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Popular Inc. reports net income drop in 1Q23 due to deferred tax asset

Popular Inc. reported net income of $159 million for the quarter ended March 31, compared to net income of $257.1 million for the quarter ended Dec. 31, 2022, and net income of $211.6 for the first quarter of 2022.

Excluding the effects of the partial release of $68.2 million of the deferred tax asset valuation allowance, the net income for the fourth quarter was $188.9 million, the bank stated in its earnings report.

“We reported strong results for the first quarter as we continued to support our clients during a period of increased volatility and uncertainty,” Popular Inc. CEO Ignacio Álvarez said.

“Our diversified business model and strong deposit base, robust capital and liquidity positions are a source of strength and allow us to continue to meet our clients’ needs, as reflected by the growth in our loan portfolio and client base during the quarter,” he said.

“We remain optimistic about the opportunities that lie ahead as we remain vigilant of potential risks stemming from continued inflation and economic and market uncertainty. Economic trends in Puerto Rico are positive, and a considerable amount of recovery funds yet to be disbursed are expected to support additional economic activity in future years,” Álvarez said.

In the report, Popular Inc. confirmed net interest income of $531.7 million in the most recent quarter, compared to $494.3 million for the same year-ago period, and $559.6 million for the quarter ended Dec. 31, 2022. The impact of having two fewer days in the quarter resulted in a $9 million reduction to net interest income and affected the net interest margin for the quarter, the bank stated.

Meanwhile, its net interest margin was 3.22% in the first quarter of 2023, compared to 3.28% in fourth quarter 2022. On a taxable equivalent basis, net interest margin for the first quarter of 2023 was 3.46%, compared to 3.64% for the prior quarter.

The main variances in net interest income on a taxable equivalent basis were: lower interest income from money market, investment and trading securities by $15.4 million driven by lower average volume by $1.5 billion; and, higher interest expense on deposits by $53.9 million due to the increase in rates, mainly from Puerto Rico government, commercial deposits and Popular Bank deposits, the bank explained.

As for its credit quality, Popular Inc. reported nonperforming loans held-in-portfolio decreased by $27.1 million from the fourth quarter in 2022.

While loans increased by $260.6 million, reaching $334.5 million in average quarterly balances since the fourth quarter of 2022, deposit balances dropped by $273.3 million, with $1.3 billion in average quarterly balances during the same period.

Author Details
Author Details
Business reporter with 30 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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