Popular, Inc. Q4 FY2025 earnings call

• 2025 results reflected strength of the franchise with net income growth, loan growth, and stable credit quality.
• Fourth quarter highlights: net income of $234 million and EPS of $3.53, driven by higher net interest income, expanding margin, strong loan growth, and lower operating expenses.
• Economic trends in Puerto Rico: solid business activity with favorable employment, consumer spending, construction, and tourism data.
• Strategic initiatives: deployment of new consumer credit origination platform, modernization of physical retail network, efficiency initiatives including exiting US mortgage business, optimizing Puerto Rico mortgage servicing, and ERP transformation.
• Dividends and share repurchases: quarterly common stock dividend increased to $0.75 per share, and $500 million in common stock repurchased in 2025, with $720 million repurchased since 2024.

In 2025, Popular, Inc. achieved an annual net income of $833 million, a 36% increase compared to 2024. Total loan growth for the year was $2.2 billion (6%). In the fourth quarter, loan growth was $641 million, with Banco Popular contributing $497 million (driven by commercial and mortgage lending) and Popular Bank contributing $144 million (mainly commercial lending). Net interest income in Q4 was $658 million, an increase of $11 million, and for the year, NII increased by $259 million (11%). The net interest margin expanded to 3.61% on a GAAP basis in Q4. Annual net charge-offs decreased to 52 basis points, and the common equity tier one ratio ended the year at 15.7%. Tangible book value per share was $82.65, a 21% increase year over year.

• 2026 consolidated loan growth expected 3%-4%.
• 2026 NII expected to increase 5%-7% due to reinvestment of securities, loan originations, and lower deposit costs.
• 2026 noninterest income expected $160M-$165M quarterly.
• 2026 GAAP expenses expected to increase ~3% compared to 2025.
• 2026 effective tax rate expected 15%-17%.
• 2026 net charge-offs expected 55-70 basis points.

• Geopolitical risks that could impact the business.
• Affordability issues potentially affecting clients.
• Uncertainty surrounding the PREPA bankruptcy and its impact on the Puerto Rico economy.
• Competition in deposit pricing in the market.

Q: Brett Rabatin asked about the NII guide and ROC fee goal.

A: Jorge Garcia responded on NII growth drivers and ROC fee focus on sustainable performance.

Q: Brett Rabatin also inquired about loan growth guidance and onshoring opportunities.

A: Javier Ferrer-Fernández discussed loan growth expectations by segment and positive impacts of onshoring.

Q: Jared Shaw asked about fees, M&A, and capital.

A: Javier Ferrer-Fernández provided insights on fee considerations, M&A criteria, and capital structure thoughts.

Q: Benjamin Gerlinger asked about expense guide and earning asset mix.

A: Jorge Garcia addressed expense run rate and earning asset mix considerations.

Q: Kelly Motta asked about capital and loan yields.

A: Jorge Garcia and Lidio Soriano responded on capital leverage and loan yield details.

Q: Arren Cyganovich asked about deposit competition and onshoring benefits.

A: Javier Ferrer-Fernández discussed deposit competition and positive impacts of onshoring.

Q: Gerard Cassidy asked about risks and onshoring progress.

A: Javier Ferrer-Fernández addressed risks and provided onshoring progress details.

Q: Emmanuel Navas asked about buyback market conditions.

A: Jorge Garcia responded on buyback market condition considerations.

Q: Timur Braziler asked about auto expectations and expense phases.

A: Lidio Soriano and Jorge Garcia provided auto trend insights and expense phase perspectives.

Q: Brandon Bowman asked about expense drivers.

A: Jorge Garcia discussed expense growth drivers.

Q: Kelly Motta circled back on NII guide and deposits.

A: Jorge Garcia provided thoughts on deposits and NII guide related to funding.