Popular Q2 Earnings Call Highlights

Popular posted a strong second quarter with net income of $278 million, or $4.35 per share, up 15% from the prior quarter and 41% from a year ago. Management also raised its full-year outlook for net interest income to 8% to 9% growth and lifted its ROTCE target to 14% to 17%. The bank announced a leadership transition : CEO Javier Ferrer will retire at the end of August, CFO Jorge García will become CEO, and Chief Risk Officer Lidio Soriano will move into the CFO role. Popular also increased its quarterly dividend by 20% to $0.90 per share, pending board approval, and authorized up to $1 billion in share repurchases. Credit quality remained generally stable , even though some commercial loans caused charge-offs and non-accruals. Non-performing loans fell to $413 million and the NPL ratio improved to 1.04%, while management now expects full-year net charge-offs of 65 to 80 basis points. Popular NASDAQ: BPOP reported a stronger second quarter, with management citing higher net interest income, solid fee generation, balance sheet growth and stable underlying credit trends, while also announcing a leadership transition and expanded capital returns. President and CEO Javier Ferrer said the company earned net income of $278 million, or $4.35 per share, up $0.57 per share, or 15%, from the first quarter. Compared with the second quarter of last year, earnings per share rose 41%. Return on tangible common equity improved to 17% during the quarter. Ferrer also announced that he will retire at the end of August, saying he plans to focus on his health and spend time with family and friends. CFO Jorge García will succeed him as CEO, while Chief Risk Officer Lidio Soriano will become CFO. Luis Sousa will succeed Soriano as chief risk officer. García said net interest income increased by $23 million from the prior quarter to $693 million. The increase was driven by loan growth, fixed asset repricing and higher investment balances supported by deposit growth at Banco Popular de Puerto Rico. Net interest margin was stable at 3.66% on a GAAP basis, while taxable-equivalent NIM expanded three basis points to 4.17%. Ending loan balances rose by $460 million during the quarter, with growth in commercial and construction lending across both banks and continued mortgage growth at Banco Popular de Puerto Rico. García said the company’s loan growth guidance remains at the low end of the 3% to 4% range. Deposit balances ended the quarter at $70.2 billion, up $2.6 billion from the first quarter. Puerto Rico public deposits increased by about $3 billion, while customer deposits excluding public funds declined by about $400 million, which García attributed to normal seasonality as customers spent tax refund proceeds. He said Popular expects public deposits to be in the range of $20 billion to $22 billion for the rest of the year. Given favorable funding trends in Puerto Rico and balance sheet growth, García said Popular now expects net interest income to increase 8% to 9% for the year. Management expects NIM to remain generally stable for the rest of the year. Non-interest income increased by $15 million to $181 million, coming in above management’s guidance range. García said the increase reflected continued strength in debit and credit card activity, as well as asset management and insurance fees. Popular now expects quarterly non-interest income of $165 million to $170 million for the year. Operating expenses increased by about $17 million to $484 million. García said the increase was primarily tied to higher per...