Puerto Rico, which has been facing long-standing structural problems now has a “unique opportunity” to tackle them, Popular Inc. CEO Ignacio Álvarez said during an earnings call to disclose first quarter results.
“The goal is not to get back to where we were but to make important fundamental changes in areas such as energy, housing, health and education,” the banking executive said.
Popular Inc. reported a net income of $91.3 million for the first quarter ended March 31, 2018, reflecting a slight drop from the same year-ago quarter and compared to a net loss of $102.2 million for the quarter ended December 31, 2017.
The results for the fourth quarter of 2017 included a non-cash income tax expense of $168.4 million, due to the impact of the Tax Cuts and Jobs Act on the Corporation’s U.S. deferred tax asset, bank executive said.
Saying the bank’s operations have “returned to normal,” Álvarez offered a rundown of the quarter’s achievements, including consumer loan originations, which are at 96 percent when compared to the same quarter 2017, before Hurricane María struck.
He noted that auto loan production is up 30 percent in comparison to the first quarter of 2017, and expressed optimism with the increase in cement sales in Puerto Rico.
“Already for the first time in roughly a decade, cement sales are up year-over-year to the highest level in the last 10 year period,” he said.
“The pace of economic recovery will be heavily dependent on the magnitude and timing of federal recovery and private insurance funds flowing into Puerto Rico. These funds, which are estimated to exceed $60 billion over the next six years, are likely to have a simulative effect on the economy,” the banking executive noted.
He also said insurance disbursements also continue to fuel client activity, yielding more than $2 billion so far out of an estimated $8 billion expected to enter the economy, according estimates from the Financial Oversight and Management Board for Puerto Rico.
Álvarez also said that while the Federal Emergency Management Agency had doled out $2.6 billion in funds to individuals, public corporations and municipalities, over the next six years, assistance could top $50 billion in the next six years.
“The effect of these funds would be tampered somewhat by the austerity contained within the recently approved Fiscal Plan. The new plan released last week contains a number of fiscal and structural reforms designed to improve fiscal stability on the island,” he said.
“The successful execution of this plan will require discipline and increased cooperation between the Oversight Board and the local government,” Álvarez added.
Notwithstanding the impact of the hurricanes and the declining population, Popular’s deposits and number of customers were up for the first quarter and since the hurricane hit last September.
“Looking beyond the immediate impact and the recovery process, the island’s longer term economic prospects will depend on the decisions regarding Puerto Rico’s rebuilding,” he said.
Popular had two notable events during the quarter: its agreement to acquire Wells Fargo’s Auto Finance Business in Puerto Rico, announced Feb. 14; and the rebranding of its U.S. operations, announced earlier this month.
The $1.8 billion cash purchase of the Wells Fargo unit is expected to close during the second quarter. Popular expects to generate some $34 million of net income from this purchase in the first 12 months after closing.
Meanwhile, the financial institution announced the decision to change its U.S. mainland’s banking subsidiary from Banco Popular North America to Popular Bank and will operate under the name Popular.
The corporation now operates under a single brand, “Popular”, throughout all its regions – United States mainland, Puerto Rico and the U.S. and British Virgin Islands.
“We are also encouraged by the growth in our U.S. business. The recent rebranding from Popular Community Bank to Popular reflects the evolution of our operations in the U.S.,” Álvarez said.
“Our focus in that market and now under a single brand, the growing collaboration between our operations in Puerto Rico, the U.S., and the Virgin Islands,” he added.
Popular Inc. will celebrate its 125th anniversary in October.