Popular Inc. reports $103M in net income for Q1, down $55M Y-O-Y
The results include an after-tax impact of $9.1 million related to the FDIC Special Assessment in November.
Popular Inc., the parent company of Banco Popular de Puerto Rico (BPPR), reported net income of $103.3 million for the first quarter of 2024, down from $158.9 in the same period in 2023, a decrease of $55 million. However, there was a slight increase from $94.6 million recorded in the fourth quarter of 2024.
The for the latest quarter included an after-tax impact of $9.1 million related to the Federal Deposit Insurance Corp. (FDIC) Special Assessment in November, compared to $45.3 million in the fourth quarter of 2023, and a $22.9 million expense related to taxes due from previous period distributions from the corporation’s U.S.-based subsidiary, the bank explained in its earnings report.
“We’re pleased to report solid earnings for the first quarter after considering the impact of an additional accrual for the FDIC special assessment and a tax-related expense associated with prior period intercompany distributions,” said Ignacio Álvarez, CEO of Popular Inc., about the institution’s adjusted net income of $135.2 million for the first quarter of 2024 and $139.9 million for the fourth quarter of 2023.
Net interest income was $550.7 million during the first quarter of 2024, an increase of $16.6 million from the last quarter in 2023 and $19.1 million from the $531.6 million reported in the same year-ago quarter.
“We continued to benefit from a stable deposit base, increased our net interest income by 3% and expanded our net interest margin by eight basis points,” Álvarez said.
Ending deposit balances for the first quarter increased by $190.5 million while average quarterly balances increased by $767.2 million from the third quarter of 2023.
Net interest income for the BPPR segment was $472.8 million for the first quarter of 2024, up $17.9 million from $454.9 million in the last quarter of 2023.
Net interest margin for this segment increased 14 basis points to 3.33% from 3.19% in the fourth quarter of 2023. The increase in net interest margin reflects a higher volume of loans by $423.6 million largely driven by commercial loans by $227.9 million coupled with higher volume across most loan categories.
Earning assets yield for the local subsidiary improved 15 basis points from 4.88% in the fourth quarter of 2023 to 5.03% in the first quarter of 2024, “mostly due to the repricing of investment securities,” the bank stated.
The cost of interest-bearing deposits at BPPR increased by 3 basis points to 2.44% from 2.41% in the fourth quarter of 2023.
“Notwithstanding that, the cost of Puerto Rico public funds decreased 1 basis point during the first quarter of 2024, the increase in the cost of interest-bearing deposits in the first quarter of 2024 is driven by a higher proportion of Puerto Rico public deposits for the quarter, which carry a higher rate,” the bank stated. “Total deposit cost in the first quarter of 2024 was 1.81%, compared to 1.79% in the fourth quarter of 2023, an increase of 2 basis points.”
In a call with reporters, Álvarez confirmed that the institution remains “optimistic” about its Puerto Rico operation, where “we’re still seeing strength in the consumer.”
He said Popular customers in Puerto Rico showed a 2% growth in the use of credit and debit cards during the first quarter of 2024, versus the same period at the end of 2023.
“Customers continue to spend, maybe not at the same pace as during the [COVID-19] pandemic, but it continues to be the motor of the economy in Puerto Rico and in the [mainland] U.S.,” Álvarez noted, adding that plastic has replaced cash to the extent that ATM withdrawals have dropped as people also substitute cash with digital transactions.
Net income includes unpaid tax expenses
In the quarterly report, Popular Inc. confirmed that net income for the quarter ended March 31, 2024, included $22.9 million of expenses, of which $16.5 million is attributed to an income tax expense, related to an “out of period adjustment” associated with its stateside subsidiary’s failure to pay federal withholding taxes on certain distributions to the holding company in Puerto Rico, a foreign corporation for U.S. tax purposes, that occurred in certain years from 2014 to 2023.
In addition to the $16.5 million of income tax expense, the corporation also recognized $6.4 million, reflected in other operating expense, for interest due up to March 31 on the related late payment of the withholding tax.
Additionally, the corporation recognized $6.5 million in income tax expense during the quarter ended March 31 to reflect the federal tax withholding liability and estimated related Puerto Rico income tax arising from a $50 million dividend paid during the quarter.
Dividends from the U.S. subsidiaries to the holding company are subject to a federal 10% withholding tax and ordinary income tax in Puerto Rico, subject to foreign tax credits, use of available net operating losses and certain other limitations.
“The corporation does not anticipate the tax treatment of U.S.-sourced dividends to the holding company to impact its liquidity or future capital actions,” it stated.
