Popular Inc ((BPOP)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Popular Inc. delivered an upbeat earnings call that balanced robust financial performance with a candid view of emerging risks. Executives highlighted strong profit growth, wider margins, healthy deposit trends and tighter expense discipline, while acknowledging higher net charge-offs and targeted reserve builds. Management’s tone remained confident, framing credit noise as manageable against a clearly positive core earnings trajectory.
Strong Profitability
Popular posted net income of $246 million and earnings per share of $3.78, representing sequential increases of $12 million and $0.25. Year over year, net income climbed 38% while EPS surged 48%, underscoring operating leverage and validating the bank’s strategic focus on profitable growth.
Return on Common Equity Expansion
Return on common equity reached 15.5%, up from 14.4% last quarter and 11.4% a year ago, marking significant improvement in capital efficiency. Management stressed that ROCE is now running above its 14% through‑the‑cycle target, suggesting room for continued capital deployment while still meeting long‑term objectives.
Net Interest Income and Margin Improvement
Net interest income rose to $670 million, up about $13 million from the prior quarter as earning assets repriced favorably. GAAP net interest margin expanded 5 basis points to 3.66%, while taxable‑equivalent NIM improved 11 basis points to 4.14%, signaling further benefit from balance‑sheet optimization.
Deposit Growth and Lower Deposit Costs
Ending deposits climbed to $67.6 billion, adding $1.4 billion quarter over quarter and reinforcing confidence in Popular’s franchise. Total deposit costs fell 12 basis points to 1.56%, and excluding Puerto Rico public balances, deposit costs declined to 1.09%, providing an important tailwind to margins.
Noninterest Income Growth and Fee Strength
Noninterest income reached $166 million, landing at the high end of management’s guidance and diversifying revenue beyond spread income. Fees rose 9% year over year, with debit card fees up 14%, credit card fees up 6% and asset management and insurance fees gaining 13%, reflecting strong customer activity.
Operating Expense Discipline
Total operating expenses fell to $467 million, down $6 million from the prior quarter and $22 million lower on an adjusted basis. Reflecting tight cost control, Popular trimmed its full‑year expense growth outlook to 2%–3% from about 3%, signaling improved operating efficiency.
Capital Return and Book Value
The bank repurchased $155 million of common stock in the quarter, supporting shareholder returns while maintaining robust capital ratios. Tangible book value per share increased by $2.33 to $84.98, and $126 million remains under the current buyback authorization, with further actions expected to be outlined next quarter.
Favorable Puerto Rico Operating Environment
Management emphasized that Puerto Rico’s economy remains a significant tailwind, with unemployment near 5.6% and card purchases up roughly 5% year over year. Tourism is surging, as hotel occupancy rose to 83% with higher RevPAR and cruise arrivals jumped 40%, while construction and reshoring projects add further support.
Higher Net Charge-Offs
Credit quality showed some noise as net charge‑offs increased to $60 million, or an annualized 61 basis points, from $50 million, or 51 basis points. The rise was largely tied to a previously identified commercial relationship and an $11 million commercial charge‑off, which management framed as idiosyncratic rather than systemic.
Loan Growth Headwinds and Portfolio Mix
Loans ended the quarter essentially flat at $39.3 billion, down about $38 million from the prior period as certain segments slowed. Management now expects 2026 consolidated loan growth to land at the low end of the 3%–4% target, citing softer consumer and auto demand along with paydowns in construction and runoff in exited residential mortgages.
Specific Reserve Buildups and ACL Increase
The allowance for credit losses rose by $16 million to $124 million, reflecting a cautious stance as specific risks emerge. ACL‑to‑loans increased to 2.10% from 2.05% and ACL‑to‑nonperforming loans moved to 180% from 162%, driven by additional reserves for a telecom‑related power exposure and selected commercial loan modifications.
Concentration and Repricing Dynamics
Puerto Rico public deposits remained sizable at $19.7 billion, continuing to be an important and concentrated funding source for the bank. Management noted that some margin expansion benefited from public deposit repricing, a potential one‑time boost that could prove less repeatable if short‑term interest rates move lower.
Competitive Pressure in Certain Segments
Executives flagged intensifying competition in auto lending and select U.S. markets, where aggressive pricing is pressuring spreads. They cautioned that loan yields could compress in these areas if competitors continue to trade margin for volume, reinforcing Popular’s preference for disciplined, risk‑adjusted growth.
Macro Risks — Energy Prices and Geopolitics
The call also underscored macro uncertainty, especially around geopolitics and energy costs, which remain key watch items for the franchise. Persistent strength in oil and commodities could weigh on customers and credit quality over time, particularly given Puerto Rico’s sensitivity to elevated energy prices.
Rating and Capital Uncertainties
Popular remains on positive watch but still below investment grade at major rating agencies, a factor that shapes its capital strategy and funding costs. Management reiterated its intention to deploy excess capital and update plans in the second quarter, while acknowledging that the scale and timing of actions depend on regulators and markets.
Forward-Looking Guidance
Looking ahead, Popular now sees 2026 net interest income growing at the upper end of its 5%–7% target, assuming no additional rate cuts and further NIM expansion later in the year. The bank guides to loan growth at the low end of 3%–4%, quarterly noninterest income of $160–$165 million, annual net charge‑offs of 55–70 basis points, and expense growth of 2%–3%, while planning to use its strong CET1 position for additional buybacks and a possible dividend increase.
Popular’s earnings call painted the picture of a bank leaning into a strong operating backdrop while keeping a close eye on credit and macro risks. With profitability rising, margins widening, fees growing and costs in check, management appears poised to continue returning capital even as it navigates competitive pressure, concentrated deposits and a still‑uncertain global landscape.