece puzzle. that's of an important

So in obviously, the that future. shows our confidence

of think valued. to We the purchases. going terms do market we're going, In open stock still fairly is we're where

in still So especially I is but and that, we stock insight [indiscernible] that the than valued, industry. to -- the our really peers more we others relative fairly believe

Kelly Motta

Got it.

some projecting with being And meaningful? the the then does growth to reduced, on NII that currently this clarification, XX% Okay. somewhat a or a there just of FTE an FTE point outlook with are you're X% this helpful. adjustment year, moving make the it basis for really GAAP is that year parts That's because that

Jorge Garcia

Yes, is all Yes. Kelly. basis. our guidance GAAP the question, Thank you for of

Kelly Motta

ahead, off outlook thinking government now to the given year-end? be balance we your sheet it. now, the about relatively deposits with Got That's government should that in at helpful. flat as for here, and between billion look movement we're And $XX.X decline of funds level being as we from

Jorge Garcia

would I the mean I certainly -- movement. expect if

with see sheet in would off the If be balance a alternative we leveraging of not you decrease sources deposits, liquidity.

a that's that or public fair terms in around So of I think statement funds. of of level more decrease less

Operator

We now turn to Timur Braziler with Wells Fargo.

Timur Braziler

how that just low-cost that will government the those managed drove deposits fiduciary the were quarter, And that? from repriced an standpoint what XQ in much $XXX on headwind this of by did services happen of Wondering million wondering from average a When quarter? flow into actions?

Jorge Garcia

Timur. you, Thank

into our First, the baked repricing guidelines. is

account the the the think repricing. So our updated takes guidance of into It happened at June. this quarter and towards beginning I end of

question I there's other Timur. know So there, part if of the don't any

think... I

Timur Braziler

That's business? helpful. And then just that what drove

Jorge Garcia

mean, these I know, you are relationships. client As

and we We react have with clients. communications coverage And conditions and market to client our expectations.

Timur Braziler

guide? maybe Okay. the revision on was updated much the question. How an just driven then on of the up year FTE update that And by in just us give FTE? Kelly's where following expect Can for FTE you context you of

Jorge Garcia

FTE guidance usually basis. don't we give on Timur,

tax least is The So provide allows rate, you GAAP do flow guidance all a the sense -- you rate our get tax EPS. of to to we it so the at basis.

Timur Braziler

should But tax-advantaged played T-bills? has remixing we expect further into out? Okay. reinvestment Or largely

Jorge Garcia

growth. As our you invest loan in portfolio. fund have we $X in currently investment We a T-bills remember, or quarter in billion probably continue to about maturities

I'll -- taxes [indiscernible] we potential the But for ultimately, tax So and haven't rate. our securities. exhausted again, effective

Timur Braziler

as less authorization this the And the or for will January to Board July? then for we've million more Or Is for year, a and a year just from seen last now the take we it. the in place decision Got buybacks. past? $XXX next expectation or a Board in go that Okay. is me, cadence around just back authorization

Ignacio Alvarez

authorization. open-ended on specific No. limit. change, This know. And is is open-end have if it. limit with you an authorization time this we authorization. don't this But no will We time a things we'll under execute let an And

Jorge Garcia

back to go January the conditions. react flexibility to We're We to not cadence. expecting market the to to annual have want

Operator

comes Jared Our Shaw Barclays. from next with question

Jared David Shaw

-- guidance expense just fees? what's to the guess, we expect should fees range, see see should if get expect to we we, And pace your growth? into and Maybe first, to faster where of where expenses lower look at a I

Jorge Garcia

Let's expenses. are merit for our costs expenses expenses, in of about seasonality example, increases, talk the our a portion Various personnel first. significant

increase is Our merit schedule summer. in the

So will half expense that is an in that expense or incremental be we'll year. an see accretive second that the of the

throughout the around are We year. These technology. to the not professional transformation, have continue symmetric efforts fees,

So terms to of income. income, lot of in that are fee there a fee components

equity a investment transactional any down And it up pickup I or there's are $X of million mean $X activity unusual from the clients. Some frankly, of Republic, in from variance. Dominican in not [indiscernible] variances. or an in million our comes quarter, lot it's -- there

Jared David Shaw

credit, And as consumer we seen think to to And move then of for credit out? is you room Okay. the a should trends Is ratio charge-offs, right. peak look All ACL expect this in lower? good when at where charge-offs still settle Or loans? do rate that see we a that here? there we've

Lidio Soriano

A the that, forward. economy are what economy -- feel you the the lot and we asked, of We to the going comfortable and for economic outlook is of or going the dependent. economy with state be

the mean net So rate of charge-off on top depend the economy. little that. ACL on I the of a and will the

Jared David Shaw

the still so you But pretty point, general confident at Okay. trajectory sounds though, it on this feel right now, like?

Lidio Soriano

We Yes. do.

Operator

RBC. to Cassidy turn with Gerard We now

Thomas Leddy

lower of Gerard. some of range. periods, consecutive solid overall of end have growth peers you negative in This Loan growth remained has while loan pretty the have is your seen acknowledging recent Thomas on guided several calling quarters, Leddy growth behalf for to guys your now

could from actually guys tailwinds here the historically projects come ahead, the of for the remaining sort sort construction growth island as for have referenced look given of accelerate loan some BPPR specifically, online? of idiosyncratic you As you

Ignacio Alvarez

This is Ignacio.

reiterate we we've the think I guidance would given.

in about I think pretty activity good economic Rico. we Puerto feel the

of a activity, island, entrepreneurs locally. seeing economic outside lot are positive the We investment from

we loan Rico. results, So seeing pretty feel Puerto the growth saw And on we are good. you as

is growth U.S. that What's holding slower than -- lot the real been that U.S., of peers us bit that on our a we and expected. especially back little slower loan a the estate, commercial focus many in has like

we a about has again, guidance. We feel that good the So slower bit general, than in reiterate but been we had Rico, we feel expected. the Puerto U.S. actually

Thomas Leddy

Okay. us your appetite you just the more growing That's a in actually environment regarding for I mainland what's give end some guess pretty of to of helpful. broadly, credit early next year? to then this year uncertain the back color face then can remain And that portfolio and expected in

Ignacio Alvarez

say, obviously, looking we -- real careful, We're estate the the banks, we've but with we we most in portfolio that I with at but very comfortable generally, commercial would we're I comfortable know as have, been [indiscernible]. sector, portfolio we have are market. had. the prudently being And the especially been

of sort growth So make from area there in cautious. of others pressure again, your is regulators in sure to a lot general is that and

of So rest market, the real we'll estate. the like commercial be cautious

the just have other from. we're see that growth with expecting areas some we'll to I But we're an be we else. cautious association, everyone think But commercial hopeful. real area yes, estate, The like is condominium that more

Operator

now to with turn Instructions] [Operator Vargo UBS. Samuel [ We ]

Unknown Analyst

lower-cost that's how can repriced, I you question. you more a between balances? lower to and yield difference have sort give the And sense cost the of million turn government for the $XXX one? already just reset any to for the much of wanted After deposits been original back in those do

Jorge Garcia

as in specific you levels see give are on We're I going Yes. that would you to tell these the information time deposits. can yield, deposits categorized reset. the in not

the levels in sense You increase in can our the of a cost and that schedule. yield get segment of

large of or of reprice terms cost, amount to In are I'm low subject any aware repricing. not significant other would that

Operator

KBW. have a We follow-up Motta from question with Kelly

Kelly Motta

have could in. sneak I I X questions, if

on rate. within full good I point for think impacting rate tax of year know a you starting be down on that on basis, it forecasting and guide had The some year? income tax-advantaged a the The would a from brought first last, range, last fair the I is discrete just you tax is clarification to but XQ considerably half the -- to quarter this back also -- items say quarter. this

Jorge Garcia

have I recur. some think the did not mentioned, discrete as events may you quarter that

X, is not I that that So something would certainly guess. times multiply

I mean, the we've given So guidance.

of -- think so quarter what guidance, first on it's to [indiscernible] what you it. think can get you work can GAAP and was, you sense I know the second I achieve quarter, the a

Kelly Motta

about Bank. couple And considerable enough. as subsidiary. I hoping in if could sell talking Fair stake gain those well at you a of was banks seen the minute We've insurance your spend a then a Dominican as your

there's wondering management these that? and viewing Just could gains businesses harvested how if is be any that potential from

Ignacio Alvarez

Yes.

have saying current look we don't it's -- plans but in of Let not we either at always Obviously, me to our investments. any those every start by any we business, plans. like sell opportunity, current

the that's steady It income In a of a very for terms successful quarter. produces us. BHD, amount every investment been of

also mentioned, produce very good. the well-run They a has the growing been which brings dividend, economy. money in company. to bank As It's a cash pickup a holding equity

we'd to better have for much our So money. use have a

But now, to not The it would be be we're going of so -- -- right think tax business really, looked selling investment. at hold it. implication I great, the we Republic Dominic wouldn't that that

for Rico it's of by citizens add of a embedded comprehensive important of -- many become Puerto value And clients. and I bringing we in the in is thesis can And our we services. very our It's think more where the things of an underinsured, us. in one is we insurance area them how can insurance, are one of think our suite to lives

would sell. we something my right not in that's mind So that now,

an and like it's it. business, our I important we of fee think part

Operator

I Alvarez, remarks. our hand closing now Ignacio This back concludes will to for Q&A. CEO,

Ignacio Alvarez

results questions. in today to joining for much. Thank you look talking and very very you third quarter we to forward Thank updating you and us October. And your for you our again much on

Operator

thank you for like call today's has Ladies and your concluded. to now participation. We'd gentlemen,

disconnect your now lines. may You

Popular (BPOP) 24 Jul 242024 Q2 Earnings call transcript