Earnings call transcript: Popular Inc. beats Q2 2025 earnings expectations

Popular Inc. (BPOP) reported strong financial results for the second quarter of 2025, significantly surpassing earnings estimates. The company’s earnings per share (EPS) came in at $3.09, exceeding the forecasted $2.52 by 22.62%. With a market capitalization of $8 billion and a P/E ratio of 12.13, the bank continues to demonstrate solid fundamentals. This earnings surprise, coupled with a robust revenue performance, has influenced a positive market reaction, with shares rising by 1.2% in pre-market trading. InvestingPro analysis reveals the company maintains a "GOOD" Financial Health Score of 2.65, supported by strong profitability metrics.

Key Takeaways

• Popular Inc. reported a 22.62% earnings surprise for Q2 2025.
• The company’s stock price increased by 1.2% in pre-market trading.
• Strong loan and deposit growth contributed to financial performance.
• Net Interest Income and Margin showed notable improvements.
• Continued focus on digital innovation and customer experience.

Company Performance

Popular Inc. demonstrated solid performance in Q2 2025, with net income rising to $210 million, up by $32 million from the previous quarter. The company’s strategic focus on loan and deposit growth yielded positive results, with loans increasing by $931 million and deposits by $1.4 billion. This growth underscores Popular’s competitive strength in Puerto Rico’s financial sector, further enhanced by its innovative digital platforms and customer-centric approach.

Financial Highlights

• Revenue: Not explicitly stated, but strong growth implied by earnings beat.
• Earnings per share: $3.09, up $0.53 per share from the previous quarter.
• Net Interest Income: $632 million, a $26 million increase.
• Return on Tangible Common Equity: 13.3%.
• Net Interest Margin: Expanded by 9 basis points on a GAAP basis.

Earnings vs. Forecast

Popular Inc. delivered an EPS of $3.09, significantly surpassing the forecast of $2.52. This 22.62% earnings surprise highlights the company’s operational efficiency and successful execution of its strategic initiatives. The magnitude of this beat is notable compared to previous quarters, indicating strong financial health and market positioning.

Market Reaction

Following the earnings announcement, Popular Inc.’s stock price rose by 1.2% in pre-market trading, reflecting investor confidence in the company’s financial performance. Trading at $116.60, the stock is near its 52-week high of $116.80, with an impressive year-to-date return of 24.3%. According to InvestingPro Fair Value analysis, BPOP appears undervalued, suggesting potential upside opportunity. This positive reaction is aligned with the broader market trends, where financial stocks have shown resilience. For investors seeking similar undervalued opportunities, check out the Most Undervalued Stocks list.

Outlook & Guidance

Looking ahead, Popular Inc. expects a 10-11% growth in Net Interest Income for 2025 and aims for a 12% Return on Common Equity by Q4. The company’s dividend has grown by 12.9% over the last twelve months, demonstrating commitment to shareholder returns. The company remains focused on enhancing operational efficiency and customer experience, with a long-term goal of achieving a 14% return on tangible common equity. These projections are supported by ongoing federal disaster recovery funds in Puerto Rico, which are expected to bolster economic activity. InvestingPro subscribers can access 10+ additional exclusive insights and a comprehensive Pro Research Report for deeper analysis of BPOP’s growth prospects.

Executive Commentary

CEO Javier Ferrer emphasized the company’s commitment to shareholder value, stating, "We are committed to generating value for our shareholders." CFO Jorge Garcia highlighted the competitive landscape, noting, "We compete every day for our customers, on service and sometimes on price." Ferrer also remarked on the economic benefits of federal funds, saying, "We are seeing deployment of those [federal] funds in Puerto Rico."

Risks and Challenges

• Economic volatility in Puerto Rico could impact financial stability.
• Rising interest rates may affect loan and deposit growth.
• Competition in digital banking could pressure market share.
• Regulatory changes may introduce operational challenges.
• Dependence on federal funds for economic support poses a risk.

Q&A

During the earnings call, analysts inquired about Popular Inc.’s exploration of stablecoin opportunities following the Genius Act approval. The company also addressed questions on deposit seasonality and loan growth prospects in both Puerto Rico and the U.S., emphasizing their focus on deposit retention and competitive strategies.

Full transcript - Popular Inc (BPOP) Q2 2025:

Elliot, Call Coordinator: Hello, everybody, and welcome to the Popular Incorporated Second Quarter twenty twenty May. My name is Elliot, and I’ll be your coordinator today. I’d now like to hand over to Paul Cardillo. Please go ahead.

Paul Cardillo, Unknown Executive, Popular Incorporated: Good morning, thank you for joining us. With us on the call today is our President and CEO, Javier Ferrer our CFO, Jorge Garcia and our CRO, Lidio Soriano. They will review our results for the second quarter and then answer your questions. Other members of our management team will also be available during the Q and A session. Before we begin, I would like to remind you that during today’s call, we may make forward looking statements regarding Popular such as projections of revenue, earnings, credit quality, expenses, taxes and capital structure as well as statements regarding Popular’s plans and objectives.

These statements are based on management’s current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these forward looking statements are set forth within today’s earnings release and our SEC filings. You may find today’s press release and our SEC filings on our webpage at popular.com. I will now turn the call over

Jorge Garcia, CFO, Popular Incorporated: to our President and CEO, Javier Ferrer.

Javier Ferrer, President and CEO, Popular Incorporated: Thank you, Paul. Good morning, everybody. I’m happy to be here with you in my first earnings call as CEO. I’d like to take a moment to recognize the impact that my predecessor Ignacio Alvarez had on this company during his tenure as well as on me as a colleague and a friend. It is an honor to follow such a great leader, so thank you, Nacho, for your partnership.

I am humbled by the opportunity to lead this iconic Puerto Rican institution. For over one hundred and thirty years, Popular has consistently demonstrated a deep commitment to Puerto Rico, its institutional values and putting our customers at the heart of everything we do. I joined Popular almost eleven years ago. I knew that if I wanted to make a meaningful contribution, this was the place to be. This idea, simple and yet powerful, continues to inspire me.

Before I discuss the highlights for the second quarter, I am pleased to report that we recently announced two capital actions, a new incremental common stock repurchase program of up to $500,000,000 and a 7% increase in our quarterly common stock dividend to $0.75 per share. These actions evidence the strength of our capital position, which allows us to continue to invest in our franchise and serve the needs of our customers, while also returning capital to our shareholders. On slide three, we share a few highlights from the period that reflect our strong operating performance in the second quarter. We reported net income of $210,000,000 and EPS of $3.09 per share, an increase of $32,000,000 and $0.53 per share respectively compared to the first quarter. Importantly, the improvement in our bottom line resulted in a very strong 13.3% return on tangible common equity.

Our results were driven by higher net interest income and expanding net interest margin and strong loan and deposit growth. We maintained our credit discipline and credit quality continued to improve. I would like to commend the lending teams at Popular, which grew loans by more than $900,000,000 during the quarter. As a notable example, we served as agent bank for a $425,000,000 loan to the private sector entity that operates and maintains several toll roads in Puerto Rico. This transaction is one of the largest infrastructure financing in Puerto Rico executed entirely by local financial institutions.

Please turn to slide four. As of the end of the second quarter, business activity in Puerto Rico continued to be solid as reflected by favorable trends in total employment, consumer spending and other key economic data. The unemployment rate of 5.5% continues to hover around all time lows. Consumer spending has been resilient and remains healthy. Combined credit and debit card sales for Banco Popular customers increased by approximately 4% compared to the second quarter of twenty twenty four.

Home purchase activity continues to be strong as demonstrated by the $158,000,000 increase in mortgage balances at Banco Popular during the quarter. While demand for new cars slowed somewhat after a very strong first quarter, we saw our auto loan and lease balances increased by $76,000,000 during the period. The tourism and hospitality sector continues to be a source of strength for the local economy. This summer, the sector is benefiting from an added tailwind during what is usually a seasonally slow period due to Benito Martinez Ogasios, also known as Bad Bunny’s thirty ninth concert residency at the Coliseum in San Juan, right next to our Popular Center complex. Conservative estimates indicate that it will lead to approximately $200,000,000 in additional local economic activity.

It is also generating significant media exposure for the island, to its strong image as a compelling destination for travelers. The Popular brand is very well represented in the residences. Additionally, some colleagues and I recently had an opportunity to attend the rebranding of an emblematic hotel property in San Juan and tour one of the island’s new luxury hotel and residential community developments being built on the East Coast. It’s encouraging to see the scale of private investments being made on the island. And last, but certainly not least, we continue to expect that the ongoing disbursement of federal disaster recovery funds will support economic activity for several years to come.

Given what we see every day, I am convinced there are opportunities for growth in Puerto Rico and that we are uniquely positioned to leverage them. We do not take our market position for granted. We compete for it every day and are strongly committed to promoting the island’s progress as we have done for over one hundred and thirty years. Before turning it over to Jorge, I would like to briefly comment on the status of our transformation. These efforts are designed to enhance our customers’ lives through more personalized and seamless experiences, increase employee performance and satisfaction with more agile work processes, modernize the company’s technology to enable greater innovation and security and generate sustainable and profitable growth for our shareholders.

A company wide multiyear program such as this one requires commitment, focus and patience. We are pleased with the substantial progress we have made so far. We have modernized branches to enhance customer experience and operational efficiency, reduced loan processing times for small and mid sized commercial customers at Banco Popular and launched a new digital platform to improve our commercial cash management services. These are only a small sample of the many efforts completed and in process that will ensure we are the number one bank for our customers. I am confident that we can improve how we work by becoming simpler, more productive and more efficient.

We will continue to leverage our position to size additional opportunities for growth in Puerto Rico. I am convinced there are many to drive increased profitability and continue enhancing our performance in the coming years. It’s only been a couple of weeks since I officially began in this role, but I’m excited to show everyone what we can achieve together with even greater strategic focus and agility. I will now turn the call over to Jorge for more details on our financial results.

Jorge Garcia, CFO, Popular Incorporated: Thank you, Javier. Good morning and thank you all for joining the call today. As Javier mentioned, our quarterly net income increased by $32,000,000 to $210,000,000 and our EPS improved by 21% to $3.9 per share. These results were driven by better NII and noninterest income and a lower provision for credit losses offset somewhat by higher operating expenses. There are numerous positive to highlight this quarter, but most significant for us is that the improvement in net income coupled with our repurchase activity resulted in a 13.3% ROC fee for the period, an increase of 190 basis points from last quarter.

As we have mentioned before, our objective is to deliver sustainable financial results. Our prior guidance of achieving at least a 12% ROCCE in Q4 of this year still stands. Additionally, given this quarter’s results and credit outlook, we are increasingly confident we should exceed a 12% ROCCE for the full year and not just in Q4. Longer term, we remain focused on achieving a sustainable 14% return on tangible common equity. Please turn to Slide six.

Our net interest income of $632,000,000 increased by $26,000,000 and was driven by balance sheet growth, asset repricing in our investment portfolio and lower deposit costs in both of our banks. Our net interest margin expanded by nine basis points on a GAAP basis and 12 basis points on a tax equivalent basis, driven by lower deposit costs and a larger balance of loans and tax exempt investment securities. After a slow Q1, growth of $931,000,000 in the quarter was very strong with both banks contributing to the increase. At BPPR, we saw loan growth of $681,000,000 reflected across all portfolios, but driven primarily by commercial and construction lending. This includes the $265,000,000 that we retained from the toll roads financing that Javier described earlier.

At PV, we saw loan growth of $251,000,000 driven by commercial and construction lending. Last quarter, we guided to the lower end of the 3% to five percent low growth range due to expected payoff in our construction portfolio and the uncertainty in the economic environment. However, given the loan growth realized in Q2 and continued demand in Puerto Rico and in our niche lending businesses in The U. S, we reiterate our original 3% to 5% guidance. In our investment portfolio, we continued to reinvest proceeds from maturities into treasuries targeting a yield of at least 4% while trying to manage the duration of the portfolio.

During the quarter, we purchased approximately $2,400,000,000 of treasuries at an average yield around 4%. The duration of these was closer to one point five years as we felt the yields on that part of the curve were more attractive, particularly when considering the extension we achieved through our loan growth. We expect to continue to invest in treasuries to lessen our NII sensitivity to lower rates, while maintaining an overall duration of two to three years in the investment portfolio. Ending deposit balances increased by $1,400,000,000 while average balances grew by $499,000,000 Puerto Rico public deposits ended the quarter at $20,900,000,000 an increase of approximately $1,300,000,000 compared to Q1. We continue to expect public deposits to be in the range of 18,000,000,000 to 20,000,000,000 At BBPR, excluding Puerto Rico public deposits, ending deposit balances decreased by approximately $60,000,000 end to end and an average deposits grew by approximately $440,000,000 with non interest bearing deposits accounting for $93,000,000 of that increase.

At PB, ending deposit balances increased by approximately $150,000,000 net of intercompany deposits. Total deposit costs decreased by five basis points. At BBPR, deposit costs decreased by three basis points to 1.52%, mostly due to a 10 basis point reduction in the cost of market linked public deposits. At Popular Bank, deposit costs decreased by 14 basis points as we continued our efforts to reduce the cost of our U. S.

Deposits. We’re very happy with the efforts of our teams and their focus on deposit retention and growth strategies. However, we continue to expect third quarter deposit balances in BPPR to reflect historical seasonality and decrease as our retail client base spends Q1 and Q2 tax refunds. That said, given the results in the first half of the year along with the anticipated NIM expansion for the rest of the year from repricing of our fixed rate earning assets and deposit retention strategies, we now expect to see higher NII growth of 10% to 11% in 2025. Please turn to Slide seven.

Non interest income was $168,000,000 an increase of $16,000,000 compared to Q1 and above the high end of our 2025 quarterly guidance. There were two primary drivers of the delta versus our expectations. Better fees related to customer transaction activity as a result of higher credit and debit card spending and higher other operating income, which was mostly due to a $3,000,000 increase in income from equity method investments and an approximately $3,000,000 related to a reimbursement from the IRS. Based on the quarter’s results, we now expect quarterly non interest income for 2025 to be at the high end of the 155,000,000 to $160,000,000 range. Please turn to Slide eight.

Total operating expenses were $493,000,000 an increase of $22,000,000 when compared to last quarter. The largest expense variance in the quarter was the $17,000,000 increase in personnel costs. We’ve had a very good first half of twenty twenty five. As can recently be assumed by our improved outlook for NII and credit, our internal net income forecast for the full year are now outpacing the original 2025 budget expectations by a significant enough margin to prompt us to begin to accrue profit sharing expense. During the quarter, we accrued $13,000,000 for profit sharing in addition to other performance related incentives.

If we continue to outperform for the remainder of the year, the total profit sharing expense will be capped at approximately 40,000,000 or approximately 2% of our expense base. Being in a position to share profits with all of Popular’s full time employees is a terrific outcome and allows our teams to benefit from the acceleration and the improvement of our profitability. This expense was not included in our original 4% expense growth guidance at the beginning of the year. However, we’re working to mitigate the impact of these costs on our total expenses for the year with sustainable efficiency efforts. We now expect the increase in 2025 expenses including profit sharing to be between 45% when compared to last year.

In other words, excluding profit sharing, we should see expense growth below our original 4% expectation. Please turn to Slide nine. Regulatory capital levels remain strong. Our CET ratio of 15.91% decreased by 20 basis points from Q1, mainly due to loan growth during the quarter and the effects of capital actions net of quarterly net income. Tangible book value per share at the end of the quarter was $75.41 an increase of $3.39 per share from Q1 driven by our net income and lower unrealized losses in our MBS portfolio offset in part by our capital return activity in the quarter.

During the second quarter, we repurchased approximately $112,000,000 in shares at an average price of $99 per share. As of July 15, we had $33,000,000 remaining on the share repurchase authorization announced in July 2024 in addition to the incremental $500,000,000 announced last week. With that, I turn the call over to Leo.

Lidio Soriano, CRO, Popular Incorporated: Thank you, Jorge, and good morning. Credit quality metrics improved during the second quarter with lower NPLs, lower inflows and lower net charge offs. Our mortgage and commercial loan portfolios continue to drive the results with credit metrics significantly below pre pandemic levels, coupled with improved performance from our consumer portfolio. Over the years, we have managed credit under different macroeconomic and operating environments. And more recently, we have taken several credit tightening actions to reduce our exposure to riskier segments.

We continue to carefully monitor the performance of our book and response to the environment accordingly. However, we are confident that the improvement in the risk profile of our loan portfolios positions Popular to operate successfully under more difficult economic condition. Turning to Slide number 10. Non performing assets and loans decreased slightly during the quarter, driven by Banco Popular. NPLs in Banco Popular decreased by $4,000,000 reflected across all loan segments.

NPLs in Popular Bank increased by $2,000,000 driven by a $3,000,000 commercial NPL inflow during the quarter. OREOs decreased by 6,000,000 driven by sales of residential real estate properties in Puerto Rico. Inflows of NPLs decreased by $4,000,000 quarter over quarter. In Banco Popular, inflows decreased by $5,000,000 driven by the commercial portfolio. In Popular Bank, NPL inflows remained flat.

The ratio of NPLs to total loans held in portfolio decreased two basis points to 82 basis points. Turning to slide number 11. Net charge off amounted to $42,000,000 or annualized 45 basis points compared to $49,000,000 or 53 basis points in the prior quarter. Net charge off in Banco Popular decreased by $7,000,000 driven by lower auto loans and personal loans, offset in part by a commercial loan recovery recognized in the first quarter. In Popular Bank, net charge off remained flat.

Given our credit performance during the first half of the year and our outlook for the second half, we now expect net charge offs to be between 45 to 65 basis points for the full year, below our original guidance of between 70 to 90 basis points. The allowance for credit losses increased by $7,000,000 to $770,000,000 driven by higher resource from portfolio growth and less favorable economic assumptions, offset in part by revised probability weights and changes in credit quality. We leveraged multiple scenarios to estimate our ACL. In the second quarter, we slightly reduced the pessimistic weight resulting in a $4,000,000 decrease in the ACL. In Banco Popular, the ACL increased by 3,000,000 driven by auto loans due to changes in credit quality and changes in the economic scenarios, offset in part by improvements in the credit quality of our commercial portfolios and changes in probability weights.

In Popular Bank, the ACL increased by $4,000,000 driven by the changes in economic forecast and higher qualitative reserves for the CRE portfolio. The compression ratio of the ACL to loans held in portfolio was two zero two basis points compared to two zero five basis points in the prior quarter, while the ratio of the ACL to NPLs was 247% compared to 243% in the prior quarter. The provision for credit losses was $50,000,000 compared to $65,000,000 in the prior quarter. In BBR, the provision was $10,000,000 lower, while in Popular, the provision was $7,000,000 lower. The combined provision to net charge off ratio for the quarter was 117%.

To summarize, credit quality metrics improved during the second quarter. We are attentive to evolving environment, but are confident that the improvement in the risk profile of our loan portfolios will allow us to operate successfully under different economic conditions. With that, I would like to turn the call over to Javier for his concluding remarks. Gracias.

Javier Ferrer, President and CEO, Popular Incorporated: Thank you, Lidio and Jorge for your update. I am extremely pleased with our financial performance in the second quarter. We increased net interest income, grew loans and deposits and maintained strong credit metrics. We have had a strong first half of the year. We will continue to execute on our objectives and I am urging our teams to remain focused on deposit retention, loan generation and particularly on our expense discipline.

We are committed to generating value for our shareholders and to achieving our ROCE objectives. We will continue to execute our transformation program determined to be the number one bank for our customers and to simplify our operations to improve efficiency and drive sustained performance. We’re also focused on reinvesting in the communities we serve and believe we are making a meaningful difference. These efforts are highlighted in our corporate sustainability report, which we published in June. I want to give a shout out to our colleagues and recognize their hard work.

I see what they do every day in our branches, call centers and centralized offices. We are pushing ourselves to deliver more for our clients every day, and I am incredibly grateful for their commitment. We are now ready to answer your questions.

Elliot, Call Coordinator: Thank you. First question comes from Jared Cassidy with RBC. Your line is open. Please go ahead.

Jorge Garcia, CFO, Popular Incorporated: Hi, guys. This is actually Forrest Hamilton in Gerard’s place for today. Nice quarter. And just one quick question. There’s been a lot of recent highlights and headlines on stablecoins.

And I was just curious how you guys see stablecoins potentially impacting Popular’s business and deposits and kind of the medium to long term outlook.

Javier Ferrer, President and CEO, Popular Incorporated: Well, thank you for that question. I I I just wanna say that we’re looking at it given that the Genius Act was approved. We put together a team to to do deeper dives and start to think about potential use cases. So that’s where we are with it. We realized that it’s coming and it will have an impact in the industry.

It’s early innings, but we have started moving on the opportunity.

Jorge Garcia, CFO, Popular Incorporated: Okay, great. Thank you. And that’s it for me for today. Thank you. We

Elliot, Call Coordinator: now turn to Timur Braziler with Wells Fargo. Your line is open. Please go ahead.

Timur Braziler, Analyst, Wells Fargo: Hi, good morning. Good morning. Looking at the level of current accruals for the profit sharing, I’m just wondering what the interplay is between the $13,000,000 that’s accrual today versus the max of $40,000,000 and the revenue guide that’s out there. Does the revenue guide imply that current accrual is the right number and you need to top that in order to get closer to the $40,000,000 Or as we get closer to to hitting that new guide, that accrual should continue inching higher?

Jorge Garcia, CFO, Popular Incorporated: So I first, I I you know, I’ll you, Timur, you know, the way the profit sharing works is that we have to beat our our our budget by of net income by at least three percent. And as that number increases and the payoff gets gets greater, it’s capped off. It’s up to 8%, of our employee salary up to a maximum total compensation of $70,000. That’s where the the 8% applies to. So if you make more than 70,000, you don’t keep accruing.

And this is a great opportunity for us to sharing with our, employee base when we really exceed plan. Whenever they executes, and exceed plan, we feel that our interests are aligned between shareholders and our and our employees. Having said that, you know, the guide that we have provided, which includes increasing, net interest income as well as increasing expenses. The expense rates that we have, we are, certainly expecting to accrue the max of of property sharing and that’s embedded in our guidance. So we don’t take lightly Javier’s comments of making sure our team continues to be focused and executing.

Timur Braziler, Analyst, Wells Fargo: Yeah. Okay. Great. Appreciate that color. And then, maybe a two part question on deposits.

I think I heard commercial deposit competition was maybe picking up on the island, driving some of the higher costs there. And then appreciate the comments on typical seasonality in 3Q. I’m just wondering if you can frame how that seasonality looks in in 2025 versus what we saw last year.

Jorge Garcia, CFO, Popular Incorporated: In in terms of of competition, you know, Javier, like I say, we we compete every day, for for our customers, for our business. We do it on on service and and and sometimes on price as well. Right? And, I would say that on the commercial side, we’re we don’t see as much yield seeking, behavior or pushback. I think a lot of that has been embedded in our in our baseline.

On the retail clients, there are still many discussions and still some yield seeking behavior. We continue to to see outflows of roughly 100,000,000 a month into our popular security subsidiary. So there’s still some some yield seeking behavior and from our retail clients. The the one thing that is different than last year, you know, for your question is that our teams are much more focused on deposit gathering and deposit retention strategies in our in our branches. As you know, we adjusted our compensation plans.

We adjusted targets to really make sure that we were incentivizing, the the the deposit retention behavior. When we look back pre pre pandemic where you don’t have all the noise that we saw during the pandemic, it is clear that there’s a trend where our our client base gets more inflows in the first half of the year. They tend to spend, some of that in the third quarter and then you see stability and maybe an uptick in the fourth quarter. We expect those trends to to continue. But I would also say, when we look at the inflows of our clients, particularly in this first half of the year, our clients have received more, tax refunds than they did last year.

And even though last year, we had the special one time rebate from the Puerto Rico government, and inflows outside of the tax proceeds are about 6% higher. So people are earning more, you know, so it it really does go to to to demonstrate the strength of the consumer in Puerto Rico. So we are confident in our teams, but, you know, there is a seasonality. We have over a million, retail clients. It’s very difficult to to understand their you know, predict their spending behavior.

But that all is accounted in our NII guide, Timur.

Timur Braziler, Analyst, Wells Fargo: Great. Thank you for the color. Appreciate it.

Elliot, Call Coordinator: Our next question comes from Kelly Motta with KBW. Your line is open. Please go ahead.

Kelly Motta, Analyst, KBW: Hey, good morning. Thanks for the question here. I thought maybe kicking it off to the loan side of things, you had a really strong quarter and you highlighted the larger infrastructure project. I believe the guidance bakes in some planned runoff in The U. S.

Can you give us a bit more color as to what that is, one? And two, the activity in Puerto Rico, I feel like the second half of the year, usually is better for you. So I’m wondering if you could help, provide additional color on both parts of the business. Thanks.

Jorge Garcia, CFO, Popular Incorporated: Thanks, Kelly. So we we do see strong pipelines, particularly into the third quarter in in in in both Puerto Rico and The US. You know, so so like what we’re seeing, still continue to see large transactions that make a difference in those in those, jumps some point to point. In The US, we continue to expect that we will see some payoffs in the construction portfolio. The the, you know, the speed at which that portfolio has been growing and the pipeline behind it is, you know, we we expect that eventually it’s gonna come down.

As you know, those construction loans end up, they’re mostly multifamily projects, and we don’t always succeed in retaining the takeout, the term loans after the construction is project is completed. So we do expect that decrease to happen, more likely in the fourth quarter than than in the third quarter.

Kelly Motta, Analyst, KBW: Got it. That that’s helpful. And on the funding side, it looks like most of the deposit growth was on the government side, and you you took out some borrowings to bridge the gap. Wondering especially with the deposit seasonality as you look ahead, do you the expected cash flows cover the loan growth you’re expecting or would you anticipate necessitating some more borrowings here to to fund your growth outlook?

Lidio Soriano, CRO, Popular Incorporated: Alright. So so a couple

Jorge Garcia, CFO, Popular Incorporated: of things. I mean, let let me I just wanna clarify a couple of things. We we did see end to end growth that was mostly, the public funds. But on an average basis, the public funds were I think they grew maybe $5,060,000,000. Really, the the nonpublic deposits is what grew almost 500,000,000 on an average basis in the quarter, including about a 150,000,000 in in non interest bearing accounts, about a 100 of that in Puerto Rico, 50 in The US.

So the the deposit franchise was was strong. We did do some borrowings in The US, short term for their home loan bank borrowings that we do at any time as part of our liquidity. We have over $25,000,000,000 in off balance sheet and on balance sheet liquidity in both banks combined. And, you know, so it’s more about, you know, being able to fund. We as you know, in The US, the alternative area of growth for us has been direct deposits on the Internet online channel.

We’ll continue to use that, Joseph. If have flexibility to fund quicker or at a better price on a short term basis than Federal Home Loan Bank, we we will do that. In Puerto Rico, we did not, have any, change in our in our wholesale borrowing.

Kelly Motta, Analyst, KBW: Got it. Thanks. Last quick question from me is on the expense side. You rightly pointed out that with the profit sharing expense, your operating expenses are actually lower than what you had previously expected. Wondering if you could offer what’s what’s driving that.

Are you pushing out some of the transformational expenses next year or realizing greater efficiencies with what you’ve done so far?

Jorge Garcia, CFO, Popular Incorporated: It it really is, all of the above. I mean, we are, we do have as part of the transformation efforts, we do have work streams that are focused on efficiency. We are finding opportunities and sustainable efficiencies that are operational and technology, expenditures. Just managing, data purge exercises, how how we manage, you know, different different operational accounts with more precision and, you know, you know, urging our teams for a commitment of excellence and and not not being just being on top of their responsibility and and making sure that we have that discipline. We are incentivizing people on expense control and that usually, you know, warns people to start paying attention and and they are focused on that.

On the transformation, they they are projects that get delayed and made that it that impacts our total expense base. Some of it is delayed because of things that we do. Other things are delayed because of of bigger picture things like, you know, there’s a recent conversion in Fedwire that impacted the entire, banking sector, and that got delayed about a quarter. So you see some of that in our in our expense delays. So, it it really is a combination of a lot of different things.

But, our teams are focused, and, we wanna make sure that we get to pay out on that profit sharing and also mitigate the total expense base for Popular.

Kelly Motta, Analyst, KBW: Got it. Thanks for the color. I’ll step back.

Elliot, Call Coordinator: We now turn to George Shaw with Barclays. Your line is open. Please go ahead.

George Shaw, Analyst, Barclays: Hey, good morning.

Jorge Garcia, CFO, Popular Incorporated: Hi, Gerard.

George Shaw, Analyst, Barclays: Maybe on the loan growth, you highlighted the large deal that you led. Are you now at the point where you’re starting to see the federal stimulus money or federal investments really start to get traction? Should we start to expect more of these larger deals? And I guess what’s your comfort with sort of the upper end of hold size on those?

Javier Ferrer, President and CEO, Popular Incorporated: Well, mean, we are seeing talking to the government agencies that are handling the federal funds and also to our customers, we are seeing deployment of those funds in Puerto Rico. We expect to have more projects announced in the next few weeks to months. Don’t think that we’re going to be seeing in the next few weeks anything on public partnership activity. That doesn’t mean that there won’t be more, but I won’t want to I wouldn’t want to mislead you to to tell you there’s a pipeline on public partnership transactions or financings of that nature. There are certain things that are being discussed in Puerto Rico.

And definitely, we are the go to bank locally when the government and third parties want to come in and participate in P3 projects. So again, I don’t think that I can share at this moment things that are being discussed, but we’re committed to financing and participating in those deals. So I mean and I want to say also, I think the government is very much focused on economic development, permitting, agility and given their good relationships with the Trump administration, what we hear and see is encouraging.

George Shaw, Analyst, Barclays: All right. Thanks. Shifting just to the fee income guide. Should we assume basically sort of steady trends from here excluding maybe in the equity investment adjustment and the refund that $6,000,000 and other? Or is there any other areas that are seeing outsized opportunity?

Jorge Garcia, CFO, Popular Incorporated: I mean, are cyclical cycles. I’m sorry for the, the double, there. But, if you if you look historically, second second quarter and fourth quarter tend to be higher. You have more transactional activity in in the second and fourth quarter. There’s some insurance fees that happen and, you know, that come in in the second and fourth quarter as well.

Certainly, we highlighted the IRS refund. That’s not something that that we would you know, that’s something unusual. But the the equity pick up, there there was nothing unusual about that. Just had a slower first quarter and and and picked up in the second quarter. So, you know, we we feel good about the updated guidance for the, you know, for the year and it just you know, you can do the math.

It just signifies top end of the guidance for the second half of the year as well.

George Shaw, Analyst, Barclays: Okay. Okay. Thanks. And then just finally on the capital and the buybacks, good level of buybacks this quarter. Is

Javier Ferrer, President and CEO, Popular Incorporated: this sort of

George Shaw, Analyst, Barclays: a pace you feel comfortable with given the broader capital backdrop and growth outlook?

Jorge Garcia, CFO, Popular Incorporated: I think it’s a reasonable pace and we still feel that our share price is very attractive at these levels.

George Shaw, Analyst, Barclays: Thank you.

Elliot, Call Coordinator: This concludes our Q and A. I’ll now hand back to Javier Ferrer, CEO for any final remarks.

Javier Ferrer, President and CEO, Popular Incorporated: Well, thanks again for joining us and for your questions. We look forward to updating you on our third quarter results in October. Thank you.

Elliot, Call Coordinator: Ladies and gentlemen, today’s call has now concluded. We’d like to thank you for your participation. You may now disconnect your lines.

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