Q1 2025 Popular Inc Earnings Call
and Lidio Soriano.
and Lidio Soriano.
Elliot: Hello and welcome to the Popular Incorporated, First Quarter, 2025, Earnings Call. My name is Elliot, I'll be your coordinator today. If you'd like to register questions in state events, please press slot one on your telephone keypad.
Speaker Change: Oh and I'd like to hand over to Paul Cardillo, Invest the Relations Officer, please go ahead.
Thank you.
and Lidio Soriano.
Speaker Change: Good morning and thank you for joining us. With us on the call today is our CEO Ignacio Alvarez, our president and CEO , Javier Ferrer, our CFO , Jorge Garcia, and our CRO Video Soriano.
Speaker Change: Bill, review our results for the first quarter and then answer your questions.
Speaker Change: Other members of our management team will also be available during the Q&A session.
Speaker Change: Before we begin, I would like to remind you that during today's call, we may make forward-looking statements regarding popular, such as projections of revenue, earnings, credit quality, expenses, taxes, and capital structure, as well as statements regarding popular's plans and objectives.
Speaker Change: These statements are based on management's current expectations and are subject to risks and uncertainties [inaudible]
Speaker Change: Factors that could cause actual results to differ materially from these forward-looking statements are set forth within today's earnings release and our SEC filings.
Speaker Change: You may find today's press release and or at see filings on our web page.
at popularwater.com [inaudible]
Speaker Change: I will now turn the call over to our CEO Ignacio Alvarez. Thank you, Paul. Good morning to all. Before I begin, I'd like to apologize. I'll be here in my voice. I'm not feeling 100% today. I'm here to cover the business highlights.
Speaker Change: But before turning over to him, I would like to make some comments regarding the announcement we made in February about my upcoming retirement on June 30 in the boy deployment of Javier as my successor.
Speaker Change: Javier is a proven leader and has assumed increasing responsibilities and has demonstrated that he has the experience and vision to lead Pabularia.
Speaker Change: He fosters a collaborative, high-performance culture and will refuse new energy while ensuring a smooth transition into the CEO role.
Speaker Change: I am grateful for a support and friendship which began close to 35 years ago and I am confident that under that under his leadership, Popular will continue to thrive.
Speaker Change: I have spent 15, 15 incredibly rewarding years at Popular, leading this extraordinary organization since 2017 has been a privilege and the opportunity of a lifetime.
Speaker Change: I'm immensely proud of what we have achieved in recent years thanks to the dedication and the hard work of our entire team.
Speaker Change: While there's no perfect time to retire, I am confident that the timing is right for this transition.
Speaker Change: Popular is in a strong position and will prepare for the future. With that, I hand it over to
Good morning. Thank you, Nacho, for those incredible words.
Javier Ferrer: It has been one of my life through privileges. I gift.
Javier Ferrer: to enjoy your company as a mentor, a dear friend, and a partner.
Speaker Change: That's it. Please turn to slide three to discuss highlights of the first quarter.
Speaker Change: Our net interest income increased by $15 million and the net interest margin expanded by 5 basis points to 3.4% mainly driven by lower deposit costs.
Speaker Change: Long balances increased by 146 million, primarily driven by the commercial and construction
Speaker Change: Deported balances grew by 935 million, with both banks contributing to the increase.
Credit Quality Improved
Ledby, Lower Net Chargels, and Early Delinquency [inaudible]
Speaker Change: During the quarter, we repurchased 122 million in shares at an average price of roughly $96 per share. Today, we have repurchased 340 million of our carrying 500 million authorization.
Speaker Change: Tangible Book Value for Share, increased by nearly $4 to approximately 72.
Speaker Change: driven by our quality net income and lower on realized losses in our investment portfolio, offsetting part by sharing purchase activity and dividends in the period. Please turn to slide 4.
before commenting on the business activity for the quarter.
Speaker Change: We would like to address the recent volatility due to tariffs on certainty, which has impacted markets and raised recession concerns.
Speaker Change: We are closely monitoring the situation and communicating with clients about its potential defects.
Regardless,
Speaker Change: Our strong relationship, the diversified business mix, and extraordinary team have consistently enabled us to perform well in certain times.
Speaker Change: This is the time to focus on supporting and serving our clients and to demonstrate...
The Strength of our Great Institution
Speaker Change: At the end of the first quarter, this activity in Puerto Rico continues to be solid, as reflected in the favorable trends in total employment, consumer spending and other key economic day.
Speaker Change: The current employment rate of 5.5% continues to hover around the all-time lows.
Consumer spending has been resilient and remains healthy.
Combined Credit and debit card sales for Bangalov with our customers.
Speaker Change: Increased by approximately 6%, compared to the first quarter of 2024
Speaker Change: Mortgage loan balances and bankable hold are increased by 136 million in the first quarter to prevent it primarily by home purchase activity.
[inaudible]
Our Autolone and Disbalances
Speaker Change: Increased by 21 million compared to the fourth quarter, as demand for new cars continue to be strong in Puerto Rico.
Speaker Change: The Tourism and Hospitality Sector continues to be a source of strength for the local economy.
Speaker Change: As of February , the average daily rate of revenue per available room or rent's power increased by 10% and 9% respectively.
Hoto, Occupancy, Exceeded 75%
Speaker Change: We continue to expect that the ongoing disbursement of federal disaster recovery funds [inaudible]
We'll support economic activity in Puerto Rico for several years.
Speaker Change: And on that note, I turn the call over to Jorge for more details on our financial results.
[inaudible]
Jorge Garcia: Thank you, Javier. Good morning and thank you all for joining the call today.
Please turn to slide five
Jorge Garcia: We're very pleased with the court's results, particularly with the positive activity, the MII growth and the expansion of the name.
Jorge Garcia: Despite all the uncertainty in the economic outlook, we started the year in a strong footing.
Jorge Garcia: Net Interest Income increased by $15 million, during my acid repricing in our investment portfolio, as well as lower the public cost in both banks.
Jorge Garcia: As anticipated, long growth in the quarter was slower after a very strong Q4.
Jorge Garcia: Lombangs has increased by 146 million led by the US segment.
Jorge Garcia: At PV, we saw increases in commercial and construction lending, and at BPPR, we continue to see an increase in mortgage loans. However, as discussed in our Q4 webcast, we received some large commercial loan repayments that impacted the ending balances.
Jorge Garcia: Ending the positive balance has increased by 935 million, while average balance has grew by 1.4 billion.
Jorge Garcia: At the end of the first quarter Puerto Rico public deposits were 19.6 billion, an increase of approximately 160 million when compared to Q4.
Jorge Garcia: We continue to expect public deposits to be in the range of 18 to 20 billion.
Jorge Garcia: At BBPR, Excelim Puerto Rico Public Deposit, ending in average deposits, each group by approximately 400 million.
Jorge Garcia: And at PV, ending the positive balance is increased by a part from a 250 million net of intercompany.
Jorge Garcia: We're very happy with the successful efforts of our teams and their focus on deposit retention and growth strategies
Jorge Garcia: Arnett and Judge Margin, extended by five basis points on a gap basis and 11 basis points in a tax equivalent basis.
Jorge Garcia: during by lower deposit costs and a larger balance of tax exempt investment securities.
Jorge Garcia: Non-interest income was $152 million, a decrease of $13 million compared to Q4 and below the end of our 2025 quarterly guidance.
Jorge Garcia: The primary reason for the Delta versus our expectations was a 3 million unfavorable variance in the fair value adjustment of our MSRs, and a lower than anticipated income from equity
Jorge Garcia: We continue to expect quarterly non-interest income to be in a range of 155 to 160 million during 2025.
Jorge Garcia: As leader will cover in detail, credit metrics improved across the board during the quarter.
Speaker Change: Total operating expenses were $471 million, an increase of $3 million when compared to last quarter.
Jorge Garcia: The largest expense increase in the quarter was related to higher personal cost.
Jorge Garcia: during by Annual Incentive Awards, and payroll taxes that are normally higher in Q1. [inaudible]
Offset and Parked by Lower Basin Promotion Expenses [inaudible]
which tend to be seasonally higher during the fourth quarter.
Jorge Garcia: We continue to expect full-year 2025 expenses to increase by approximately 4% when compared to 2024.
Jorge Garcia: Our effective tax rate in the first quarter was 20% flat with Q4.
Jorge Garcia: In 2025, we expect an effective tax rate for the year to be in a range of 19 to 21%.
We stand to slide six [inaudible]
Jorge Garcia: We continue to reinvest the maturities of our U.S. Treasury Note portfolio in two and three-year buying approximately 900 million at an average yield of around 4.2% during the quarter.
Jorge Garcia: We expect to continue this strategy to lessen our sensitivity to lower rates while maintaining a similar duration in the investment portfolio.
Jorge Garcia: In BPPR, the deposit costs decreased by 12 basis points to 1.55%, mostly due to a 38 basis point reduction in the cost of market-linked public deposits.
Jorge Garcia: At Popular Banks, the deposit cost decreased by 11 basis points during the quarter.
Jorge Garcia: While we have made progress in reducing the cost of our US deposits, we continue to see a lag in the reduction of deposit costs due to the competitive landscape of our US footprint and online the profit space.
Jorge Garcia: As well as the high proportion of time deposit, which take longer to reprise
Jorge Garcia: When we provided long growth items in January , we expected the rate of growth to accelerate as the year progressed.
Jorge Garcia: despite growing uncertainty about the economic outlook, demand for credit and Puerto Rico remains strong.
Jorge Garcia: In our US market, the man for credit was stable during the first quarter as we continue to benefit from draws from ongoing construction projects and long growth in our healthcare and community association lending business.
Jorge Garcia: While the impact of tariffs on economic activity may affect loan demand, we believe that we can achieve our original loan growth guidance of 3-5% for 2025.
Jorge Garcia: However, given the overall environment, now we see the lower end of that range as a more likely scenario
Jorge Garcia: We expect NII to increase by 7-9% this year and anticipate further near-expansion.
Jorge Garcia: during by continuing reinvestment of maturing lower yielding securities and loan originations in the current rate environment.
Jorge Garcia: As well as lower costs of online deposits at Popular Bank.
Please turn to slide seven.
Jorge Garcia: Regulatory capital levels remain strong. Our CT1 ratio of 16.1% increased by 8 basis points from Q4 mainly due to quarterly net income that was somewhat offset by capital actions during the period.
Jorge Garcia: Tangible Book Valley per share at the end of the quarter with $72.02, an increase of $3.86 per share from Q4.
Jorge Garcia: Durant by our net income and lower annualized losses in our MBS portfolio, offset and part by a capital return activity during the quarter.
Jorge Garcia: During the first quarter, we repurchased approximately 122 million shares and an average price of $96 per share.
Jorge Garcia: and as of the end of March, we had 160 million remaining of our existing 500 million authorization.
Jorge Garcia: We turn in tangible common equity for the quarter with 11.4%, an increase of 14 basis points from last quarter, driven by stable net income and buyback activity.
Jorge Garcia: We continue to anticipate at least a 12% Roxy in the fourth quarter of this year
Jorge Garcia: Longer term, we remain focused on achieving a sustainable 14% return on tangible culmination
With that, I turn over the call to leave you
Thank you Jorge and good morning.
with lower-early delinquencies, MPL, Influos, and Necharja.
Jorge Garcia: Armourgish and Commercial Road portfolios continue to reflect very metrics significantly below
Jorge Garcia: As we have discussed in previous calls, we have been encouraged by the performance of our most recent consumer bendius.
Jorge Garcia: During the quarter, our consumer portfolio reflected lower than Inquencies, NPLs, and their charge of during my auto and personal loan portfolios.
Jorge Garcia: Over the years, we have managed credit under different macroeconomic and overrated environments.
Jorge Garcia: And more recently, we have taken several credit tightening actions to reduce our exposure to riskier borrowers.
Jorge Garcia: We continue to carefully monitor the performance of our book and response to the environment according to making.
Jorge Garcia: We are confident that the improvements in the risk profile of our loan portfolios positions popular to operate successfully on the more difficult economic conditions.
Don't need this line number eight [inaudible]
Jorge Garcia: Non-performing assets and loans decreased in the quarter during my DDPR.
MPL ZBPR decreased by 30 million
during my lower auto, mortgage, and commercial loans. [inaudible]
Jorge Garcia: commercial MPL's decreased, given by 9 million, single long pay off during the first quarter of 2025.
NPL's in Popular Bank, the quiz by San Emilio.
given by a single loan sale.
Jorge Garcia: Aureus, decreased by 5 million during my sales of residential real estate properties in Puerto Rico.
Jorge Garcia: Infros of NPLs decreased by 16 million per hour per quarter. In BDR, total inflows decreased by 11 million during my lower mortgage inflows. In Popular Bank, a decrease of 7 million during my lower mortgage inflows decreased by 11 million during my lower mortgage inflows.
Jorge Garcia: The ratio of MPL to total runs, helping portfolio decrease 11 basis point to 84 basis points.
I don't know. I don't know. I don't know. I don't know.
Turning to slide number nine [inaudible]
Speaker Change: Neat charge of amounted to 49 million, or analyzed 53 basis points.
from birth to sixty-seven million.
or 74 basis point in the prior quarter.
Net Charge of NDPPR, Degrees by 60 million
Speaker Change: During my lower consumer, my 11 million, and lower commercial, related to the commercial
Impopular bank.
Neat charge off the grease by 3 million
Inafraud, Webcast
Speaker Change: We provide a guidance for the 2025 full-year net charge-offs estimating a range of between 70 to 90 basis points.
Speaker Change: Considering the performance of the Lumpur fall in the first quarter [inaudible]
and short-term outlook.
We could lower our guidance [inaudible]
Please turn to line number 10.
Speaker Change: The allowance for credit losses increased by $16 million to $662 million.
Speaker Change: The increasing the ACL was driven by changes in the probability of weight of economic scenarios, coupled with increases in qualitative reserves, of setting part by improvements in quality and changes in portfolio mix.
We leverage multiple scenarios to estimate our ACM [inaudible]
In response to the Korean economic uncertainty,
Speaker Change: We increase the weight of fine to the pessimistic scenario causing an 18 million increase in the ACL.
Speaker Change: In BEPR, they shall increase by 6 million during by the changing probability weights of setting parts by improvements in the correct quality of our commercial and consumer portfolio.
Speaker Change: The Corporation Racial of the ACL to Ron Shelton portfolio was 205 basis points compared to 201 basis points in the prior quarter, while the ratio of the ACL to MPL was 233% compared to 213% in the previous quarter.
Speaker Change: The provision for credit losses was $64 million, compared to $66 million in the prior quarter, and the VR, the provision was $53 million, compared to $67 million, while in popular bank, the provision was $13 million, compared to $2 million in the prior quarter.
Speaker Change: The combined probation to the charge of ratio for the quarter was 133%.
to summarize.
What is credit quality metrics improved in the first quarter?
Speaker Change: We are attentive to the both the environment where our confidence and the improvements in the risk of our loans portfolio will allow us to operate successfully on the more difficult economic conditions.
Speaker Change: With that, I would like to turn the call over to Ignacio for his concluding remarks. Thank you.
Ignacio Alvarez: Thank you, Lidio. And thank the Javier Lidio and Jorge for their updates. We are extremely pleased with our strong financial performance in the first quarter. We are increased our netro-synchum, rule-owned and deposit, and maintain strong credit measures.
Ignacio Alvarez: We also expanded our customer base and continue making progress on our transformation program.
Speaker Change: I want to express my sincere gratitude to our employees for all their hard work and support during my tenure. I am grateful for our achievements as well as the challenges we face and conquer
Speaker Change: I wish Javier great success in a new role, for which I believe he is won and ready. I'm confident Javier and the team will take popular to even greater heights.
Speaker Change: It has been an honor and a privilege to serve as CEO these last few years and I look forward to celebrating popular successes. I'll be it from a different vantage point for many years to come.
We are now ready to answer your questions.
[inaudible]
Speaker Change: Thank you. If you would like to ask a question, please press star full of by one on your telephone keypad. If you would like to withdraw your question, please press star full of by two.
Speaker Change: One preparing to ask a question, please ensure your device is unmuted locally.
Speaker Change: Our first question comes from Frank Schiraldi with Piper Sandler. Your line is open, please go ahead.
and Lidio Soriano. Thank you. Thank you.
Morning.
Speaker Change: It's kind of a water question. You know, mention the macro, I'm certain it'll be the tariff.
Speaker Change: Obviously, my new flow seems to change every day, but there's some obvious concerns. There's also talks of potential benefits for the island, and specifically, you know, hear about the comparative advantage in pharmaceuticals.
Speaker Change: And again, things are changing quickly, but just wondering what you guys are hearing, seeing on the ground from clients in terms of talk of potential new investment on the island, and how significant a headwind are things like the issues that the power group.
Speaker Change: The power grid is, I hate to answer it this way.
Speaker Change: But the power grid is not a significant issue because Puerto Rico has...
Over time, it become very resilient to power outages.
Speaker Change: I was going to the airport the other day and I was shocked during the outage [inaudible]
Speaker Change: Something that people have to think about, when they decide to invest in Puerto Rico, but many people are in Puerto Rico, especially in the form of Zulu, when everybody likes sectors, are doing their own ...
Speaker Change: Relative Cost of Max for the Benefit Small. So I don't think we've seen...
tasked with bringing in investment to Puerto Rico. This is an area where we believe Puerto Rico.
Speaker Change: You know, stands out in that it's a known entity for companies considering reshoring.
Speaker Change: We have the proven skilled talent pool in Puerto Rico, and the financial incentives are still more attracted than any state side option. Remember, Puerto Rico, depending on how you measure it, is either the number one or number two exporter of pharma.
Speaker Change: Products in the United States. So it's definitely a robust industry. We still have capacity both from existing
Companies in Puerto Rico, and for...
Speaker Change: plans that were here before that may be kind of white box at this point. There's also CMO organizations in Puerto Rico that can ramp up to do third party manufacturing. So it is an area that could be a highlight. I'd love to give you some example of a big win, but what we can talk right now is the strength of the industry and the anecdotal focus of the government and the teams that are supposed to do that.
Halfwood Bring the Supporter Rego [inaudible]
Yeah, sure. Okay, now let's help. Well then, um.
Speaker Change: Just switching gears as a follow up, Jorge, I wonder if you could update us on your broad thoughts on deposit flows. Obviously, you had the outflows in the third quarter of last year, I think it was, you talked about...
Speaker Change: 600 to 800 million additional at risk. Where are we now on that? You've had a couple of positive quarters on deposits. You know, how seasonal is the growth in one queue and just your thoughts on flows through the year here?
Sure, so first of all, happy with the efforts.
of the teams, and their focus on the pasta gathering.
Speaker Change: So the teams have reacted as they usually do, and we're very happy with those results, there's a lot of momentum [inaudible]
Speaker Change: 200 million ahead of last year in terms of tax refunds in our client accounts. We continue to expect more tax refunds in April and maybe a little bit into May.
You know, in terms of the deposits. Thanks.
Speaker Change: And when we look at our balances today, we're about 35% higher on average balance when compared to pre-pandemic. You may remember that the peak was 50%. And that was in 2022 when our clients were benefiting from a lot of federal stimulus.
Speaker Change: One of the interesting things that we see is that when we compare the inflows into our clients' accounts that have continued after 2022, our clients are actually getting more inflows today than they were in 2022. And that's driven by the higher earnings and higher wages.
Speaker Change: Higher Economic Activity that's ongoing in Puerto Rico. So that gives us some confidence that the baseline is tracking to where we think it would be.
when we look at, you know, [inaudible]
So we'll see how the trends, whether they repeat.
Speaker Change: But also given the uncertainty in the environment right now, we would also expect some clients to counteract that with maintaining higher balance that is perhaps pertailing some of their spend activity.
Speaker Change: You know, I think the bottom line we are outpacing where we thought we would be in the positive this time of the year, very happy with the efforts and our team's focus and we'll see where we turn out in the second and third quarter but glad to be starting from this point forward.
Speaker Change: Great, and just thinking about the seasonality again, is it still fair to think that three Q is probably the the trough from the seasonality standpoint for deposits
Speaker Change: That's what we saw in 2024. We'll have to see how it goes. We would expect continued tax refunds
Speaker Change: In the last year, we begin to see some of the spin occurring in the second quarter, so I will just depend on the speed and magnitude to it, bye.
again
We think the point of baseline should turn higher.
Gotcha. Okay, appreciate the color. Thanks
[inaudible]
Jared Cassidy: We now turn to Jared Cassidy with RBC. Your line is open, please go ahead.
Thank you.
Speaker Change: Nashio, congratulations on your retirement and have a year, congratulations on taking over the new role.
With that, Javier, can...
Speaker Change: You're welcome. Have a year. Can you share with us your view of where you see popular under your leadership? Will it differ at all from the last three or four years? What do you see for a popular in a big picture?
Speaker Change: I continue to see Popular as a pre-eminent financial institution Puerto Rico.
I think we're only getting stronger
Our transformation efforts continue to...
Speaker Change: Thank you for your time. It's been a pleasure. Thank you.
and Accelerate.
I see us becoming stronger in certain areas.
such as Payment or money movement.
ICOs, Strengthening, are...
Marcus Leading, Only Channel Experience for Customers
Speaker Change: for executing our strategy. I think it's going to be about...
Execution.
Speaker Change: Building on what the team has done on their Ignacio's great leadership.
Speaker Change: areas that I just described and of course you know we're gunning for that
Speaker Change: 12th of January , if you're wealthy and as the big mess in order I was favorable for.
We have you to get to the 14% royalty
on a sustainable basis. So that's what I...
That's what that's for I.T.
Speaker Change: The Authorization continues, of course, into the remainder of 2025. In view of, you know, it appears from the US regulatory standpoint that the regulators are going to maybe loosen the corset around the banking industry to ease up on maybe some of the capital requirements. Do you guys see for you folks, your CET-1 ratio, even with the buyback went higher in this quarter?
Any way of kind of projecting for us?
Speaker Change: What's a comfortable level above your peers, so I know that it's the Puerto Rico kind of premium or excess that you need to carry, but it seems like your capital levels are so strong or too strong, that you could lower them maybe more.
Speaker Change: Optimally with a stronger buyback over the next 12 to 18 months.
and Lidio Soriano.
Gerard, good morning, it's Jorge, you know, I had-
Speaker Change: You know, we share in your perspective in that we have our bus capital and certainly our
Speaker Change: We've spoken in the past about having a cushion or a spread against peer averages given our geographic concentration in Puerto Rico.
Speaker Change: We don't believe that, it needs to be five or six hundred basis points depending on how you measure it today.
Speaker Change: However, on the other hand, we have also said that we will be measured in our reduction of capital and do it over time. We do have an active authorization and we'll correct, the authorization is open-ended, it does not expire in 2025.
Speaker Change: Our intent to make sure that we are always working with some level of open authorization that we can execute upon and have the flexibility to do that.
Speaker Change: I read you and we hear it from many of our investors.
Speaker Change: In the meantime, focus on return on the level of capital that we have, focus on executing and making sure that we are active in returning capital to our shareholders both in organic growth and in capital returns through dividends and repurchases.
Speaker Change: Very good, Jorge. And just as a quick follow-up on your comment about the open authorization, once you've satisfied the 500 million that you were authorized from, I think, the 3rd or 4th quarter of last year, once you've satisfied that amount, what's the procedure to increase the authorization further?
Speaker Change: There's not much different than we used to raise heavily based on our internal stress that is based on the fed scenarios and obviously adjusted for Puerto Rico.
Speaker Change: talking to our board, looking at our organic growth plans, looking at our strategic plan, and making sure that we consider the overall environment in going to our board and communicating with our regulators of our plan.
Very good. Thank you.
You're welcome, Jerry.
Speaker Change: Our next question comes from Timur Braziler with Wells Fargo. Your line is open, please go ahead.
[inaudible]
Hi, good morning.
Starting on the N.A.H.A.
Speaker Change: and your thoughts around, maybe, upper versus lower levels of the guide, and what would you actually need to see for the pace of the top line growth to slow into that kind of lower
Speaker Change: I mean, I think, you know, certainly we have some tailwinds and the reinvestment of our investment portfolio, certainly in addition to that loan origination to the man for loans, you know, we'll, you know
Speaker Change: adds to that and I grow, but ultimately the deposit mix and the deposit costs are a big driver teamer. So, you know, like I said, you know, we're very happy with the levels of deposits. We'll see kind of client behavior and the efforts are continued efforts of our teams.
Speaker Change: But certainly that makes costs and levels will have an impact on where we end up in that 79% range.
I'm sorry, I'm sorry, I'm sorry, I'm sorry, I'm sorry
Speaker Change: BDAs and specific, just end of period versus the average discrepancy.
Speaker Change: is the expectation that some of that bill towards quarter end exits in 2Q and then just as you think about this massive little strategy, can you kind of ring-fend the portion of DDA that might be at risk of migrating at the higher cost categories as the strategy plays out?
Interest Thereing Transaction Account
Speaker Change: So that's why you're seeing kind of the discrepancy where you see a significant reduction in average balances of the man, but you don't see it in ending balances because that had already been embedded in the year end numbers. So that is to say that I wouldn't expect that trend to repeat organically, right?
Speaker Change: So, in terms of, you know, the cannibalization of people moving to higher cost deposits,
Speaker Change: We haven't really seen that in Puerto Rico, we do see it in the US, it's more prevalent in our US distance.
Speaker Change: Not in Puerto Rico, and part of that is driven by, you know, average balances, you know, the levels of average balances in Puerto Rico are commercial and corporate clients, you know, working capital, requirements, etc.
Speaker Change: Okay, and then just let me follow up on the by-back [inaudible]
Speaker Change: Popular was one of the more conservative banks when Rates started.
Speaker Change: Hiking and pausing the buyback level of uncertainty is higher today. Does this rise to that sink and a level where maybe you guys would pause and take a step back and engage with going on in the macro or is the comfort level internally and not where the buyback resumed despite some of this near-term uncertainties?
Ignacio Alvarez: You know, these are discussions we have on a constant basis of our board.
Ignacio Alvarez: I don't see anything today that would cause us to do that. A lot of us see we're very vigilant if something really bad happened, we would take action.
Great, thank you and congratulations both Nacho and Javier
Thank you. Thank you. Thank you.
[inaudible]
Speaker Change: We now turn to Jared Shaw with Barclays Castle. Your line is open, please go ahead.
Speaker Change: Hey, good morning. Thanks for the questions and just to echo everybody's congratulations as well for me and Ignacio, hope good luck with your next steps.
Thank you very much.
Speaker Change: I think maybe looking at the potential opportunity for on-choring in Puerto Rico, is there anything else, any other incentives the government's offering to apart from the farm industries, is there an opportunity to attract new industry, or is it really most of the efforts focused around on farmaceuticals?
Speaker Change: It's much more attractive for the pharmaceutical company. So, two other areas that have been gained traction, one is the medical device, and again, they have good, they have good private margins. And recently, aerospace and aerospace has a different standard because...
Speaker Change: Not much of what the aerospace industry produces in Puerto Rico is for the U.S. military. And, you know, by law that has to be made in the U.S.
So, that's a...
Under the advantage we have there.
Speaker Change: And more recently, too, we have seen some technology-focused organizations coming to Puerto Rico given that some of the R&D credits apply to software development, and that is attractive to some of those folks.
particularly in AI and kind of those unique areas.
Speaker Change: Great, thanks. And then maybe just a little more detail on the expectations around construction growth is that something we should be thinking...
continues to grow in an accelerated pace here.
Speaker Change: So, I think there's a couple of things there, you know, one, we are seeing our clients and most of their construction portfolios focus in New York and it's it's a
Speaker Change: Slower or less. So, developers are able to dedicate more people to accelerate the construction efforts. They're doing this to try to reduce the impact of the higher rate, borrowing rates, mitigate their increasing costs of development, etc.
Speaker Change: So, we are at some point expecting to see where we'll see some payouts and there won't be the pipeline to kind of...
You know, continue the level growth that we have seen.
Speaker Change: that are ongoing at the same time, meanwhile, our teams are going out and continue to develop business, so hopefully we get enough runway that it becomes a little transparent, but there is that nature. Remember what we make compete in some of the takeout loans, they're not, we're not, you know, our construction loans are not contingent on the takeout loan, sometimes we don't want to take out loan.
Speaker Change: to see the benefits from some of the smartphones that are being allowed to construction of low housing in Puerto Rico, low income housing in Puerto Rico, the timing is a little bit difficult to say, but we think that that's going to happen in this year next year.
Speaker Change: And one other area where we've seen the man in the U.S. is in our community and condissociation lending, particularly in South Florida, but there are some legislative requirements.
Speaker Change: for condo boards to address maintenance on any building that's higher than three floors and 30 years old. And there's a lot of activity in that area. That shows up more in our CNI portfolio rather than the construction given the nature of the collateral and the way those loans are made.
Great. Thank you.
Speaker Change: Our next question comes from Ben Gerlinger with City. Your line is open, please go ahead.
[inaudible]
Hi, good morning.
Hi Ben, good morning.
Speaker Change: Everything we talked to here on the longer term seems to be pretty positive [inaudible]
Speaker Change: But in your commentary, you're kind of towards the lower end of the guidance range, and it's kind of curious, is it more so just being prudent?
Speaker Change: in the conservative, or just like, Elbedo Payout, some people not utilizing lines as the pace we're thinking, I'm just kind of trying to marry the two of them, like, out of the all along the lower line ground.
Yeah, I think, you know, first there's-
Speaker Change: Payoffs in our runway that we see, so obviously that money that needs to be replaced.
Speaker Change: We started in the past, you know, for example, our auto portfolio, our run rate is somewhere in the 400 million in
Speaker Change: So, you know, we talk a lot about growth but the machinery that has to support that growth is extensive as well.
Speaker Change: I think when we talk about our low end of the range, it is driven by...
Speaker Change: Not only disability to our pipeline conversation with our clients.
Speaker Change: And most our clients are confident with the projects that are ongoing, but the uncertainty certainly gives
Speaker Change: with projects that are that are longer term people just want to understand what it is that they're building into committing into buying into etc.
Okay, that is helpful
Speaker Change: And then I think in the kind of previous discussion, you talked through kind of refund taxes and returns and just the overall the positive pull that you normally see is getting a little bit better
Speaker Change: Are you seeing those refunds go directly to paying off the link? Well, there are two different ships passing in. Both are part of them. I'm just trying to see if one hand is going right to the other.
Speaker Change: I would say that that that would be a natural tendency for it to occur because we will become more liquid to use some of that liquidity to deliver themselves.
Speaker Change: But I think what we have seen this quarter is a function of some of the actions that we took back in 2023, related to tightening some of our risky borrowers, and a management effort that we have put forth in collections has really paid off this work.
and when we look at the Delta of...
Speaker Change: in the first quarter this year versus last year, versus the increase in taxes, those seem to be consistent. So whatever behavior we're seeing, it is not out of,
You know, I don't think with what we have seen traditionally.
Speaker Change: So if people are using, you know, to pay in and become current, we're still seeing the deposit balances grow so that you're getting two positives there, I guess it's a better way of saying it.
Speaker Change: Jackson, that's helpful. Appreciate it, Simon, also slide some of the team. It looks great. Thank you, Paul.
Thank you.
Operator: We now turn to Kelly Motta with KBW. The line is open, please go ahead.
Kelly Motta: Hi, good morning. I just wanted to echo everybody's congratulations. To you, Ignacio, on your retirement, it's been such a pleasure working with you and Javier on Congrats on the new gig.
Thank you.
So, let's see, um,
Kelly Motta: dropping below the end of the range, depending on how this goes. I'm just wondering where we stand on that normalization of the consumer and life cycle there.
Kelly Motta: Is there still a potential of, you know, some of those losses taking higher? Or has that, you know,
Kelly Motta: addressing the PICO scores on that kind of contained that back more towards the normal end of the range, just trying to kind of frame where we are in what we've been talking about the half of the recorders.
Kelly Motta: I think as we mentioned in the paper remarks, we're very pleased and very happy with the performance of our long book, this product.
Kelly Motta: We also mentioned that giving the performance in the first quarter
and the outlook, the short-term outlook for a book.
Kelly Motta: Results for the quarter and how to look for the rest of the year. However, given the uncertainty, we'll hold it off from changing the estimate at this time.
and Lidio Soriano. Thank you. Thank you.
Got it. Okay, that's helpful.
Kelly Motta: So maybe stepping back, I think I caught that you reiterated your intermediate term outlook for, you know, eventually getting to that 14% Rossi.
Kelly Motta: In order to get there, can you help frame? Would that take a more substantial return on capital beyond these opportunistic share purchases you have here? I'm just trying to
Kelly Motta: at a high level, what would it take to get there?
Kelly Motta: I think that part of the reason of extending and then making that a target, and not giving the time into that target, it is...
that it requires us to execute across the entire-
Kelly Motta: That's called a P&L in balance sheet, right? They will require us.
Kelly Motta: to maintain our focus on the positive growth, our mix of the positive growth.
Our Expandent Name
Expense Control, Strategic Decisions, and including...
Kelly Motta: in our capital stack. So it's really all of the above, Kelly, and just goes to the nature of the effort and focus that our management team has to have active participants in making sure that we make decisions towards that goal.
[inaudible]
Great, I'll step back. Thank you very much.
Thank you very much.
Speaker Change: That's another reminder, if you'd like to ask a question, please press star one on your telephone to keep on now.
Speaker Change: We now turn to a near bohan with hoofed group. Your line is open, please go ahead.
Hi, good morning.
Speaker Change: Just a quick question. Talking about your fee income, do you expect your total fee income to rebound from here after the slight decrease this quarter and have the mortgage?
Banking Income, up, check again.
Speaker Change: Yeah, we do it, as we said in the guidance, expect to finish the year between 155 to 160 per quarter and when we look at year end, so that would signify, as you say, a pickup. There is some security in some of those fee lines, you know, for example, Frank's Action Accounts, Credit Cards, you know, we would expect
We don't.
Speaker Change: Equity Method Investments, you know, we would expect there to add to that increase going forward. And then there's also other cyclical fees from our insurance company that get paid some in the second quarter and others in the fourth quarter. So when you put that all together, they are levers in our business mix that should...
Speaker Change: I'll take that off to the levels that we're guiding to [inaudible]
Perfect, well, thank you so much [inaudible]
Thank you, welcome.
Thank you.
Speaker Change: This concludes our Q&A. I'll not hand back to Ignacio Alvarez. See you for any final remarks.
Speaker Change: Once again, thank you, it's been a pleasure working with you and we appreciate the interest that you have in our company.
And while we are, may not always agree we, we always listen.
Speaker Change: Thank you, and I look forward to listening to the next clip. Take care.
Speaker Change: Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.
David
Speaker Change: and Lidio Soriano. Thank you. Thank you. Thank you. Thank you.