Popular Q2 Earnings Call Highlights

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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.

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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.

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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%.

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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.

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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 personnel costs, including profit-sharing and performance-based compensation linked to the company's financial results. Business promotion expenses also rose due to higher credit card loyalty program activity.

Management continues to expect full-year expense growth of about 2% to 3%, including profit-sharing expenses. García said annual salary increases that took effect in July are expected to add about $4 million to $5 million per quarter in the second half of the year.

Popular also raised its annual ROTCE objective to a range of 14% to 17%. García said the new target reflects the strength of results and management's confidence in the company's ability to deliver sustainable returns.

Tangible book value per share increased by $2.96 to $87.94, and the common equity Tier 1 capital ratio rose 16 basis points to 16.1%. During the quarter, Popular returned $174 million to shareholders, including approximately $125 million in common stock repurchases.

The company fully utilized its prior $500 million repurchase authorization and announced a new share repurchase authorization of up to $1 billion. It also announced a planned 20% increase in its quarterly dividend to $0.90 per share beginning in the fourth quarter, subject to board approval. García said Popular expects to repurchase an additional $300 million to $400 million of common stock during the remainder of the year.

Soriano said credit quality remained stable in the second quarter, supported by improved consumer credit performance, stable mortgage trends and the resolution of a previously disclosed commercial loan. Consumers remained resilient, supported by higher tax refunds and a solid labor market, he said.

However, reported credit metrics were affected by several commercial developments. Popular resolved its largest non-performing relationship, a $155 million commercial loan that had been classified as non-performing since the third quarter of 2025. During the quarter, the company recognized a $71 million charge-off and transferred the remaining $84 million balance to loans held for sale. Soriano said the sale was completed on July 2 for $84 million.

Separately, two unrelated commercial and industrial relationships totaling about $129 million were placed on non-accrual status. Soriano said these were borrower-specific situations and were not indicative of broader deterioration in the portfolio or the related industries.

Total non-performing loans decreased by $45 million to $413 million, and the non-performing loan ratio improved to 1.04% from 1.17% in the prior quarter. Net charge-offs were $104 million, or an annualized 1.05%, compared with $60 million, or 61 basis points, in the prior quarter. Excluding the $71 million commercial charge-off, the net charge-off ratio was 33 basis points.

Popular now expects full-year net charge-offs in the range of 65 to 80 basis points. García said allowance coverage remained strong, with the allowance for credit losses to loans ratio at 1.97% and the allowance to non-performing loans ratio increasing to 190% from 180%.

Ferrer said business activity in Puerto Rico remained stable, supported by a healthy labor market, strong tourism activity, ongoing infrastructure investment and consumer spending. Unemployment stood at 5.8% in June, while Popular debit and credit card sales volume increased more than 7% year over year.

Construction activity remained strong, supported by public and private investment, including the deployment of federal disaster recovery funds and private-sector projects. Ferrer also pointed to manufacturing investment activity, saying the sector has announced about $2.3 billion of investments and more than 5,000 direct jobs since 2025 across pharmaceutical, aerospace, logistics, technology and advanced manufacturing.

Tourism also remained a source of strength. Ferrer said hotel demand approached 2 million room nights, or 81% occupancy, from January through May, increasing about 7% versus the same period in 2025. Cruise passenger arrivals increased about 45% year over year through May.

Management said Popular continues to focus on its three strategic objectives: being the number one bank for customers, being simple and efficient, and being a top-performing bank. Ferrer cited ongoing investments in branch modernization, digital tools, cash management capabilities, corporate credit card solutions and targeted customer segments as key parts of the strategy.

Popular, Inc, headquartered in San Juan, Puerto Rico, is a financial holding company and a leading provider of banking services in the United States mainland and Puerto Rico. Through its primary subsidiaries—Banco Popular de Puerto Rico and Popular Bank—the company delivers comprehensive commercial and consumer banking solutions. It offers deposit products, lending facilities, cash management services and payment-processing solutions designed for individuals, small businesses and large corporations.

The company's product suite encompasses checking and savings accounts, certificates of deposit, residential and commercial mortgage loans, business lines of credit and credit cards.

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The article "Popular Q2 Earnings Call Highlights" was originally published by MarketBeat.

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