Popular Inc., parent company of Banco Popular de Puerto Rico, reported net income of $127.6 million for the quarter ended June 30, 2020, a 25% drop from the $171.1 million on record for the same quarter in 2019, but a significant jump from the $34.3 million reported for the first quarter of the year.
For the six months ended June 30, Puerto Rico’s largest bank reported $161.9 million in net income, down from the $339 million reported for the same period in 2019, according to its financial results.
“We reported net income of $127.6 million for the quarter, notwithstanding the challenging economic environment resulting from the coronavirus pandemic and the historically low interest rate scenario,” said Ignacio Álvarez, the CEO of Popular Inc.
The results for both periods were significantly impacted by the COVID-19 pandemic, which has affected the markets in which the bank operates and its results of operations.
“Credit quality trends remained stable. However, the full extent of future economic disruption, as a result of the pandemic, is still uncertain,” he said.
The corporation’s total assets increased by $10 billion during the most recent quarter to $62.8 billion, primarily due to an increase in deposits of $9 billion, of which $4.2 billion were from the public sector, driven by local and federal government assistance programs related to the COVID-19 pandemic.
Most of this increased liquidity was deployed in overnight federal funds or in short-term U.S. Treasury securities and to originate $1.4 billion in U.S. Small Business Administration loans under the Payment Protection Program.
In total, Banco Popular secured funding approval for more than 28,000 loans adding up to some $1.4 billion. About $1.2 billion of the loans were granted in Puerto Rico, $215 million in the mainland United States and $29 million in the U.S. Virgin Islands. The bank originated 69% of all PPP loans in Puerto Rico.
The average size of loans extended under the PPP was approximately $45,000 in Puerto Rico and the U.S. Virgin Islands and $152,000 in the mainland United States, the bank confirmed. Popular added some 20,000 new clients to its portfolio through the PPP program, Álvarez said.
The financial institution will continue to extend PPP loans while the program remains open and is now working on the second part of the process, loan forgiveness, which is expected to be completed predominantly through digital channels, it confirmed.
As of June 30, 2020, Banco Popular had granted a loan payment moratorium to 116,226 eligible retail customers with an aggregate book value of $3.9 billion, and to 5,003 eligible commercial clients with an aggregate book value of $4.1 billion.
Auto loans represented the bulk of the moratoriums granted, with nearly 48,000 cases, followed by other consumer loans (21,800), credit cards (19,256), mortgage loans (16,595), and lease financing (10,600).
COVID-related moratoriums began in March of 2020 and are set to expire between July 1, 2020 and September 30, 2020, depending on the loan product and deferral agreements with the borrowers.
Surviving second business lockdown would be hard
During a conference call with members of the island’s media to discuss the results, Álvarez said it would be very hard for Puerto Rico’s economy to sustain a second full business lockdown.
“We’re aware that there remains much uncertainty as to the future of the economy. Economic performance will continue to be tied to developments on the health front, which are very difficult to predict,” he said.
“If the health situation deteriorates, leading to a new round of restrictions on businesses, this will obviously hamper the economic recovery. The strength of our balance sheet, levels of capital and liquidity place us in a strong position to continue to serve our clients and weather the challenges that may lie ahead,” he added.
“While affecting a much smaller portion of economy than the original lockdown, these restrictions will undoubtedly have a significant impact on the hotel and restaurant segment, the severity of which will depend on the length of these restrictions,” Álvarez predicted.