Popular Inc. reports lower Q3 earnings amid rising loan growth, provision costs
The rise in provisions was largely driven by loan growth and changes in credit quality trends, particularly in the auto loan segment.
Popular Inc., parent company of Banco Popular de Puerto Rico, released its financial results for the third quarter of 2024, reporting net income of $155.3 million, reflecting year-over-year growth of $18.7 million, but a drop of $22.5 million compared to the previous quarter.
Despite loan growth and a rise in net interest income, the higher provision for credit losses weighed on profitability, reflecting the corporation’s cautious approach to managing credit quality amid rising delinquencies.
Popular’s net interest income for the third quarter of 2024 stood at $572.5 million, a $4.2 million increase compared to the previous quarter and $38.4 increase year over year.
However, the bank’s net income declined due to an increase in provisions for credit losses, which amounted to $72.8 million for the third quarter, compared to $44.2 million in the prior quarter and $45.1 million in the same year-ago quarter.
The rise in provisions was largely driven by loan growth and changes in credit quality trends, particularly in the auto loan segment.
“Our third-quarter results reflected an increase in net interest income, which was offset by a higher provision for credit losses. This increase in provisions was related to loan growth of nearly 2% during the quarter,” said Popular Inc. CEO Ignacio Álvarez.
He noted that while consumer delinquencies increased, particularly in auto loans, they remained below pre-pandemic levels. Álvarez also emphasized the bank’s capital strength, pointing to a rise in tangible book value per share and an ongoing commitment to stock repurchases.
Popular Inc. reported a 2% increase in loans, with ending balances, excluding loans held for sale, amounting to $36.2 billion, an increase of $603.3 million from the prior quarter. The rise in loan balances was driven by strong growth in commercial, mortgage and auto loans, which contributed to the $16.3 million increase in interest income from loans during the quarter.
Despite the growth in loans, credit quality remained relatively stable. Nonperforming loans (NPLs) increased by $19.6 million, bringing the NPL ratio to 1%, unchanged from the previous quarter. Net charge-offs also increased by $4.9 million, largely due to higher consumer charge-offs in the auto loan portfolio. Popular’s allowance for credit losses rose slightly to 2.06%, up from 2.05% in the second quarter.
Popular experienced a $1.9 billion decrease in deposit balances during the third quarter, with ending balances at $63.7 billion. This decline was primarily driven by a drop in interest-bearing deposit accounts in Puerto Rico, including government demand accounts, partially offset by an increase in time deposits in Popular’s U.S. segment, according to the results.
During the third quarter, Popular repurchased 599,096 shares of its common stock for $58.8 million at an average price of $98.11 per share, as part of its ongoing capital management strategy.
