Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- First BanCorp (FBP, Financial) reported a strong quarter with $73.7 million in net income, translating to $0.45 per share.
- The company achieved a solid return on assets of 1.55% and maintained an efficiency ratio in the 52% range.
- Asset quality improved with nonperforming assets reduced to 63 basis points of total assets.
- The loan portfolio grew by $63 million despite higher-than-expected commercial prepayments.
- First BanCorp (FBP) successfully launched the nCino platform, enhancing the digital experience in commercial lending.
Negative Points
- Adjusted pretax pre-provision income slightly decreased to $112 million due to increased expenses.
- Loan growth expectations were revised down to 4% for 2024, primarily due to higher-than-forecasted prepayments.
- Net charge-offs increased to $24 million, or 78 basis points of average loans, compared to 69 basis points last quarter.
- Expenses rose to $122.9 million, $4.3 million higher than the previous quarter, due to increased personnel and consulting costs.
- The investment portfolio income decreased by $1 million as repayments and maturities continued.
Q & A Highlights
Q: What are your thoughts on when the balance sheet can start increasing, and how does this relate to NII growth in 2025?
A: Orlando Berges, Executive Vice President and CFO, explained that cash flows from the investment portfolio will continue to be reinvested in loans, which is why the balance sheet hasn't grown significantly. They expect a stable balance sheet until the investment portfolio reaches a desired level for liquidity needs. Balance sheet growth is anticipated in the latter part of 2025, correlating with deposit growth.
Q: Can you provide insights into the broader health of the consumer in Puerto Rico and current consumer trends?
A: Aurelio Aleman, President and CEO, noted that consumer behavior is normalizing post-pandemic. They expect stability in the consumer portfolio with some improvement in delinquency and loss metrics over 2025, without increasing risk appetite.
Q: What are the expected cash flows from the securities portfolio beyond the first quarter of 2025?
A: Orlando Berges stated that for the full year 2025, including the first quarter, they estimate cash flows from maturities and repayments to be between $1 billion and $1.1 billion, with an average yield of around 1.80% to 1.90%.
Q: How are you approaching deposit repricing following the Fed rate cut?
A: Orlando Berges explained that deposit repricing will vary by type. Noninterest-bearing accounts have a beta of 13-14%, government deposits around 78%, and term deposits are being adjusted on new issuances. They expect a lag in repricing, with some adjustments already made to table rates.
Q: What is the outlook for loan growth given the strong pipeline and recent prepayments?
A: Aurelio Aleman indicated that despite higher-than-expected prepayments, they anticipate mid-single-digit loan growth in the coming quarters, supported by strong origination volumes and economic activity.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
