Popular, Inc. (BPOP) Earnings & Analysis

Latest quarter

Popular reported Q2 revenue of $1.2 billion, up from $1.1 billion a year earlier, and diluted earnings per share of $4.35, compared with $3.09. Free cash flow rose to $290.5 million from $198.4 million.

In its filing, Popular attributed higher net income mainly to increased net interest and noninterest income and lower operating expenses, partly offset by a higher provision for credit losses. The filing said higher-yielding Treasury investments, loan growth and lower deposit costs contributed to the increase in net interest income. Higher card activity and purchase volumes helped lift fee income.

Popular said its provision rose partly because of higher specific reserves on commercial loans placed on nonperforming status. Operating margin was 27.9%, compared with 23.2% a year earlier.

For the later quarter ended September 30, adjusted EPS of $4.21 exceeded the consensus of $3.90, while revenue of $874.6 million exceeded the consensus of $872.1 million.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

On Popular’s latest call, Lidio Soriano said the company invested in securities during the quarter. He said reinvesting proceeds from maturing notes increased their yield. Soriano also said Popular had reduced its full-year loan growth expectation, citing lower auto and lease activity and more moderate commercial growth.

Jorge Garcia said an account reclassification reduced quarterly fee income by around $2.0 million. He also said Popular continued to execute share repurchases to return capital.

On the earlier Q1 call, CEO Javier Ferrer-Fernández said Popular was monitoring geopolitical developments because sustained higher oil and commodity prices could affect customers. He also said mortgage balances at Banco Popular had increased modestly and pointed to investment supporting construction activity in Puerto Rico.

CFO Garcia said slower consumer and auto demand had led Popular to expect consolidated loan growth at the low end of its original range. He said modest mortgage and commercial growth at Banco Popular de Puerto Rico had been partly offset by auto-lending trends.

Asked about loan pricing on that earlier call, Ferrer-Fernández said Popular was focusing on relationship banking and seeking deposits alongside loans, rather than pursuing loan growth alone. Discussing margins, he said repricing of public deposits had contributed to expansion and that the pace of further repricing would depend on short-term rates. Garcia said the guidance then assumed no further rate cuts during the year.

Guidance

Popular expects an effective tax rate of 14.0% for FY2026, below its previous range. The company also expects operating expenses to increase 2.00% for the year, revising its earlier range.

For Q4, Popular expects approximately $170.0 million in noninterest income, compared with its earlier quarterly guidance of $160.0 million to $165.0 million. Soriano said the company had reduced its full-year loan growth expectation from the low end of its original range.