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Popular Inc. reports $79.7M in YoY net income growth in 3Q21

Popular Inc. CEO Ignacio Álvarez on the status of Puerto Rico’s debt restructuring process.

Popular Inc., the parent company of Banco Popular de Puerto Rico (BPPR), reported net income of $248.1 million for the quarter ended September 30, 2021, up $79.7 million in comparison to the $168.4 million reported for the same year-ago quarter.

“The third quarter was another strong quarter. We achieved net income of $248.1 million, driven by a reserve release of $61 million. The release reflects strong credit quality performance as well as a positive economic outlook,” said Popular Inc. CEO Ignacio Álvarez.

“We continued to see higher credit and debit card spending, strong auto and mortgage originations as well as higher deposits. During the quarter we also continued to return capital to our shareholders, completing our $350 million accelerated repurchase program and announcing the redemption of $187 million in high-cost trust preferred securities,” he said

On Oct. 15, 2021, Puerto Rico’s largest financial institution also completed a “bolt-on acquisition of a national equipment leasing platform that complements our existing healthcare lending vertical,” he said.

“I am extremely proud of the work our team has accomplished during 2021 as we continue to serve our clients and communities,” Álvarez added.

In its earnings report, the financial institution confirmed that Popular Equipment Finance, LLC, a newly-formed wholly-owned subsidiary of Popular Bank — Popular Inc.’s US mainland operation — completed the acquisition of certain assets and the assumption of certain liabilities of Minnesota-based K2 Capital Group LLC’s equipment leasing and financing business.

Popular Equipment Finance paid about $159 million in cash, representing a premium of approximately $40 million over the book value of K2’s net assets, it explained.

An additional estimated $29 million in earnout payments could be payable to K2 over the next three years, contingent upon the achievement of certain agreed-upon financial targets during such period, the bank stated.

Specializing in the healthcare industry, the acquired company provides a variety of lease products, including operating and capital leases, and offers private label vendor finance programs to equipment manufacturers and healthcare organizations.

The acquisition provides Popular Bank with a national equipment leasing platform that complements its existing healthcare lending business, Popular Inc. explained in its earnings release.

As part of the transaction, Popular Equipment Finance acquired approximately $119 million in net assets that consisted mainly of capital leases. All of K2’s former employees, including its management team, became Popular Equipment Finance employees at the closing of the transaction. The transaction will be accounted for as a business combination, the bank stated.

Meanwhile, Álvarez said while the institution is “pleased” with its third quarter results, it is keeping a close eye on how the evolving health situation may impact the economy.

In a virtual meeting with Puerto Rico-based reporters, he also responded to questions about the status of the commonwealth’s Debt Adjustment Plan, which is currently in the hands of the Legislature for final approval. The proposal is expected to go to the Senate for a vote today, after getting the go-ahead from the House.

“Puerto Rico’s economy has been moving forward positively, but this matter of the debt is like a black cloud hovering over Puerto Rico, which creates a lot of uncertainty. I think it would be beneficial and it’s time for an exit, and to know what we can count with,” he said.

“The proposed plan may not be perfect, but it’s a compromise for all parties. I think a lot of time and effort has been spent and it would be quite dangerous and risky to start at zero now,” he said, referring to the possibility of a rejection of the plan that has been more than five years in the making.

Author Details
Author Details
Business reporter with 27 years of experience writing for weekly and daily newspapers, as well as trade publications in Puerto Rico. My list of former employers includes Caribbean Business, The San Juan Star, and the Puerto Rico Daily Sun, among others. My areas of expertise include telecommunications, technology, retail, agriculture, tourism, banking and most other segments of Puerto Rico’s economy.
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