Popular Inc. reports $541M in net income in 2023, $94.6M in 4Q
Popular Inc., the parent company of Banco Popular de Puerto Rico (BPPR), reported a net income of $541.3 million for 2023, compared to $1.1 billion in 2022. Its net income for the last quarter of the year was $94.6 million.
Both results were affected by a Federal Deposit Insurance Corporation (FDIC) decision on Nov. 16 approving a final rule for a special assessment to recover losses from the FDIC’s use of the systemic risk exception for several failed bank receiverships in March 2023.
Under the final rule, the assessment base equals an insured depository institution’s estimated uninsured deposits. Banco Popular de Puerto Rico and Popular Bank reported estimated uninsured deposits of approximately $28.1 billion as of Dec. 31, 2022. The corporation recorded a $71.4 million expense, $45.3 million net of tax, in the fourth quarter of 2023, representing the full amount of the assessment.
So, excluding the $45.3 million after-tax impact in the fourth quarter, Popular Inc.’s adjusted net income was $139.9 million, and excluding the effects of the FDIC Special Assessment, adjusted net income for 2023 was $586.6 million, compared to $807.8 million in 2022.
“We delivered solid fourth quarter and year-end results and entered 2024 with strong momentum. Notwithstanding the interest rate environment and the disruptions in the banking market early in the year, we were able to maintain stable net interest income as we grew loans by approximately $1 billion during the quarter and a total of $3 billion for the full year,” said Popular Inc. CEO Ignacio Álvarez.
“We continued to experience strong client activity during the year, growing our customer base in Puerto Rico by 34,000 reflecting the continued strength of the local economy and our diversified product offerings,” he said.
“Excluding the gain from the Evertec transaction in 2022, we grew noninterest income by $11 million. While we saw some credit normalization in our consumer portfolios, credit quality remained strong. We were also able to manage our operating expenses at the same time we continued to invest in our transformation efforts,” Álvarez added.
“Our CET1 ratio at year-end was 16.3% and our tangible equity increased by 33%, or $14.77 per share. Our strong liquidity and capital ratios position us well to continue to support responsible growth in 2024,” he continued.
“While conscious that we are living in a period of great uncertainty, the outlook for the macroenvironment in Puerto Rico remains positive and we look forward to 2024 with optimism,” Álvarez concluded.
The quarterly report includes results for BPPR, which showed a $729 million increase in all major loan categories for the year.
BPPR’s fourth quarter net interest income was $454.9 million, with a net interest margin of 3.19% compared to 3.14% in the third quarter.
“The increase in net interest margin reflects a higher volume of loans by $729 million across all loan categories, except construction loans, partially offset by a lower volume of investment securities, trading and money market investments by $1.6 billion driven by a decrease in deposits of $1.0 billion and a higher cost of deposits, mainly Puerto Rico government deposits,” according to the quarterly report.
BPPR’s nonperforming loans decreased by $5.1 million, led by a $12.3 million reduction in mortgage nonperforming loans, partially offset by a $4.9 million increase in consumer nonperforming loans, the financial institution stated.
“It was a very good year for us, a little under last year, but that’s because last year’s numbers were inflated by the special reserve that we created due to the pandemic,” Álvarez said.
Looking to 2024, Álvarez also anticipated a “good year” particularly as inflation in the U.S. is under control.
“I think interest rates won’t go up again, but we don’t know when they’ll start to drop. That’s another story,” he said during a call with reporters. “There are different opinions about when that drop could start, but there is consensus that the increase in interest rates is over.”
Álvarez also said that despite 2024 being an election year, Popular Inc. isn’t modeling or changing any of its business based on the November elections.
“The ones who have the most influence on Puerto Rico are those in Congress, so it’ll all depend on how the House and Senate shape up. So right now, we’re not speculating much on the impact of the elections,” he said.
Apple Pay to be available this year
In response to a reporter’s question, Álvarez confirmed that the Apple Pay service will finally be available in Puerto Rico this year.
“The delay has been on Apple because they didn’t open the alternative to the local market. Now we’re working closely with them and I’m hoping that the service will be available by mid-year, sometime,” Álvarez said. “We’ve been pushing them on this for years, and now they’re committed to doing this this year.”
