Q2 2025 Popular Inc Earnings Call
Coordinated today.
If you'd like to register your questions today's events. Please press star one on your telephone keypad.
Paul Taylor: That's a hand over to Paul Taylor. Please go ahead.
Paul Taylor: Good morning, and thank you for joining us.
Paul Taylor: With us on the call today is our president and CEO Javier for our CFO, Jorge Garcia and our CRO video Soriano. They will review our results for the second quarter and then answer your questions. 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 plans and objectives. These statements are based on management's current expectations and are subject to risks and uncertainties.
Speaker Change: Sectors that could cause actual results to differ materially from these forward looking statements are set forth within todays earnings release, and our SEC filings.
Speaker Change: Find today's press release, and our SEC filings on our webpage at popular Dot com.
Javier Ferrer: I will now turn the call over to our President and CEO Javier Ferrer.
Speaker Change: Thank you Paul.
Speaker Change: Good morning, everybody I'm happy to be here with you in my first earnings call as CEO.
Speaker Change: I'd like to take a moment to recognize the impact that my predecessor Ignacio Alvarez.
Speaker Change: Adam This company during his tenure.
Speaker Change: That's what SME as a colleague and a friend.
Speaker Change: It is an honor to follow such a great either.
Speaker Change: Thank you for your partnership.
Speaker Change: I am humbled by the opportunity to lead this iconic point, both Aiken institution.
Speaker Change: For over 130 years <unk> has consistently demonstrated a deep commitment to dollars per vehicle.
Speaker Change: It's institutional values.
Speaker Change: I am putting our customers at the heart of everything we do.
Speaker Change: I joined <unk>, almost 11 years ago.
Speaker Change: I knew that if I wanted to make a meaningful contribution.
Speaker Change: What's the place to be.
Speaker Change: This idea simple yet powerful continues to inspire me.
Speaker Change: Before I close the highlights for the second quarter.
Speaker Change: Im pleased to report that we recently announced two capital actions are new incremental common stock repurchase program.
Speaker Change: Up to $500 million and a 7% increase quarterly common stock dividend to <unk> 75 per share.
Speaker Change: These actions evidenced the strength of our capital position, which allows us to continue to invest in our franchise.
Speaker Change: And serve the needs of our customers, while also returning capital to our shareholders.
Speaker Change: On slide three we share a few highlights from the period that reflect our strong operating performance in the second quarter.
Speaker Change: We reported net income of $210 million.
Speaker Change: And EPS of $3.09 per share an increase of $32 million of <unk>.
Speaker Change: <unk> three per share respectively compared to the first quarter.
Speaker Change: Importantly, the improvement in our bottom line, resulting in a very strong 13, three return on tangible common equity.
Speaker Change: Our results were driven by higher knitting net interest income and expanding net interest margin and strong loan and deposit growth.
Speaker Change: We maintained our credit discipline and.
Speaker Change: Credit quality continued to improve.
Speaker Change: I would like to commend the lending teams at <unk> with.
Elliot: My name is Elliot and I'll be your coordinator today.
Speaker Change: Which grew loans by more than $900 million during the quarter.
Elliot: If you would like to register your questions during today's event, please press star 1 on your telephone keypad.
Serve the needs of our customers, while also returning Capital to our shareholders.
Speaker Change: As a notable example, we serve that's agent bank for a 425 million loan to the private sector entity that operates and maintains several toll roads in Puerto Rico.
Paul Cardillo: And I'd like to hand over to Paul Cardillo. Please go ahead. Good morning, and thank you for joining us.
On slide 3, we share a few highlights from the period that reflect our strong operating performance in the second quarter.
Paul Cardillo: With us on the call today is our President and CEO, Javier Ferrer, our CFO, Jorge Garcia, and our CRO, Lidio Soriano. They will review our results for the second quarter and then answer Other members of our management team will also be available during the Q&A session.
We reported net, income of 210 million.
Speaker Change: This transaction is one of the largest infrastructure financings in Puerto Rico executed entirely by local financial institutions.
Please turn to slide four.
Speaker Change: So at the end of the second quarter basis activity in Puerto Rico continued to be solid as reflected by favorable trends in total employment consumer spending another key economic data.
Paul Cardillo: 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. The following statements are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these forward-looking statements are set forth within today's earnings release and our S&P.
An EPS of $39 per share, an increase of 32 million, and 53 cents per share respectively, compared to the first quarter. Importantly, the improvement in our bottom line, resulted in a very strong 13.3, return on tangible, common equity.
Speaker Change: The unemployment rate of five 5%.
Speaker Change: Continues to hover around all time lows.
Our results were driven by higher net in net interest income and expanding net, interest, margin and strong loan and deposit growth.
Speaker Change: Consumer spending has been resilient and remains healthy combined credit and debit card sales for bulk global our customers increased by approximately 4% compared to the second quarter of 2024.
We maintain our credit discipline.
And credit quality continue to improve.
Paul Cardillo: You can find today's press release and our SEC filings on our webpage at popular.com.
I would like to commend The Lending teams at popular, which grew loans by more than 900 million during the quarter.
Speaker Change: Home purchase activity continues to be strong as demonstrated by the 158 million increase in mortgage balances at <unk> during the quarter.
Javier Ferrer: We will now turn the call over to our President and CEO, Javier Ferrer. Thank you, Paul. Good morning, everybody.
Javier Ferrer: I'm happy to be here with you in my first earnings call as CEO. I'd like to take a moment to recognize the impact that my predecessor, Ignacio Alvarez, had on this company during his tenure. swear up on me as a colleague and a friend. It is an honor to follow such a great leader, so thank you, Nacho, for your partnership. I am humbled by the opportunity to lead this iconic Puerto Rican institution. For over 130 years, Popular has consistently demonstrated a deep commitment to Puerto Rico.
As a notable example, we served as agent bank, for a 425 million loan to the private sector entity that operates and maintains several toll roads in Puerto Rico.
Speaker Change: While demand for new cars slowed somewhat after a very strong first quarter, we saw our alto loan and lease balances increased by $76 million during the period.
This transaction is 1 of the largest infrastructure financing in Puerto Rico executed entirely by local financial institutions.
Please turn to slide 4.
Speaker Change: The tourism and hospitality sector continues to be a source of strength for the local economy.
Speaker Change: This summer.
Speaker Change: The sector is benefiting from an added tailwind.
As of the end of the second quarter business activity in Puerto Rico, continued to be solid as reflected by favorable Trends in total employment consumer spending and other key economic data.
Speaker Change: During what is usually a seasonally slow period due to Benito Martinez Ocasio also known as <unk>.
the other employment rate of 5.5%,
Continued to hold around all-time lows.
Javier Ferrer: Institutional Values. putting our customers at the heart of everything we do. I joined Popular almost 11 years ago. I knew that if I wanted to make a meaningful contribution, this was the place to be. This idea, simple and yet powerful, continues to inspire me. Before I discuss the highlights for the second quarter, I am pleased to report that we recently announced two capital actions, a new incremental common stock repurchase program of up to $500 million and a 7% increase in our quarterly common stock dividends to $0.75 per share. These actions evidence the strength of our capital position, which allows us to continue to invest in our franchise.
Speaker Change: 39 concert residency at the Colosseum in San Juan right.
Consumer spending has been resilient and remains healthy.
Speaker Change: Right next to our popular center complex.
Speaker Change: Conservative estimates indicate that he will lead to approximately $200 million in additional local economic activity. It is also generating significant media exposure for the island.
Combined credit and debit card sales for Bank customers increased by approximately 4% compared to the second quarter of 2024.
Speaker Change: Adding to its strong image as a compelling destination for travelers.
Home purchase activity continues to be strong as demonstrated, by the 158 million increase in mortgage balances, at Bank of mobile are doing the quarter.
Speaker Change: The pulpwood our brand is very well represented in the revenues.
Speaker Change: Additionally, some colleagues and I recently had an opportunity to attend the rebranding of an emblematic hotel property in San Juan and tour.
While the man for new cars slowed somewhere after a very strong first quarter, we saw our auto loan at least balances increase by 76 million During the period.
Speaker Change: One of the islands, new luxury hotel and residential community development being built on the East coast.
The tourism and Hospitality sector continues to be a source of strength for the local economy.
Speaker Change: Encouraging to see the scale of private investments being made on the island.
This summer, The sector is benefiting from an added Tailwind.
Javier Ferrer: serve the needs of our customers while also returning capital to our shareholders.
Speaker Change: At last.
But certainly not least we continue to expect that the ongoing disbursement of federal disaster recovery funds will support economic activity for several years to come.
Javier Ferrer: On slide three, we share a few highlights from the period that reflect our strong operating performance in the second quarter. We reported net income of $210 million. an EPS of $3.09 per share, an increase of 32 million and 53 cents per share respectively. compared to the first quarter. Importantly, the improvement in our bottom line resulted in a very strong 13.3 return on annual common equity. Our results were driven by higher net interest income, an expanding net interest margin, and strong loan and deposit growth. We maintain our credit discipline. Credit Quality continues to improve. I would like to commend the lending teams at Popular, which grew loans by more than $900 million during the quarter.
During what is usually a seasonally slow period due to Benito Martinez Ocasio also known as bad bunnies.
39 concert residency at the coliseum in San Juan.
Right next to our popular Center complex.
Speaker Change: Given what we see every day.
Speaker Change: I am convinced there are opportunities for growth in Puerto Rico.
Conservative estimates indicates that it will lead to approximately 200 million in additional local economic activity.
Speaker Change: And we are uniquely positioned to leverage them.
It is also generating significant media exposure for the island.
Speaker Change: We will not take our market position for granted.
Adding to its strong image as a compelling destination for travelers.
Speaker Change: Compete for it every day on.
Speaker Change: And are strongly committed to promoting the islands progress.
The popular brand is very well represented in the residences.
Speaker Change: As we have done for over 130 years.
Speaker Change: Before turning it over to Jorge I would like to briefly comment on the status of our transformation.
Additionally, some colleagues. And I recently had an opportunity to attend the rebranding of an emblematic Hotel property in San Juan and tour.
Jorge Garcia: These efforts are designed to enhance our customers' lives through more personalized and seamless experiences increased.
1 of the islands. New luxury, hotels and residential Community developments being built on the East Coast.
It's encouraging to see the scale of private Investments being made on the island.
Jorge Garcia: Employee performance and satisfaction with more ideal work processes modernize the company's technology to enable greater innovation in security and generate sustainable profitable growth for our shareholders.
And last.
Javier Ferrer: As a notable example, we served as agent bank for a $425 million loan to the private sector entity that operates and maintains several toll roads in Puerto Rico. This transaction is one of the largest infrastructure finances in Puerto Rico, executed entirely by local financial institutions.
But certainly not least, we continue to expect that the ongoing disbursement of federal Disaster Recovery funds will support economic activity for several years to come.
Given what we see every day.
Jorge Garcia: Our companywide multi year program.
I am convinced.
Jorge Garcia: Such as this one requires commitment focus.
There are opportunities for growth in Puerto Rico.
Speaker Change: Ah patients.
And that we are uniquely positioned to leverage that.
Javier Ferrer: Please turn to slide four. As of the end of the second quarter, business activity in Puerto Rico continued to be solid, as reflected by favorable trends in total employment, consumer spending, and other key economic data. The unemployment rate of 5.5% continues to hover around all-time lows. Consumer spending has been resilient and remains healthy. Combined credit and debit card sales for Banco Popular customers increased by approximately 4% compared to the second quarter of 2020. Home purchase activity continues to be strong, as demonstrated by the $158 million increase in mortgage balances at Banco Popular during the quarter.
Speaker Change: We are pleased with the substantial progress we have made so far.
We do not take our Market position for granted.
Speaker Change: We have modernized branches to enhance customer experience and operational efficiency reduce loan processing times for small and mid sized commercial customers above global air and launched a new digital platform to improve our commercial cash management services.
We compete for it every day.
And are strongly committed to promoting the Island's progress.
as we have done for over 130 years,
Jorge: before turning it over to Jorge.
Jorge: I would like to briefly comment on the status of our transformation.
Speaker Change: These are only a small sample of the many efforts completed and in process that will ensure we are the number one bank for our customers.
Speaker Change: I am confident that we can improve how we work.
Speaker Change: By becoming simpler and more productive and more efficient.
Speaker Change: We will continue to leverage our position to <unk> additional opportunities for growth in Puerto Rico.
Jorge: This efforts are designed to enhance our customers lives through more personalized and seamless experiences. Increase employee performance and satisfaction with more agile. Work processes, modernize the company's technology to enable greater Innovation and security, and generate sustainable and profitable growth for our shareholders.
Javier Ferrer: While demand for new cars slowed somewhat after a very strong first quarter, we saw our auto loan and lease balances increase by $76 million during the period. The tourism and hospitality sector continues to be a source of strength for the local economy. This summer, the sector is benefiting from an added tailwind during what is usually a seasonally slow period due to Benito Martinez Ocasio, also known as Bad Bunny. 39th Concert Residency at the Coliseum in San Juan, right next to our Popular Center Complex. Conservative estimates indicate that it will lead to approximately $200 million in additional local economic activity.
Jorge: A companywide multi-year program.
Speaker Change: I am convinced there are many.
Jorge: Commitment.
Speaker Change: To drive increased profitability and continue enhancing our performance in the coming years.
Jorge: Focus.
Jorge: And patience.
Speaker Change: It's only been a couple of weeks since I officially the yen in this role.
Jorge: We are pleased with the substantial progress. We have made so far.
Speaker Change: But I'm excited to show.
Speaker Change: Everyone.
Speaker Change: What we can achieve together with even greatest.
Speaker Change: Strategic focus and agility.
Jorge Garcia: I will now turn the call over to Jorge for more details.
Jorge: We have modernized branches to enhance customer experience and operational efficiency, reduce loan processing times for small and mid-size, commercial customers at Bangalore, and launched a new digital platform to improve our commercial cash Management Services.
Speaker Change: Our financial results.
Javier Ferrer: Thank you Javier.
Javier Ferrer: And thank you all for joining the call today.
Speaker Change: Thanks, Javier mentioned, our coordinated income increased by 32 million to $210 million and our EPS improved by 21% to $3 90 per share.
Jorge: These are only a small sample of the many efforts completed and in process that will ensure. We Are The Number 1 Bank for our customers.
Jorge: I am confident that we can improve how we work.
Javier Ferrer: It is also generating significant media exposure for the island, adding to its strong image as a compelling destination for travelers. The popular brand is very well represented in the restaurant.
Speaker Change: These results were driven by better NII, and noninterest income and a lower provision for credit losses.
Jorge: By becoming simpler more productive and more efficient.
Speaker Change: So that somewhat by higher operating expenses.
Jorge: We will continue to leverage our position to size additional opportunities for growth in Puerto Rico.
Speaker Change: There are numerous positive to highlight this quarter. The most significant for US is that the improvement in net income coupled with our repurchase activity, which resulted in a 13, 3% ROTC for the period.
Javier Ferrer: Additionally, some colleagues and I recently had an opportunity to attend the rebranding of an emblematic hotel property in San Juan and tour one of the island's new luxury hotel and residential community developments being built on the east coast. It's encouraging to see the scale of private investments being made on the island. and left. But certainly not least, we continue to expect that the ongoing disbursement of federal disaster recovery funds will support economic activity for several years to come. Given what we see every day, I am convinced there are opportunities for growth in Puerto Rico. and that we are uniquely positioned to leverage.
I am convinced there are many.
Jorge: To drive increased profitability, and continue enhancing our performance in the coming years.
Jorge: It's only been a couple of weeks since I officially began in this role.
Speaker Change: An increase of 190 basis points from last quarter.
Speaker Change: As we have mentioned before our objective is to deliver sustainable financial results.
Jorge: But I'm excited to show everyone.
Jorge: What we can achieve together with even greatest.
Speaker Change: Our prior guidance of achieving at least a 12% ROTC in Q4 of this year still stands. Additionally, given this quarters results and credit outlook. We are increasingly confident we should exceed a 12% roughly for the full year and not just in Q4.
Jorge: Strategic focus at agility.
Jorge: I will now turn the call over to Jorge for more details on our financial results.
Jorge: Thank you Javier. Good morning, and thank you all for joining the call today.
Speaker Change: Longer term, we remain focused on achieving a sustainable 14% return on tangible common equity.
Jorge: Mentioned our coordinate income increased by 32 million, to 210 million and our EPS improved by 21% to 3.9 cents per share.
Speaker Change: Please turn to slide six.
Speaker Change: Our net interest income of $632 million increased by $26 million and was driven by balance sheet growth asset repricing in our investment portfolio and lower deposit costs in both of our banks.
Javier Ferrer: We do not take our market position for granted. We compete for it every day and are strongly committed to promoting the island's progress as we have done for over 130 years.
Jorge: These results were driven by better knee and non-interest income and a lower provision for credit losses.
Jorge: Offset somewhat by higher operating expenses.
Speaker Change: Our net interest margin expanded by nine basis points on a GAAP basis, and 12 basis points on a tax equivalent basis.
Javier Ferrer: Before turning it over to Jorge, I would like to briefly comment on the status of our transformation. These efforts are designed to enhance our customers lives through more personalized and seamless experiences. Increase employee performance and satisfaction with more agile work processes. modernize the company's technology to enable greater innovation and security and generate sustainable and profitable growth for our shareholders. Company-wide multi-year program. such as this one requires commitment, focus, and patience. We are pleased with the substantial progress we have made so far. We have modernized branches to enhance customer experience and operational efficiency, reduced loan processing times for small and mid-sized commercial customers at Banco Popular, and launched a new digital platform to improve our commercial cash management service.
Speaker Change: By lower deposit costs, and a larger balance of loans and tax exempt investment securities.
Jorge: There are numerous positive to highlight this quarter but most significant for us is that the Improvement in net income coupled with a repurchase activity which resulted in a 13.3% roxy. For the period, an increase of 190 basis points from last quarter,
Speaker Change: After a slow Q1 loan growth of 931 million in the quarter was very strong with both banks contributing to the increase.
Jorge: As we have mentioned before, our objective is to deliver sustainable Financial results.
Our prior guidance of achieving at least a 12% Rosy, in Q4 of this year, still stands
Speaker Change: At <unk>, we saw loan growth of $681 million reflected across all portfolios.
Speaker Change: But driven primarily by commercial and construction lending.
Jorge: Additionally, given this quarter's results and credit Outlook. We are increasingly confident, we should exceed a 12%, Roxy for the full year and not just in Q4
Speaker Change: This includes the $265 million that we retained from the toll roads financing have you had described earlier.
Jorge: Longer term will remain focused on achieving a sustainable 14% return on tangible? Common equity.
Jorge: Please turn to slide 6.
Speaker Change: At <unk>, we saw loan growth of $251 million, driven by commercial and construction lending.
Speaker Change: Last quarter, we guided to the lower end of that 3% to 5% load growth range due to expected payoff in our construction portfolio and the uncertainty in the economic environment.
Our net interest income of 632 million increased by 26 million, and was driven by balance sheet growth as a repricing, in our Investment Portfolio, and lower deposit costs, in both of our banks.
Speaker Change: However, given the loan growth realized in Q2 and continued demand in Florida Rico and in our niche lending businesses in the U S. We reiterate our original 3% to 5% guidance.
Jorge: Our net interest margin expanded by 9 basis points on a gap basis and 12 basis points on a tax equivalent basis.
Javier Ferrer: These are only a small sample of the many efforts completed and in process that will ensure we are the number one bank for our customers. I am confident that we can improve how we work by becoming simpler, more productive, and more efficient. We will continue to leverage our position to size additional opportunities for growth in Puerto Rico. I am convinced there are many. to drive increased profitability and continue enhancing our performance in the coming years.
Jorge: Driven by lower deposit costs and a larger balance of loans and tax exempt investment securities.
Speaker Change: And our investment portfolio, we continued to reinvest proceeds from maturities into treasuries targeting a yield of at least 4% while trying to manage the duration of the portfolio.
Jorge: After a slow, q1 loan growth of 931 million in the quarter was very strong with both Banks contributing to the increase.
Speaker Change: During the quarter, we purchased approximately $2 4 billion of treasuries and an average yield around 4%.
A bppr we so long growth of 681 million reflected across all portfolios.
Jorge: but during primarily by commercial and construction Lending,
Speaker Change: The duration of these was closer to one five years as we felt the yields on that part of the curve were more attractive, particularly when considering the extension we achieved through our loan growth.
Jorge: This includes the 265 million that we retained from the toll roads, financing that have yet described earlier.
Speaker Change: We expect to continue to invest in treasuries to lessen our NII sensitivity to lower rates, while maintaining an overall duration of two to three years in the investment portfolio.
Javier Ferrer: It's only been a couple of weeks since I officially began in this role. But I'm excited to show everyone. what we can achieve together with even greatest. Strategic Focus, Energy Literacy.
Jorge: At PVE we saw longer growth of 251 million driven by commercial and construction Lending.
Speaker Change: Ending deposit balances increased by $1 4 billion, while average balances grew by $499 million.
Jorge: Last quarter, we got it to the lower end of the 3 to 5% low, growth range due to expected payoffs in our construction portfolio and the uncertainty in the economic environment.
Jorge Garcia: I will now turn the call over to Jorge for more details on our financial...
Speaker Change: Puerto Rico public deposits ended the quarter at 29 billion, an increase of approximately $1 3 billion compared to Q1.
Jorge Garcia: Thank you, Javier. Good morning, and thank you all for joining the call today. As Javier mentioned, our quarterly net income increased by $32 million to $210 million, and our EPS improved by 21% to $3.09 per share. These results were driven by better NII and non-interest income and a lower provision for credit loss. offset somewhat by higher operating expenses. There are numerous positives to highlight this quarter, but most significant for us is that the improvement in net income, coupled with our repurchase activity, which resulted in a 13.3% ROCE for the period, an increase of 190 basis points from last quarter.
However, given the loan growth realized in Q2 and continued demand in Puerto Rico and in our Niche, lending businesses in the US, we reiterate our original 3 to 5% guidance.
Speaker Change: We continue to expect public deposits will be in the range of $18 billion to $20 billion.
Speaker Change: <unk>, excluding Puerto Rico public deposits ending deposit balances decreased by approximately $60 million and to end and an average deposits grew by approximately $440 million with noninterest bearing deposits accounting for $93 million of that increase.
Jorge: In our Investment Portfolio. We continue to reinvest proceeds from maturities into treasuries.
Jorge: Targeting a yield of at least 4%, while trying to manage the duration of the portfolio.
During the quarter, we purchased approximately 2.4 billion of treasuries and an average yield of around 4%.
Speaker Change: At PV ending deposit balances increased by approximately $150 million net of intercompany deposits.
Jorge: The duration of these was closer to 1.5 years, as we felt the yields on that part of the curve were more attractive.
particularly when considering the extension we achieved through our loan growth,
Speaker Change: Total deposit cost decreased by five basis points.
Speaker Change: <unk> deposit costs decreased by three basis points to 150.
Jorge Garcia: As we have mentioned before, our objective is to deliver sustainable financial results. Our prior guidance of achieving at least a 12% ROTC in Q4 of this year still stands. Additionally, given this quarter's results and credit outlook, we are increasingly confident we should exceed a 12% ROCE for the full year and not just in Q4. Longer term, we remain focused on achieving a sustainable 14% return on tangible common income.
Speaker Change: 52%, mostly due to a 10 basis point reduction in the cost of market linked public deposits.
Jorge: We expect to continue to invest in, treasuries, to lessen, our knee sensitivity to lower rates while maintaining an overall duration of 2 to 3 years, in the Investment Portfolio.
Speaker Change: At popular bank deposit costs decreased by 14 basis points as we continued our efforts to reduce the cost of our U S deposits.
Speaker Change: Very happy with the efforts of our teams and their focus on deposit retention and growth strategies.
Puerto Rico, public deposits. And the, the quarter at 20.9 billion an increase of approximately 1.3 billion compared to q1,
Speaker Change: However, we continue to expect third quarter that bumped, it bounces and BBB or do reflect historical seasonality and decrease as a retail client base expense Q1, and Q2 tax refunds.
We continue to expect public deposits to be in the range of 18 to 20 billion.
Jorge Garcia: Please turn to slide 6. Our net interest income of $632 million increased by $26 million and was driven by balance sheet growth, asset repricing in our investment portfolio, and lower deposit costs in both of our banks. Our net interest margin expanded by 9 basis points on a gap basis and 12 basis points on a tax equivalent basis. driven by lower deposit costs and a larger balance of loans and tax-exempt investment security. After a slow Q1, loan growth of $931 million a quarter was very strong, with both banks contributing to the increase. At BPPR, we saw a loan growth of $681 million, reflected across all portfolios, but driven primarily by commercial and construction lending.
Speaker Change: That said given the results in the first half of the year along with the anticipated NIM expansion for the rest of the year from re pricing of our fixed rate, earning assets and deposit retention strategies. We now expect to see higher NII growth of 10% to 11% in 2025.
At bbpr excluding Puerto Rico, public deposits ending. The positive balance has decreased by approximately 60 million, end to end and an average deposit, grew by approximately 440 million, with non-interest bearing deposits accounting for 93% of that increase.
At pending deposit, balances increased by approximately 150 million, net of interco company, deposits.
Jorge: Total deposit costs decreased by 5 basis points.
Speaker Change: Please turn to slide seven.
Speaker Change: Noninterest income was $168 million, an increase of $16 million compared to Q1 and above the high end of our 2025 quarterly guidance.
At bbpr deposit, costs decreased by 3 basis. Points to 1.52% mostly due to a 10 basis point reduction in the cost of Market linked public deposits.
Speaker Change: There were two primary drivers of the delta versus our expectations.
Speaker Change: <unk> fees related to customer transaction activity as a result of higher credit and debit card spending.
Jorge: At popular bank deposit costs decreased by 14 basis points as we continue our efforts to reduce the cost of our us deposits.
Speaker Change: And higher other operating income, which was mostly due to a $3 million increase in income from equity method investments and an approximately $3 million related to a reimbursement from the IRS.
Jorge: We're very happy with the efforts of our teams and their focus on deposit retention and growth strategies.
Jorge Garcia: This includes the $265 million that we retained from the toll roads financing that Javier described earlier. At PBE, we saw a loan worth of $251 million, driven by commercial and construction lending. Last quarter, we got it to the lower end of the 3% to 5% low growth range due to expected payoff in our construction portfolio and the uncertainty in the economic environment. However, given the long growth realized in Q2 and continued demand in Puerto Rico and in our niche lending businesses in the U.S., we reiterate our original 3-5% goal. In our investment portfolio, we continue to reinvest proceeds from maturities into treasuries, targeting a yield of at least 4% while trying to manage the duration of the portfolio.
Speaker Change: Based on the quarter's results, we now expect quarterly noninterest income for 2025 to be at the high end of the $155 million to $160 million range.
However we continue to expect third quarter deposit, balances and bbpr to reflect historical seasonality and decrease as a retail client base spends q1 and Q2 tax refunds.
Speaker Change: Please turn to slide eight.
Speaker Change: Total operating expenses were $493 million, an increase of $22 million when compared to last quarter.
Jorge: That said given the results in the first half of the Year along with the anticipated name expansion, for the rest of the year. From repricing of our fixed rate, earning assets and deposit retention strategies. We now expect to see higher knee growth of 10 to 11% in 2025.
Speaker Change: The largest expense variance in the quarter was the $17 million increase in personnel costs. We've.
Jorge: Please turn to slide 7.
Speaker Change: We've had a very good first half of 2025 African reasonably be assumed by our improved outlook for NII in credit our internal net income forecast for the full year are now outpacing the original 2025 budget expectations by a significant enough margin to prompt us to begin to accrue profit sharing expense.
Jorge: Not interest income was 168 million, an increase of 16 million compared to q1, and above the high-end of our 2025 quarterly guidance.
Jorge: There were 2 primary drivers of the Delta versus our expectations.
Jorge Garcia: During the quarter, we purchased approximately $2.4 billion of treasuries and an average yield of around 4%. The duration of these was closer to 1.5 years, as we felt the yields on that part of the curve were more attractive. particularly when considering the extension we achieved through our long road. We expect to continue to invest in treasuries to lessen our NII sensitivity to lower rates while maintaining an overall duration of two to three years in the investment portfolio. Ending deposit balances increased by $1.4 billion, while average balances grew by $499 million. Puerto Rico public deposits ended the quarter at $20.9 billion, an increase of approximately $1.3 billion compared to Q1.
Jorge: Better fees related to customer transaction activity as a result of higher, credit, and debit card spending.
Speaker Change: During the quarter, we accrued 13 million for profit sharing in addition to other performance related incentives.
Speaker Change: If we continue to outperform for the remainder of the year. The total profit sharing expense will be capped at approximately $40 million or approximately 2% of our expense base.
Jorge: And higher other operating income which was mostly due to a 3 million increase in income from Equity method Investments and an approximately 3 million related to a reimbursement from the IRS.
Speaker Change: Being in a position to share profits with all of them up with large fulltime employees. It's a terrific outcome and allows our teams to benefit from the acceleration and the improvement of our profitability.
Jorge: Based on the quarter's results. We now expect quarterly, non-interest, income for 2025 to be at the high end of the 155 to 160 million range.
Jorge: Please turn to slide 8.
Speaker Change: This expense was not included in our original 4% expense growth guidance at the beginning of the year. However, we are working to mitigate the impact of these costs on our total expenses for the year were sustainable efficiency efforts.
Jorge: Total operating expenses. Were 493 million an increase of 22 million when compared to last quarter?
Jorge: The largest expense variance in the quarter was the 17th increase in Personnel costs.
Speaker Change: We now expect to increase in 2025 expenses, including profit sharing to be between 4% and 5% when compared to last year.
Jorge Garcia: We continue to expect public deposits to be in the range of $18 to $20 billion. At BVPR, excluding Puerto Rico public deposits, ending deposit balances decreased by approximately $60 million end-to-end, and an average deposits grew by approximately $440 million, with non-interest bearing deposits accounting for $93 million of that increase. At PV, ending deposit balances increased by approximately $150 million net of intercompany deposits. Total deposit cost decreased by 5.8%. At BBPR, deposit costs decreased by 3 basis points to 1.52%, mostly due to a 10 basis point reduction in the cost of market-linked public deposits. At Popular Bank, deposit costs decreased by 14 basis points as we continued our efforts to reduce the cost of our U.S.
Speaker Change: Other words, excluding profit sharing we should see expense growth below our original 4% expectation.
Jorge: We've had a very good first half of 2025, as can recently be assumed by our improved outlook for knee and credit our internal net income forecast for the full year are now outpacing. The original 2025 budget. Expectations by a significant enough margin to prompt us to begin to acrew profit sharing expense.
Speaker Change: Please turn to slide nine.
Speaker Change: Regulatory capital levels remained strong our <unk> ratio of 15, 91% decreased by 20 basis points from Q1, mainly due to loan growth during the quarter and the effects of capital actions net of quarterly net income.
Jorge: During the quarter, we accured 13 million for profit sharing in addition to other performance related incentives.
If we continue to outperform for the remainder of the year, the total profit sharing expense will be capped at approximately 40 million or approximately 2% of our expense space.
Speaker Change: Tangible book value per share at the end of the quarter was $75.41 an increase of $3 39 per share from Q1, driven by our net income and lower unrealized losses in our MBS portfolio offset in part by our capital return activity in the quarter.
Jorge: Being in a position to share profits. With all of popular's full-time employees is a terrific outcome and allows our teams to benefit from the acceleration and the Improvement of our profitability.
Speaker Change: During the second quarter, we repurchased approximately $112 million in shares at an average price of $99 per share.
Jorge Garcia: deposit. We're very happy with the efforts of our teams and their focus on deposit retention and growth strategy. However, we continue to expect third quarter deposit balances in BPPR to reflect historical seasonality and decrease as our retail client base spends Q1 and Q2 tax refunds. That said, given the results in the first half of the year, along with the anticipated name expansion for the rest of the year from repricing of our fixed rate earning assets and deposit retention strategies, we now expect to see higher NII growth of 10 to 11% in 2020.
Jorge: This expense was not included in our original 4%, expense growth guidance at the beginning of the year, however we're working to mitigate the impact of these costs on our total expenses for the year with sustainable efficiency efforts.
Speaker Change: As of July 15th we had $33 million remaining on the share repurchase authorization announced in July of 2024. In addition to the incremental $500 million announced last week.
Leo: With that I'll turn the call over to Leo.
Jorge Garcia: Jorge and good morning.
Jorge: We now expect the increase in 2025 expenses, including profit sharing to be between 4 and 5 percent. When compared to last year, in other words, excluding profit sharing. We should see expense growth below. Our original 4% expectation.
Leo: Credit quality metrics improved during the second quarter.
Jorge: Please turn to slide 9.
Leo: With lower Npls, lower inflows and lower net charge offs.
Leo: Our mortgage and commercial loan portfolios.
Leo: To drive the results with.
Leo: With credit metrics significantly below pre pandemic levels.
Jorge: Regulatory Capital levels, remain strong. Our CT ratio of 15.91% decrease by 20 basis points, from q1 mainly due to Long growth during the quarter and the effects of capital actions net of quarterly net income.
Leo: <unk> improved performance from our consumer portfolio.
Jorge Garcia: Please turn to slide 7. Non-interest income was $168 million, an increase of $16 million compared to Q1 and above the high end of our 2025 quarterly guidance. There were two primary drivers of the Delta versus our expectations. Better fees related to customer transaction activity as a result of higher credit and debit card spending, and higher other operating income, which was mostly due to a $3 million increase in income from equity method investment. and an approximately $3 million related to a reimbursement from the IRS. Based on the quarter's results, we now expect quarterly non-interest income for 2025 to be at the high end of the $155 to $160 million range.
Leo: Over the years, we have managed credit under different macroeconomic and operating environment and more recently, we have taken several credit tightening.
Jorge: Tangible book value per share. At the end of the quarter was 75.41, an increase of 3.39 per share from q1. During by our net income and lower unrealized losses, in our MBS portfolio offset in part by our Capital return activity in the quarter.
Leo: <unk> to reduce.
Leo: Our exposure to riskier segments.
Leo: We continue to carefully monitor the performance of our growth in response to the environment Accordingly.
Jorge: During the second quarter, we repurchased approximately 112 million in shares at an average price of $99 per share.
Leo: However, we are confident on the group and the risk profile of our loan portfolios position.
Jorge: As of July 15th, we had 33 million remaining on the share. We purchase authorization announced in July of 2024. In addition to the incremental 500 million announced last week.
Leo: <unk> to operate successfully on the more difficult economic condition.
Leo: Turning to slide number 10.
Leo: Nonperforming assets and loans decreased slightly during the quarter driven by bankable blueline npls remarkable for large decreased by $4 million reflected across all loan segments.
Jorge: Credit quality metrics improved within the second quarter with the lower mpls, lower inflows and lower net charge off.
Jorge Garcia: Please turn to slide 8. Total operating expenses were $493 million, an increase of $22 million when compared to last quarter. The largest expense variance in the quarter was the $17 million increase in personnel. You've had a very good first half of 2025. That can reasonably be assumed by improved outlook for NII and credit. Our internal net income forecast for the full year are now outpacing the original 2025 budget expectations by a significant enough margin to prompt us to begin to accrue profit-sharing expense. During the quarter, we accrued $13 million for profit-sharing in addition to other performance-related incentives.
Jorge: Our mortgage and Commercial loan portfolios.
Jorge: Continue to drive the results.
Leo: Npls in Buffalo.
Jorge: With credit metrics significantly below pre-pandemic levels.
Leo: <unk> dollars 2 million driven by a $3 million for merger NPL inflow during the quarter.
Coupled with improved performance from our consumer portfolio.
Leo: Oreo decreased by.
Leo: By 6 million.
Leo: Driven by sales of residential real estate properties in Puerto Rico.
Over the years, we have managed credit under different microeconomic and operating environments and more. Recently, we have taken several credit tightening actions.
Leo: Inflows of Npls decreased by 4 million quarter over quarter in <unk>.
Jorge: To reduce our exposure to riskier segments.
Leo: Inflows decreased by $5 million driven by the commercial portfolio in popular bank.
Jorge: We continue to carefully monitor the performance of our books and respond to the environment accordingly.
Leo: Inflows remained flat.
Leo: The ratio of Npls to total loans held in portfolio decreased two basis points to 82 basis points.
Jorge Garcia: If we continue to outperform for the remainder of the year, the total profit-sharing expense will be capped at approximately $40 million, or approximately 2% of our expenses. Being in a position to share profits with all of Popular's full-time employees is a terrific outcome and allows our teams to benefit from the acceleration and the improvement of our profitability. This expense was not included in the original 4% expense growth guidance at the beginning of the year. However, we're working to mitigate the impact of these costs on our total expenses for the year with sustainable efficiency efforts. We now expect the increase in 2025 expenses, including profit sharing, to be between 4% and 5% when compared to last year.
However, we are confident that the Improvement in the risk profile of our long for portfolios.
Positions popular, to operate successfully on the more difficult economic condition.
Leo: Turning to slide number 11.
Turning to slide number 10.
Leo: Net charge offs amounted to $42 million or annualized 45 basis points.
Leo: Third to 49 million or 53 basis points.
Leo: Net charge offs and <unk> decreased by $7 million driven.
Jorge: Non-performing assets and Loans. Decreased sliding during the quarter driven by Bank of aula npls, in Bank of popular, decreased by 4 million reflected across all long segments.
Leo: Driven by lower auto loans and personal loans offset in part.
Jorge: Npl in popular bank increased by 2 million driven by a 3 million commercial npl inflow during the quarter.
Leo: By a commercial loan recovery recognized in the first quarter.
Leo: In Buffalo Bank net charge off remained flat.
Jorge: Or you speak with by 6 million, Do You Remember by sales of residential real estate properties in Puerto Rico?
Leo: Youre going to a clinic performance during the first half of the year.
Jorge Garcia: In other words, excluding profit sharing, we should see expense growth below our original 4% expectation.
Leo: Our outlook for the second half.
Jorge: Inflows of npls decreased by 4 million quarter quarter.
Leo: We now expect net charge offs to be between 45 to 65 basis points for the full year.
Jorge Garcia: Please turn to slide 9. Regulatory capital levels remain strong. Our CET ratio of 15.91% decreased by 20 basis points from Q1, mainly due to long growth during the quarter and the effects of capital actions, net of quarterly netting. Tangible book value per share at the end of the quarter was $75.41, an increase of $3.39 per share from Q1, driven by our net income and lower unrealized losses in our MBS portfolio, offset in part by our capital return activity in the quarter. During the second quarter, we repurchased approximately $112 million in shares at an average price of $99 per share.
Jorge: In Bank of popular inflows decreased by 5 million driven by the commercial portfolio. In popular Banks npl enclosed with remains flat
Leo: Below our guidance of between 70 to 90 basis points.
Jorge: The ratio of npls to to Total loans held in portfolio.
Leo: The allowance for credit losses increased by $7 million.
Jorge: Decreased 2 basis points to 82 basis points.
Leo: $770 million.
Jorge: Turning to slide number 11.
Leo: Driven by higher resource.
Leo: Portfolio growth and less favorable economic assumptions off.
Jorge: Net charge of amounted to 42 million or annualized 45 basis points.
Leo: In part our revised probably three weeks.
Jorge: Compared to 49 million or 53 basis points in the prior quarter.
Leo: And changes in credit quality.
Leo: We leveraged multiple scenarios to estimate our ACO.
Jorge: Net charge of in Bank of our decreased by 7 million.
Jorge: Driven by lower auto loans and personal loans.
Leo: In the second quarter, we slightly reduced the pessimistic way, resulting in a four 4 million decrease in the future.
Jorge: Offset in part.
Jorge Garcia: As of July 15th, we had $33 million remaining on the share repurchase authorization announced in July of 2024 in addition to the incremental $500 million announced last year.
Jorge: By a commercial loan recovery recognized in the first quarter.
In popular bank. Nature jobs, remained flat.
Leo: No.
Leo: In Banco popular the ACL increased by $3 million.
Jorge: Performance during the first half of the year.
Lidio Soriano: With that, I turn the call over to Lidio. Credit Quality Metrics improved during the second quarter, with lower NPLs, lower inflows and lower net charge-on. our mortgage and commercial loan portfolio. continue to drive the results. The credit metric is significantly below pre-pandemic levels. coupled with improved performance from our consumer portfolio. Over the years, we have managed credit under different macroeconomic and operating environments. And more recently, we have taken several credit-tightening actions. to reduce our exposure to riskier substances. We continue to carefully monitor the performance of our books and respond to the environment accordingly. However, we are confident that the improvement in the risk profile of our loan portfolios to operate successfully on the more difficult economic conditions.
Leo: Driven by auto loans due to changes in credit quality.
Jorge: And our outlook for the second half.
Leo: Changes in economic scenarios offsetting part by improvements in the credit quality of our commercial portfolios and changes in probably three weeks.
We now expect net charge of to be between 45 to 65 basis points for the full year.
Leo: In popular bank, the ACL increased by 4 million driven by the changes in economic forecasts.
Jorge: below our, you know, guidance of between 70 to 90 basis point,
Jorge: The allowance for credit losses, increased by 7 million.
Leo: Higher qualitative reserves for the CRE portfolio.
Jorge: To 770 million.
Driven by higher resource.
Leo: The completion ratio of the ACL to loans held in portfolio.
Jorge: From portfolio, growth and less favorable, economic assumptions.
Leo: Last one or two basis points compared to 205 basis points in the prior quarter, while the ratio of ACL to Mpls also under 47%.
Jorge: Offset, import by revised probability weights.
Jorge: And changes in credit quality.
Leo: Compared to 243% in the prior quarter.
Jorge: We leverage multiple scenarios to estimate our ACL.
Leo: Okay.
Leo: The provision for credit losses was $50 million.
Leo: $65 million in the prior quarter.
Jorge: In the second quarter, which Lily reduced, the pessimistic weight resulting in a formula 4 million degrees in the HCL.
Leo: <unk> the provision was $10 million lower.
In Bangkok popular, the ACL increased by 3 million.
Leo: The provision was $7 million lower.
Leo: The combined provision to net charge off ratio for the quarter was 17%.
Lidio Soriano: Turning to slide number 10. Non-performing assets and loans decreased slightly during the quarter, driven by Banco Popular. NPLs in Banco Popular decreased by $4 million. reflected across all long NPLs in popular banks increased by $2 million, driven by a $3 million commercial NPL inflow during the crisis. Oreos decreased by $6 million driven by sales of residential real estate properties imported. Influence of NPL decreased by $4 million quarter over quarter. In Banco Popular, influence decreased by $5 million driven by the commercial portfolio. In Popular Bank, NPL influence remained. the ratio of IPLs to Total Loans Helping Portfolio.
Leo: To summarize.
Leo: Quality metrics improved during the second quarter.
Jorge: During my auto loans, due to changes in product quality and changes in the economic scenarios of setting. In part my improvements, in the correct quality of our commercial portfolios and changes in probability weights.
Leo: We are attentive to evolving environment.
Leo: Confidence.
Leo: The improvement in the risk profile of our loan portfolios.
In popular bank, the ACL increase by 4 million driven by the changes in economic forecast.
Leo: We allow us to operate successfully on their different economic conditions.
Jorge: And higher, qualitative research for the CRA portfolio.
Jorge: The cooperation ratio of the ACL to loans counting portfolio.
Javier Ferrer: With that I would like to turn the call over I would like to turn the call over to Javier So his concluding remarks.
Jorge: Was 202 basis, point.
Jorge: Compared to 205 basis point in the prior quarter.
Javier Ferrer: Thank you Leah and Jorge for your update.
Jorge: While the ratio of the ACL to npls was 147%.
Javier Ferrer: I'm extremely pleased with our financial performance in the second quarter.
Compared to 243% in the prior quarter.
Javier Ferrer: We increased net interest income grew loans and deposits and maintain strong credit metrics.
Jorge: The provision for credit, losses was 50 million compared to 65 million in the prior quarter.
Javier Ferrer: We have had a strong first half of the year, we will continue to execute on our objectives and I'm urging our teams to remain focused on deposit retention loan generation and particularly on our expense discipline.
Jorge: in the pr, the provision was 10 million lower when in popular the provision was
Jorge: 7 million lower.
Jorge: The combined provision to net charge of ratio for the quarter.
Lidio Soriano: turning to slide number 11. Net charge-off amounted to $42 million, or annualized $45.5 million. compared to 49 million or 53 basis points in the paragraph.
Jorge: Was down. 17%.
Jorge: To summarize.
Javier Ferrer: We are committed to generating value for our shareholders and to achieving our ROTC objectives.
Jorge: Credit quality metrics improved during the second quarter.
Jorge: We are attentive to the both the environment but but our confident.
Javier Ferrer: We will continue to execute our transformation program.
Lidio Soriano: Nature Shopping Banco Popular decreased by $7 million. driven by lower auto loans and personal loans. offset in part by a commercial loan recovery recognized in the.
Jorge: That the Improvement in the rich profile of our loan portfolios.
Speaker Change: The tournament.
Speaker Change: The number one bank for our customers and to simplify our operations.
Speaker Change: To improve efficiency and drive sustained performance.
Lidio Soriano: and Popular Bank, nature of job remains. Even our credit performance during the first half of the year.
Speaker Change: We're also focused on reinvesting in the communities, we serve and believe we are making a meaningful difference.
With that, I would like to turn the call over. I would like to turn the call over to Javier for his concluding remarks with us.
Jorge: Thank you, lady on. Jorge for your update,
Lidio Soriano: Our outlook for the second half... We now expect net charge-off to be between 45 to 65 basis points for the full year. below our original guidance of between 70 to 90 patients. The allowance for credit losses increased by $7 million. $770 million. driven by high resource from portfolio growth and less favorable economic assumption. offset import by revised probability weighting. We leverage multiple scenarios to estimate our ACM. In the second quarter, we slightly reduced the pessimistic weight, resulting in a $4 million decrease in the S&P. In Banco Popular, the HCL increased by $3 million. during my auto loans due to changes in credit quality.
Speaker Change: These efforts are highlighted in our corporate sustainability report, which we published in Europe.
Speaker Change: I am extremely pleased with our financial performance in the second quarter.
Speaker Change: I want to give us a shout out to our colleagues at.
Speaker Change: We increased net interest income rule, loans and deposits, and maintain strong. Credit metrics.
Speaker Change: And recognize their hard work.
Speaker Change: I see what they do every day in our branches call centers and centralized offices.
Speaker Change: We're pushing ourselves to deliver more for our clients every day.
Speaker Change: We have had a strong first half of the year. We will continue to execute on our objectives and I'm urging our teams to remain focused on the positive retention, loan generation and particularly on our expense discipline,
Speaker Change: I am incredibly grateful for their commitment.
Speaker Change: We are now ready to answer your questions.
Speaker Change: We are committed to generating value for our shareholders and to achieving our Rosy objectives.
Speaker Change: Thank you Carl Q&A, if you'd like to ask a question. Please press star followed by one on your telephone keypad if.
Speaker Change: If you would like to withdraw your question. Please press star followed by <unk>.
Speaker Change: When preparing to ask a question. Please I'm showing a device is unmated.
Speaker Change: We will continue to execute our transformation program determined to be the number 1 Bank, for our customers and to simplify our operations to improve efficiency and drive sustained performance.
Speaker Change: Last question comes from Gerard Cassidy with RBC. Your line is open. Please go ahead.
Speaker Change: We're also focused on reinvesting in the communities. We serve and believe, we are making a meaningful difference.
Gerard Cassidy: Hi, guys.
Gerard Cassidy: This is actually for tablets and Gerard <unk> for today.
Lidio Soriano: And they obviously walk a little bit bit slower. Popular Bank, the ACL increased by $4 million, driven by the changes in economic forecasts and higher quantitative research for the CRE portfolio. The cooperation ratio of the ACL to loans helping portfolio was 202 basis. compared to 205 basis points in the paragraph. while the ratio of the ACL to MPL was 247%. compared to 243% in the priority. The provision for query losses was $50 million, compared to $65 million in the prior quarter. In BPR, the provision was $10 million lower, while in Popular, the provision was $3.5 million.
Speaker Change: This efforts are highlighted in our corporate sustainability report, which we published in June.
Speaker Change: Nice quarter.
Speaker Change: Just one quick question Theres been a lot of recent highlights and headlines on stable coin.
Speaker Change: I want to give a shout out to our colleagues.
Speaker Change: And recognize their hard work.
Speaker Change: And I was just curious how you guys see stable coins potentially impacting <unk> business and deposits and kind of the medium to long term outlook.
Speaker Change: I see what they do. Every day in our branches, call centers and centralized offices.
Speaker Change: Well, thank you for that question.
Speaker Change: We are pushing ourselves to deliver more for our clients every day. And I am incredibly grateful for their commitment.
Speaker Change: Just wanted to say that we're looking at it given that the genius Act was approved.
Speaker Change: We are now ready to answer your questions.
Speaker Change:
Speaker Change: We put together a team to do deeper dive and start to think about potential use cases.
Speaker Change: Thank you for all Q&A. If you would like to ask a question please press star. Followed by 1 on your telephone keypad.
Speaker Change: So that's where we are we did it we were real.
Speaker Change: If you would like to withdraw your question, please press star followed by 2.
Speaker Change: Your life is that he's come in and it will have an impact in the industry.
Speaker Change: 1 for parents to ask your question, please, ensure your device is unmuted locally.
Speaker Change: It's early innings, but we have started moving on the opportunity.
Speaker Change: First question comes from Chad Cassy with RBC. Your line is open, please go ahead.
Speaker Change: Okay, great. Thank you that's it for me for today.
Lidio Soriano: The combined provision to net charge of ratio for the quarter was $19.17.
Speaker Change: Thank you.
Speaker Change: Uh huh.
Lidio Soriano: Summarize. Curric quality metrics improved during the second We are attentive to the evolving environment, but are confident that the improvement in the risk profile of our loan portfolios will allow us to operate successfully under different economic conditions.
Speaker Change: Right now Tom <unk> with Wells Fargo. Your line is open. Please go ahead.
Speaker Change: Hi, good morning.
Speaker Change: Good morning, looking at the looking at the level of current accruals for the profit sharing I'm just wondering what the interplay is.
Hi guys. Uh, this is actually for Hamilton in Gerard's place for today. Um, nice quarter, and just 1 quick question. There's been a lot of recent highlights and, uh, headlines on stable coins. Um, and I was just curious how you guys see stable coins potentially uh, impacting popular's business and deposits and kind of the medium to long term Outlook.
Speaker Change: Between the $13 million, that's accrual today versus the Max of 40 million and the revenue guide Thats out there does the revenue guide imply the current accrual is the right number and you need to top that in order to get closer to the $40 million or as we get closer to hitting that new guy that accrual should continue inching higher.
Javier Ferrer: With that, I would like to turn the call over to Javier for his concluding remarks. Thank you Lidio and Jorge for your update. I am extremely pleased with our financial performance in the second quarter. We increase net interest income, rule loans and deposits, and maintain strong credit metrics. We have had a strong first half of the year. We will continue to execute on our objectives, and I am urging our teams to remain focused on deposit retention, loan generation, and particularly on our expense system. We are committed to generating value for our shareholders and to achieving our ROTC objectives.
Speaker Change: Well, thank you for that question. I I I just want to say that we're looking at it given that the junior Sac was approved.
Speaker Change: Uh,
Speaker Change: we put together a team to to do deeper dive and start to think about potential use cases.
Speaker Change: So first of all.
Speaker Change: Um, so that's where we are. We did it, you know, we realized that it's that it's coming and it will have an impact in the industry.
Speaker Change: I remind you Tamar.
Speaker Change: The way the profit sharing works is that we have to beat our budget by of net income by at least 3% and as that number increases and they pay off gets gets greater it's capped off.
Speaker Change: Um, it's early in ins, but, but we have started. Moving on the opportunity.
Speaker Change: Okay, great. Thank you. And that's it for me for today.
Speaker Change: It's up to 8%.
Speaker Change: Thank you. Thank you.
Speaker Change: All of our employees salary up to a maximum total compensation of $70000 Thats, where the 8% of places. So if you make more than 70000, you don't keep accruing.
Speaker Change: Okay. Now turn to team brazila with Wells Fargo. Your line is open, please go ahead.
Speaker Change: Hi, good morning.
Javier Ferrer: who will continue to execute our transformation program, determined to be the number one bank for our cost. and to simplify our operations to improve efficiency and drive sustained performance. We are also focused on reinvesting in the communities we serve and believe we are making a meaningful difference. These efforts are highlighted in our corporate sustainability report, which we published in June.
Speaker Change: And it is a great opportunity for us to sharing with our employee base. When we really exceed plan whenever he executes and exceed plan, we feel that our interests are aligned between shareholders and our employees.
Speaker Change: Having said that the guy that we have provided which includes increasing.
Speaker Change: Net interest income as well as increasing expenses the expense rates that we have.
Speaker Change: We are.
Speaker Change: Good morning. Looking at the looking at the level of current approvals for the profit sharing. I'm just wondering what the interplay is between the 13 million. That's a cruel today. Versus the max of 40 million and the revenue guy that's out. There does the revenue guide imply. The current approval is the right number and you need to top that in order to get closer to the 40 million. Or as we get uh closer to to hitting that new guy that across s*** continuing higher.
Speaker Change: Finally expecting to accrue the Max of profit sharing and that's embedded in our guidance.
Javier Ferrer: I want to give a shout-out to our colleagues. and recognize their hard work. I see what they do every day in our branches, call centers, and centralized offices. We are pushing ourselves to deliver more for our clients every day and I am incredibly grateful for their commitment.
Speaker Change: So we don't take lightly half year's comments of making sure. Our team continues to focus on executing.
Speaker Change: Yes, okay.
Speaker Change: Okay, Great I appreciate that color and then.
Speaker Change: Maybe a two part question on deposits I think I heard.
Speaker Change: Commercial deposit competition was maybe picking up on the island and driving some of the higher cost there and then I appreciate the comments on typical seasonality and three Q I'm. Just wondering if you can frame how that seasonality looks in 2025 versus what we saw last year.
Elliot: We are now ready to answer your questions. Thank you. For our Q&A, if you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally.
Speaker Change: In terms of competition like I say, we compete everyday.
Forrest Hamilton: First question comes from Gerard Cassidy with RBC. Your line is open, please go ahead. Hi, guys.
Speaker Change: <unk> for our customers for our business, we do it on on service and sometimes some price as well right.
Forrest Hamilton: This is actually Forrest Hamilton and Gerard's place for today. Nice quarter and just one quick question. There's been a lot of recent highlights and headlines on stable coins. And I was just curious how you guys see stable coins potentially impacting popular business and deposits and kind of the medium to long term outlook. Thank you for that question. I just want to say that we're looking at it given that the Genius Act was approved. We put together a team to do deeper dive and start to think about potential use cases. So that's where we are with it.
Speaker Change: So I first I, you know, I remind you team or um, you know, the way the profit sharing works is that we have to beat our our, our budget by of net income by at least 3%. And it's that number increases and the payoff gets gets greater, it's capped off. Um, it's up to 8%, um, of our employee salary up to a maximum total compensation of dollars. That's where the the 8% applies to. So, if you make more than 70,000, you don't keep acrew. Um, and this is a great opportunity for us to share in with our, uh, employee base when we really exceed plan, whenever they execute, uh, and exceed plan, and we feel that our interests are aligned between shareholders and our, and our employees. Um, having said that, you know, the guy that we have provided which includes increasing, uh, net interest income as well as increasing expenses, the expense rates that we have. Um, uh, we are, uh,
Speaker Change: I would say that on the commercial side.
Speaker Change: Where we don't see as much yield seeking behavior or pushed back I think a lot of that has been embedded in our in our baseline.
Speaker Change: Sharing in that embedded in our guidance.
Speaker Change: On the retail clients there are still many discussions and still some yield seeking behavior. We continue to see outflows of roughly $100 million a month into our popular security subsidiary. So there is still some some yield seeking behavior and from our retail clients. The one thing that is different than last year for your question is that our teams are much.
Speaker Change: So we don't take lightly a half years comments of making sure our teams continue to be focused and executing
Speaker Change: Yeah.
Speaker Change: Okay, great. Um, appreciate that caller, and then
Speaker Change: Maybe a 2-part question on deposits. I think I heard
Speaker Change: More focus on deposit gathering and deposit retention strategies in our in our branches as you know we adjusted our compensation plans, we adjusted targets to really make sure that we were incentivizing.
Forrest Hamilton: You know, we realize that it's coming and it will have an impact in the industry. It's early innings, but we have started moving on the opportunity. Okay, great. Thank you and that's it for me for today. Thank you.
Speaker Change: a commercial deposit competition was maybe picking up on the island driving, some of the the higher, uh, costs there and then appreciate the comments on typical seasonality in 3Q. I'm just wondering if you can frame how that seasonality looks in in 2025 versus what we saw last year.
Speaker Change: The deposit retention behavior.
Speaker Change: When we look back pre pandemic, where you don't have all the noise.
Speaker Change: We saw during the pandemic. It is clear that there's a trend where are our client base gets more inflows in the first half of the year. They tend to spend some of that in the third quarter and then you'll see stability and maybe an uptick in the fourth quarter, we expect those trends to continue.
Timur Braziler: We now turn to Timur Braziler with Wells Fargo. Your line is open, please go ahead. Hi, good morning.
Timur Braziler: Looking at the level of current accruals for the profit-sharing, I'm just wondering what the interplay is between the $13 million that's accrued today versus the max of $40 million and the revenue guide that's out there. Does the revenue guide imply that current accrual is the right number and you need to top that in order to get closer to the $40 million, or as we get closer to hitting that new guide, that accrual should continue inching higher? So first, I remind you, Timur, the way that profit sharing works is that we have to beat our budget of net income by at least 3%.
Speaker Change: But I would also say when we look at the inflows of our clients, particularly in the first half of the year our clients have received more.
Speaker Change: Tax refunds than it did last year and even though last year, we had the special one time rebates from the Puerto Rico government and inflows outside of the tax proceeds or about 6% higher so people are earning more.
Speaker Change: Um, in, in terms of of competition, you know how you're like, I say we we compete every day, uh, for, for our customers, for our business. We do it on on service and, and, and sometimes some price as well, right? And, um, um, I would say that in the commercial side, uh, we're we don't see as much yield seeking, uh, Behavior or push back. I think a lot of that has been embedded in our in our Baseline. Um, on the retail clients, there are still many discussions and still some yield seeking Behavior. We continue to to see how those of roughly 100 million a month into our popular Securities subsidiary. So there's still some some, uh, yields that can behavior. And from our retail clients, the 1 thing that is different than last year. You know, for your question is that our teams are much more focused on the positive Gathering and deposit retention strategies in our, in our spend?
Speaker Change: So it really does go to to demonstrate the strength of the consumer in Puerto Rico. So.
Speaker Change: We are confident in our teams, but there is a seasonality we have over 1 million retail clients are very difficult to to understand their predict their spending behavior.
Speaker Change: Branches, as, you know, uh, we adjusted our compensation plans, we adjusted targets to really make sure that we were incentivizing. Um, the, the the deposit retention, uh, behavior. Um,
Timur Braziler: And as that number increases and the payoff gets greater, it's capped off up to 8% of our employees' salary, up to a maximum total compensation of $70,000. That's where the 8% applies to. So if you make more than $70,000, you don't keep accruing. And this is a great opportunity for us to share in with our employee base when we really exceed plan, when everybody executes and exceeds plan, we feel that our interests are aligned between shareholders and our employees. Having said that, the guide that we have provided, which includes increasing net interest income, as well as increasing expenses, the expense range that we have, we are...
Speaker Change: Yeah.
Speaker Change: But not only is accounted in our NII guide tumor.
Speaker Change: Great. Thank you for the color I appreciate it.
Speaker Change: Our next question comes from Kelly Motta with <unk>. Your line is open. Please go ahead.
Speaker Change: Hey, good morning, Thanks for the question here.
Speaker Change: Maybe kicking it off to the loan side of things and you had.
Speaker Change: A really strong quarter and you highlighted.
Speaker Change: Larger infrastructure project.
Speaker Change: I believe the guidance bakes in some planned run off in the U S. Can you give us a bit more color as to what that is one and two.
Timur Braziler: certainly expecting to accrue the max of profit sharing and that's embedded in our guidance. So we don't take lightly Javier's comments of making sure our teams continue to be focused on executing. Yeah. Okay, great. Appreciate that caller.
Speaker Change: Yes.
Speaker Change: The activity in Puerto Rico, I feel like the second half of the year.
Speaker Change: Usually as better for you I'm wondering if you could help provide additional color.
Speaker Change: When we look back pre pre pandemic, where you don't have, all the noise that we saw during the pandemic, it is clear that there's a trend where our our client base gets more inflows in the first half of the year, they tend to spend uh, some of that in the third quarter. And then you see stability and maybe an uptick in the fourth quarter, we expect those Trends to to continue. Um, but I would also say, um, when we look at the inflows of our clients, particularly in this first half of the Year, our clients have received more, um, uh, tax refunds than they did last year. And even though, last year, we had the special 1-time rebate from the Puerto Rico, government and inflows outside of the tax proceeds are about 6% higher, so people are earning more, um, you know, so it it, it really does go to to, to demonstrate the strength of the consumer in Puerto Rico. So, um, we are confident in our teams but, you know, there is a seasonality, we have over a million, uh, retail clients as very difficult to, to understand their
Speaker Change: You know, predict their spending Behavior.
Seth: Both parts of it that Seth thanks.
Speaker Change: Thanks, Kelly, So we do see strong pipelines, particularly into the third quarter and in both Puerto Rico and the U S.
Speaker Change: But but that always accounted in our knee guide uh, teamwork.
Timur Braziler: And then maybe a two part question on deposits. I think I heard Commercial Deposit Competition was maybe picking up on the island, driving some of the higher costs there, and then appreciate the comments on typical seasonality in 3Q. I'm just wondering if you can frame how that seasonality looks in 2025 versus what we saw last In terms of competition, Javier, like I said, we compete every day for our customers, for our business. We do it on service and sometimes some price as well, right? And I would say that on the commercial side, we don't see as much yield-seeking behavior or pushback.
Speaker Change: Great, thank you for the caller, appreciate it.
Speaker Change: It also like what we're seeing.
Speaker Change: We'll continue to see large transactions that make a difference in those and those Johnson.
Kelly, M: Our next question comes from Kelly, M with KBW, your line is open. Please go ahead.
Kelly M: Hey, good morning.
Speaker Change: Point to point in the U S. We continue to expect that we will see some payoffs in the construction portfolio.
Kelly M: You've been here. Um,
Speaker Change: The speed at which that portfolio has been growing and the pipeline behind it.
Speaker Change: We expect that eventually is going to come down as you know those construction loans end up there.
Speaker Change: Mostly multifamily projects and we don't always succeed in retaining the takeout of the term loans after the construction.
Speaker Change: <unk> is completed so we do expect that decrease to happen.
Speaker Change: Likely in the fourth quarter than in the third quarter.
Javier Ferrer: I think a lot of that has been embedded in our baseline. On the retail clients, there are still many discussions and still some yield-seeking behavior. We continue to see outflows of roughly $100 million a month into our popular security subsidiaries, so there's still some yield-seeking behavior from our retail clients. The one thing that is different than last year, for your question, is that our teams are much more focused on deposit gathering and deposit retention strategies in our branches. As you know, we adjusted our compensation plans, we adjusted targets to really make sure that we were incentivizing the deposit retention behavior.
Speaker Change: Got it.
Kelly M: Thought maybe, um, kicking it off to the long side of things. Um, hi. You had a a really strong quarter and you highlighted um, the larger infrastructure project. Um, I believe the guidance, um, bakes in, um, some plan runoff in the US. Can you give us a bit more Colour as to what that is 1 and 2? Um, the activity in Puerto Rico, I feel like the second half of the year. Um, usually is better for you. So I'm wondering if you could help um, provide additional color on both parts of the business. Thanks.
Speaker Change: That's helpful.
Speaker Change: On the funding side it looks like most of the deposit growth was on the government side.
Speaker Change: You took out some borrowings to bridge the gap.
Speaker Change: I'm wondering, especially with the deposit seasonality as you look ahead.
Speaker Change: The expected cash flow to cover the loan growth, you're expecting or what do you anticipate that.
Kelly M: Thanks Kelly. So we, we do see strong pipelines particularly into the third quarter, and, and, and, and both Puerto Rico and the US, um, you know, so so like what we're seeing, uh, still continue to see large transactions and make a difference in those in those uh, jumps some.
Speaker Change: Also taking some more borrowings here to fund your crosstown walk.
Speaker Change: Alright, so a couple of things I mean.
Speaker Change: Let me I just wanted to.
Speaker Change: To clarify a couple of things we did see.
Speaker Change: And to end growth that was mostly the <unk>.
Javier Ferrer: When we look back pre-pandemic, where you don't have all the noise that we saw during the pandemic, it is clear that there's a trend where our client base gets more inflows in the first half of the year. They tend to spend some of that in the third quarter, and then you see stability and maybe an uptick in the fourth quarter. We expect those trends to continue. But I would also say, when we look at the inflows of our clients, particularly in this first half of the year, our clients have received more tax refunds than they did last year.
Speaker Change: Public funds, but on an average basis.
Speaker Change: The public funds, where I think they grew maybe 50 60 million really the nonpublic deposits is what grew almost $500 million on an average basis in the quarter, including about $150 million in noninterest bearing accounts about 100 of that in Puerto Rico of 15, the U S.
Kelly M: Point to point in the US, we continue to expect that we will see some payoffs in the construction portfolio and the the, you know, the speed at which that portfolio has been growing and the pipeline behind it is, you know, we we expect that eventually it's going to come down as you know those construction loans end up. Um, they're mostly multifamily projects and we don't always succeed and retaining the takeout the term loans after the construction is Project is completed, so we do expect that decrease to happen. Um, more likely in the fourth quarter than than in the third quarter.
Speaker Change: Profit franchise was was strong we did do some borrowings in the U S.
Speaker Change: Short term federal home loan bank borrowings that we do at any time as part of our liquidity, we have over $25 billion in off balance sheet and on balance sheet liquidity in both banks combined.
Timur Braziler: And even though last year we had the special one-time rebate from the Puerto Rico government, and inflows outside of the tax proceeds are about 6% higher. So people are earning more. You know, so it really does go to demonstrate the strength of the consumer in Puerto Rico. So we are confident in our teams, but you know, there is a seasonality, we have over a million retail clients, it's very difficult to, to understand their, you know, predict their spending behavior. But that all is accounted in our NII guide, Timur. Great. Thank you for the call.
Speaker Change: And.
Speaker Change: So it's more about being able to fund as you know in the U S. The alternative area of growth for US has been direct deposits on the Internet online channel. We will continue to use that Joseph we have flexibility to fund quicker at a better price on a short term basis on federal home loan Bank, we will do that in Puerto Rico, we did not have any.
Kelly M: The deposit seasonality, as you look ahead, do you the the expected cash, flows cover? The loan growth, you're expected, or would you anticipate? Um, necessitating some more borrowings here to to fund your growth Outlook?
Kelly M: all right, so so a couple of things, I mean, um, let let me I just want to
Kelly M: Clarify, a couple of things we we did see.
Speaker Change: A change in our in our wholesale borrowing.
Speaker Change: Got it thanks.
Speaker Change: Last quick question from me is on the expense side, you rightly pointed out that with the profit sharing expense nor operating expenses are actually.
Kelly Motta: Our next question comes from Kelly Motta with KBW. Your line is open, please go ahead. Hey, good morning. Thanks for the question here. I thought maybe kicking it off to the loan side of things, you had a really strong quarter and you highlighted the larger infrastructure project. I believe the guidance bakes in some planned runoff in the US.
Speaker Change: Lower than what you had previously expected.
Speaker Change: Wondering if you could offer what what's driving that are you pushing out some of the.
Speaker Change: Transformational expenses next year, realizing greater efficiencies with what you've done so far.
Speaker Change: It really is all of the above I mean, we are we do have as part of the transformation efforts. We do have work streams that our focus on efficiency, we are finding opportunities and sustainable efficiencies that are operational and technology expenditures just managing.
Kelly Motta: Can you give us a bit more color as to what that is? One, and two, the activity in Puerto Rico, I feel like the second half of the year, usually is better for you. So I'm wondering if you could help provide additional color on both parts of the business. So we do see strong pipelines, particularly into the third quarter in both Puerto Rico and the U.S. So like what we're seeing, still continue to see large transactions that make a difference in those jumps. point to point. In the U.S., we continue to expect that we will see some payoffs in the construction portfolio.
Kelly M: End to end growth. That was mostly uh, the public funds, but on an average basis. Uh, the public funds were, I think they grew maybe 50, 60 million, really? The the non-public deposits, is, what grew almost 500 million on an average basis in the quarter, including about 150 million and, and not interest bearing accounts about a 100 of that, in Puerto Rico, 15, the US. So the the deposit, uh, franchise was was strong. We did do some borrowings in the US. Um, short term for their home, loan bank, borrowings that we do at any time. As part of our liquidity, we have over 25 billion dollars in off-balance sheet and on-balance Sheet liquidity and both Banks combined. Um, and um, you know, so it's more about, you know, being able to fund we as you know, in the US the alternative area of growth for us has been direct deposits on the internet uh online Channel. We'll continue to use that at Joseph. If we have flexibility to fund quicker or at a better price, in a short-term basis,
Speaker Change: Data purge exercises.
Speaker Change: How how we manage.
Set a hold on Bank. We will do that in Puerto Rico. We did not um, have any uh change in our in our wholesale borrowing.
Speaker Change: Different different operational accounts with more precision.
Speaker Change: Urging our teams for a commitment of excellence and not being just being on top of their responsibility and making sure that we have that discipline.
Kelly M: Got it. Thanks. Um, last quick question from me, is on the expense side, you rightly pointed out that um with the profit sharing expense your operating expenses are actually um
Speaker Change: We are incentivizing people on expense control and that usually.
Speaker Change: Warrants people to start paying attention and our focus on that.
Kelly Motta: The speed at which that portfolio has been growing and the pipeline behind it, we expect that eventually it's going to come down. As you know, those construction loans end up, they're mostly multifamily projects, and we don't always succeed in retaining the takeout, the term loans, after the construction project is completed.
Speaker Change: The transformation.
Speaker Change: Our.
Speaker Change: Projects that get delayed and made that that impacts our total expense base.
Uh, lower than what you had previously expected. Um, wondering if you could offer, what's, what's driving? That are you pushing out some of the, um, transformational expenses to next year or realizing greater efficiencies, uh, with what you've done so far?
Speaker Change: Some of it is delayed because of things that we do other things are delayed because of bigger picture things like there is a reason conversion in fed wires that impacted the entire <unk>.
Kelly Motta: So we do expect that decrease to happen more likely in the fourth quarter than in the third quarter. Got it. That's helpful. And on the funding side, it looks like most of the deposit growth was on the government side, and you took out some barrings to bridge the gap.
Speaker Change: Banking sector and that got delayed about a quarter. So you see some of that in our in our expense delays. So.
Speaker Change: It really is a combination of a lot of different things.
Speaker Change: But our teams are focused and we want to make sure that we get to pay out on that profit sharing and also mitigate the total expense base for popular.
Kelly Motta: Wondering, especially with the deposit seasonality as you look ahead, do the expected cash flows cover the loan growth you're expecting, or would you anticipate necessitating some more barrings here to fund your growth out? So a couple of things, I mean, let me, I just want to. clarify a couple of things. We did see end-to-end growth that was mostly the public funds, but on an average basis, the public funds were, I think they grew maybe 50, 60 million. Really, the non-public deposits is what grew, almost 500 million on an average basis in the quarter, including about 150 million in non-interest-bearing accounts, about 100 of that in Puerto Rico, 50 in the U.S.
Speaker Change: Got it thanks for the color I'll step back.
Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on your telephone can you Pat now.
Speaker Change: We now go on to Joe Shaw with Barclays. Your line is open. Please go ahead.
Kelly M: It it really is. Um, all of the above. I mean, we are uh, we do have as part of the transformation efforts, we do have work streams that are focused on efficiency. We are finding opportunities and sustainable efficiencies that are operational and Technology. Uh, expenditures just managing, uh, data Purge, uh, exercises, um, how how we manage, uh, you know, different different, operational accounts, uh, with more precision and, you know, you know, urging our teams for our commitment of excellence. And and not, not being just being on top of their responsibility and and making sure that we have that discipline. Um, we are incentivizing people and expense control and that usually uh uh you know warrants people to start paying attention and and our focus on that.
Joe Shaw: Hey, good morning.
Speaker Change: Okay.
Speaker Change: Hi, Gerard.
Speaker Change: Maybe on the on the loan growth you highlighted the large the.
Speaker Change: A large deal that you lead.
Speaker Change: Are you now at the point, where you're starting to see the federal stimulus money, our federal investments really start to get traction and should we start to expect more of these larger deals and I guess, what what's your.
Speaker Change: Comfort with sort of the upper end of hold size on those.
Kelly Motta: So the deposit franchise was strong. We did do some borrowings in the U.S., short-term for the Hong Long Bank, borrowings that we do at any time as part of our liquidity. We have over $25 billion in off-balance sheet and on-balance sheet liquidity in both banks combined, and so it's more about being able to fund. As you know, in the U.S., the alternative area of growth has been direct deposits on the internet, online channel. We'll continue to use that. If we have flexibility to fund quicker or at a better price on a short-term basis instead of Hong Long Bank, we will do that.
Speaker Change: Well.
Speaker Change: We are seeing talk talking to talking too.
Speaker Change: The government agencies that are handling the federal funds and also for our customers.
Kelly M: Um on the transformation they they are um projects that get delayed and made that that impacts our total expense space. Um some of it delayed because of things that we do, other things are delayed because of of bigger picture things like, you know, there's a recent conversion in fed wires that impacted the entire uh, banking sector. And that got delayed about a quarter. So you see some of that in our in our expense delays. So, um, it it really is a combination of a lot of different things. Um, but uh, our teams are focused and um, we want to make sure that we get to pay out on that profit sharing and also mitigate the total expense space for popular.
Kelly M: Got it. Thanks for the caller. I'll step back.
Speaker Change: We are seeing deployment of deployment of those funds.
Speaker Change: In Puerto Rico.
Speaker Change: as a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad now,
Speaker Change: We expect to have more.
Speaker Change: Projects announced.
George Shaw: we now send to George Shaw. With Barclays. Your line is open. Please go ahead.
Speaker Change: In the next few weeks to months.
Speaker Change: Hey, good morning.
Speaker Change: Don't think that we're going to be seeing.
Speaker Change: In the next few weeks.
Speaker Change: Anything on.
Speaker Change: On the partnership.
Kelly Motta: In Puerto Rico, we did not have any change in our wholesale Got it. Thanks.
Speaker Change: Activity that doesn't mean that there won't be more.
Speaker Change: But I will.
Speaker Change: I wouldn't want to mislead you.
Speaker Change: Tell you if there's a pipeline.
Kelly Motta: Last quick question from me is on the expense side. You rightly pointed out that with the profit sharing expense, your operating expenses are actually I'm wondering if you could offer what's driving that? Are you pushing out some of the transformational expenses next year or realizing greater efficiencies with what you've done so far? It really is all of the above. I mean, we do have, as part of the transformation efforts, we do have work streams that are focused on efficiency. We are finding opportunities in sustainable efficiencies that are operational in technology expenditures, just managing data purge exercises, how we manage different operational accounts with more precision and urging our teams for a commitment of excellence and not just being on top of their responsibility and making sure that we have that discipline.
Speaker Change: Public partnership.
Speaker Change: Transactions for financings of that nature, there are sort of things that are being discussed in Puerto Rico and definitely.
Speaker Change: Maybe on the, on the loan growth, you highlighted the, the large, uh, the large steel that you led. Um, are you now at the point where you're starting to see the federal stimulus money or federal Investments, really start to get traction? Should we start to expect more of these larger deals? Um, and I guess what, what's your your comfort with uh sort of the upper end of hold size on this?
Speaker Change: We are the go to bank locally.
Speaker Change: When when the government and third parties want to come in and participate in P. Three projects. So.
well, I mean, we we we are seeing talk talking to talking to, uh,
Again, I don't think that I can share at this moment.
Uh, the government agencies that are handling, the federal funds and also to our customers. Um, we are seeing deployment of deployment of those funds.
Speaker Change: Things that are being discussed but.
Speaker Change: In Puerto Rico.
Speaker Change: We're committed.
Speaker Change: We're committed to financing in participating in those for you.
Um, we expect to have more uh, project announced.
Speaker Change: So I mean.
Speaker Change: In the next few weeks to months.
Speaker Change: And then when our sales so I think the government is very much focused.
Speaker Change: A few weeks. Um anything on
Speaker Change: On economic development.
Speaker Change: On public partnership.
Speaker Change: Permitting agility.
Activity, that doesn't mean that they won't be more.
Speaker Change: And given there are good relationships with the Trump administration.
Speaker Change: What we hear and see is it clarity.
Speaker Change: Yeah.
Speaker Change: Okay alright. Thanks.
Speaker Change: Maybe shifting just to the fee income guide.
Kelly Motta: We are incentivizing people on expense control and that usually... Warren's people to start paying attention and our focus on that. On the transformation, there are projects that get delayed and that impacts our total expense base. Some of it is delayed because of things that we do. Other things are delayed because of bigger picture things like there's a recent conversion in Fed wires that impacted the entire banking sector, and that got delayed about a quarter. So you see some of that in our expense delays. It really is a combination of a lot of different things, but our teams are focused and we want to make sure that we get to pay out on that profit sharing and also mitigate the total expense base for Popular Inc.
Speaker Change: Should we assume basically sort of steady trends from here excluding.
Speaker Change: Maybe in the equity investment.
Speaker Change: Yes.
Speaker Change: The refund that $6 million in other.
Speaker Change: But I won't want to, I wouldn't want to mislead you to to tell you there's a pipeline on public partnership, uh, transactions for financing, some of that nature. There are certain things that are being uh, discussed in Puerto Rico and definitely uh, we we are the go-to bank locally when when the government um, and third parties want to come in and participate in P3 projects. So, um,
Speaker Change: Or is there any other areas that are seeing outsize opportunity.
Speaker Change: I mean, there are cyclical.
Speaker Change: Cycles I'm, sorry for the double there, but if you look historically.
Speaker Change: Again I I don't think that I can share this at this moment uh things that are being discussed, but um we're committed. Um, we're committed to financing and participating in those deals.
Speaker Change: so, I mean,
Speaker Change: Second second quarter and fourth quarter tend to be higher you have more transactional activity in the second and fourth quarter. There is some insurance fees that happen and they come in in the second and fourth quarter as well.
Speaker Change: And and and and and I don't want to say also, I think the government is very much focused.
Speaker Change: On economic development, you know, I as permitting agility.
Speaker Change:
Speaker Change: Certainly we highlighted the IRS refund that is not something that we would that's something unusual.
Speaker Change: Um, and given their good relationships with uh the Trump Administration.
Speaker Change: What we hear and see is encouraging.
Speaker Change: But the the equity pick up there was nothing unusual about that just had a slower first quarter and picked up in the second quarter.
Kelly Motta: Got it. Thanks for the color. I'll step back.
Speaker Change: Okay, all right. Thanks.
Um, are you shifting just to the fee income guide? Uh,
Elliot: As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad now.
Speaker Change: So.
Speaker Change: We feel good about the updated guidance for the for the year and you can do the math. It just signifies top end of the guidance for the second half of the year as well.
George Shaw: We now turn to George Shaw with Barclays. Your line is open, please go ahead. Hey, good morning. Maybe on the loan growth, you highlighted the large deal that you led. Are you now at the point where you're starting to see the federal stimulus money or federal investments really start to get traction? Should we start to expect more of these larger deals? And I guess, what's your comfort with sort of the upper end of hold size on those? Well, we are seeing, talking to, talking to... The government agencies that are handling the federal funds and also to our customers, we are seeing deployment of those funds.
Speaker Change: Okay. Okay. Thanks, and then just finally on the on.
Speaker Change: Should we assume basically you know the sort of steady Trends from here excluding um maybe in the the the equity investment adjustment in the in the refund that dollars and other. Or is there any other areas that are are seeing you know outsized opportunity?
Speaker Change: On the capital on the buybacks.
Speaker Change: Good a good level of buybacks this quarter.
I mean there are cyclical, uh,
Speaker Change: Cycles. I'm sorry for the uh,
Speaker Change: Is this sort of a pace you feel comfortable with given the broader capital backdrop in.
Speaker Change: The double, uh, there. But, uh, if you, if you look historically, um,
Speaker Change: And growth outlook.
Speaker Change: I think it's a reasonable pace and we still feel that our share price is very attractive at these levels.
Speaker Change: Thank you.
Speaker Change: Second, second quarter and fourth quarter, tend to be higher, you have more transactional activity in in the second and fourth quarter or some insurance fees that happen in, you know, that come in in the second and fourth quarter as well. Um,
Speaker Change: This concludes our Q&A and I'll hop back to have Esri CEO for any final remarks.
Speaker Change: Well, thanks, again for joining us and for your questions.
Certainly we highlighted the IRS refund. That's not something that that we would, you know, that something unusual. Um, but the the equity pick up there, there was nothing unusual about that. Uh, just at a slower first quarter and, and, and picked up in the second quarter. And um, so
Speaker Change: We look forward to updating you on our third quarter results in October Thank you.
George Shaw: We expect to have more projects announced. in the next few weeks to months. Don't think that we're going to be seeing in the next few weeks anything.
Speaker Change: Ladies and.
Speaker Change: Today's call is now concluded. Thank you for your participation you may now disconnect your lines.
Speaker Change: You know, we we feel good about the updated guidance for the, you know, for the year and it just, you know, you can do the math, it just signifies top end of the guidance for the second half of the year as well.
George Shaw: Public Partnership. That doesn't mean that there won't be more. but I wouldn't want to mislead you to tell you there's a pipeline. Public Partnership. There are certain things that are being discussed in Puerto Rico and definitely we are the go-to bank locally when the government and third parties want to come in and participate. P3 Projects, so.
Okay. Okay, thanks and then just finally on the uh on the capital and the BuyBacks. Um you know, good good level of of BuyBacks, this quarter um is this is this sort of a pace you feel comfortable with given the the broader Capital backdrop and and growth Outlook
Speaker Change: I think there's a reasonable pace and we still feel that our our share price is very attractive at these levels.
Speaker Change: Thank you.
Speaker Change: This concludes our Q&A on our hand, back to have a for CEO for any final remarks.
George Shaw: Again, I don't think that I can share this moment. things that are being discussed, but We're committed, we're committed to financing and participating in those deals. So. And I want to say also, I think the government is very much focused. on economic development, you know, permitting agility. given their good relationships with the Trump administration.
Well, thanks again for joining us and for your questions.
Speaker Change: We look forward to updating you on our third quarter results in October. Thank you.
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.
George Shaw: What we hear and see is a Okay, all right. Thanks.
George Shaw: Maybe shifting just to the fee income guide. Should we assume basically, you know, the sort of steady trends from here, excluding maybe in the equity investment adjustment and the refund that $6 million and other? Or is there any other areas that are seeing, you know, outsized opportunity? I mean there are cyclical cycles. I'm sorry for the double there, but if you look historically, second quarter and fourth quarter tend to be higher. You have more transactional activity in the second and fourth quarter. There's some insurance fees that happen in, you know, that come in in the second and fourth quarter as well.
George Shaw: Certainly we highlighted the IRS refund. That's not something that we would, you know, that's something unusual. But the equity pickup, there was nothing unusual about that. Just had a slower first quarter and picked up in the second quarter. We feel good about the updated guidance for the year. And you can do the math. It just signifies top end of the guidance for the second. Okay, okay, thanks.
George Shaw: And then just finally on the on the capital and the buybacks, you know, good, good level of buybacks this quarter. Is this is this sort of a pace you feel comfortable with, given the the broader capital backdrop and in growth outlook? I think it's a reasonable pace and we still feel that our share price is very attractive at these levels.
Elliot: This concludes our Q&A.
Javier Ferrer: I'll now hand back to Javier Ferrer, CEO, for any final remarks. Well, thanks again for joining us and for your questions. We look forward to updating you on our third quarter results in October. Thank you.
Elliot: Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.