Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Popular Inc (BPOP, Financial) announced a 13% increase in its quarterly common stock dividend from $0.62 to $0.70 per share, starting in the first quarter of 2025.
- The company authorized a $500 million common stock repurchase, indicating strong capital position.
- Net income for the second quarter was $178 million, a $43 million increase from the previous quarter, driven by higher net interest income and lower credit loss provisions.
- Deposit balances increased by approximately $1.7 billion, primarily due to higher levels of Puerto Rico government deposits.
- Credit quality trends improved with lower net charge-offs, non-performing loans (NPLs), and NPL inflows.
Negative Points
- Popular Bank saw a $36 million decrease in loan balances, driven by $140 million in commercial loan payoffs.
- The demand for credit in the US market continues to be lower than anticipated, affecting consolidated loan growth expectations.
- Operating expenses increased by $7 million, driven by professional fees and transaction-related costs.
- The cost of total deposits increased, impacting net interest margin despite higher average loan balances.
- The provision for credit losses was $47 million, reflecting ongoing economic uncertainties and higher interest rates.
Q & A Highlights
Popular Inc (BPOP) Q2 2024 Earnings Call Highlights
Q: Can you provide more details on the capital plan and the timing of the dividend increase and stock repurchase authorization?
A: (Don Ignacio Alvarez, CEO) We announced a $500 million stock repurchase authorization and a 13% increase in our quarterly common stock dividend to $0.70 per share, starting in Q1 2025. These actions reflect our strong capital position and confidence in our future.
Q: With the NII outlook being reduced, is the 8% to 10% growth projection for this year on a GAAP basis or an FTE basis?
A: (Jorge Garcia Garcia, CFO) All of our guidance is on a GAAP basis.
Q: How should we think about the balance sheet given the expected decline in government deposits?
A: (Jorge Garcia Garcia, CFO) If we see a decrease in deposits, we would not leverage the balance sheet with alternative sources of liquidity. The balance sheet should remain relatively flat as public funds decrease.
Q: What drove the repricing of the $800 million low-cost government deposits, and how will it impact Q3?
A: (Jorge Garcia Garcia, CFO) The repricing occurred towards the end of Q2 and is included in our updated guidance. It was driven by market conditions and client expectations.
Q: Can you provide an update on the FTE for the year in the context of the updated guidance?
A: (Jorge Garcia Garcia, CFO) We do not provide FTE guidance. Our guidance is on a GAAP basis, and we provide the tax rate to help estimate the flow to EPS.
Q: What is the expectation for the cadence of buybacks?
A: (Don Ignacio Alvarez, CEO) The $500 million authorization is open-ended with no specific timeline. We will execute based on market conditions and will not necessarily follow an annual January cadence.
Q: Where should we expect to see lower fees and faster expense growth to meet your guidance range?
A: (Jorge Garcia Garcia, CFO) Expenses will increase due to merit increases and transformation efforts. Fee income can vary due to transactional activity and equity pickups, but $2-3 million variance per quarter is not unusual.
Q: Have we seen peak consumer charge-offs, and where should the ACL settle?
A: (Don Ignacio Alvarez, CEO) The rate of net charge-offs will depend on the economy. We are comfortable with the current state and outlook, but it is economy-dependent.
Q: Could loan growth for BPPR accelerate as construction projects come online?
A: (Don Ignacio Alvarez, CEO) We feel good about economic activity in Puerto Rico and expect continued loan growth. However, US loan growth has been slower than expected, so we reiterate our guidance.
Q: What is your appetite for growing the mainland portfolio given the uncertain credit environment?
A: (Don Ignacio Alvarez, CEO) We are comfortable with our current portfolio but will be cautious, especially in commercial real estate. We expect growth in other areas like condominium associations.
Q: How much more do you have in lower-cost government deposits that could reprice?
A: (Jorge Garcia Garcia, CFO) We do not expect significant repricing of other large low-cost deposits. The recent repricing is reflected in our levels and yield schedule.
Q: Can you clarify the tax rate impact from tax-advantaged income and discrete items?
A: (Jorge Garcia Garcia, CFO) The quarter had some discrete events that may not recur. Use our full-year guidance to estimate the tax rate.
Q: How does management view the insurance subsidiary and the stake in the Dominican bank?
A: (Don Ignacio Alvarez, CEO) We have no current plans to sell these investments. The Dominican bank investment is successful and provides steady income. The insurance subsidiary is important for embedding in clients' lives and providing comprehensive services.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
