Popular Inc. reports 2Q net income of $151.2M
Popular Inc. has reported net income of $151.2 million for the quarter that ended June 30, compared to net income of $159 million for the quarter ended March 31, and $211.4 million in the second quarter of 2022.
“Popular achieved another strong quarter, with net income of $151 million. We are particularly pleased by the growth in our loan portfolios, both in Puerto Rico and the United States, which allowed us to maintain our net interest income stable despite higher deposit costs. Our deposit base remained strong and well-diversified,” said Popular Inc. CEO Ignacio Álvarez.
The bank reported net interest income of $531.5 million for the second quarter of 2023, remaining mostly flat when compared to the $534 million reported for the same year-ago period, and the $532 million on record for the first quarter of 2023. Of the most recent results, $453.1 million were attributed to Banco Popular de Puerto Rico for the second quarter of 2023, $3.3 million higher than the first quarter of 2023.
The main variances in net interest income on a taxable equivalent basis were higher interest expense on deposits by $50.3 million due to the increase in rates, mainly from the increase in volume and cost of Puerto Rico government deposits, and a higher cost in most deposit categories in both Banco Popular de Puerto Rico (BPPR) and Popular Bank, the financial institution explained.
“Our results were further bolstered by positive credit quality trends and healthy non-interest income. We continued investing in areas such as people, regulatory compliance, and technology, confident that they will contribute to our long-term success,” Álvarez said.
Meanwhile, the financial institution reported a net interest margin of 3.14% in the second quarter of 2023, compared to 3.22% in the first quarter of this year; a net interest margin on a taxable equivalent basis of 3.29% in second quarter of 2023, compared to the first quarter of this year.
The decrease in net interest margin was due to a higher volume of deposits and to a shift in the mix of BPPR deposits toward higher-yielding Puerto Rico government deposits, the bank explained.
However, the results were offset by higher interest income from loans by $30.4 million resulting from an increase in average loans by $635 million, reflecting increases in both BPPR and Popular Bank and across all major lending segments.
Loan origination in a higher interest rate environment and the repricing of adjustable-rate loans resulted in a higher yield on loans by 18 basis points. The categories with the highest impact were commercial loans, which increased by $18.5 million in interest income, or 20 basis points, and consumer loans which increased by $5.6 million, or 36 basis points.
Another leverage point was higher interest income from investment securities, trading and money market investments by $12.6 million driven mainly by a higher volume of money market investments, which reflects a 50 basis points increase in yield related to the increase in the federal funds rate, partially offset by a lower volume of investment securities.
The bank’s nonperforming loans held-in-portfolio (NPLs) decreased by $26.9 million from the first quarter of 2023. The NPLs-to-loans ratio stood at 1.2%, compared to 1.3% in the first quarter of 2023.
Loans increased by $692.5 million and by $630.4 million in average quarterly balances, when compared to the first quarter 2023.
The bank’s net charge-offs (NCOs) decreased by $8.8 million from the first quarter in 2023, while annualized NCOs were at 0.29% of average loans held-in-portfolio, versus 0.41% in the first quarter in 2023.
“We are encouraged by the resiliency of the U.S. economy and sustained economic activity in Puerto Rico. Our strong levels of capital and liquidity position us well to support such activity and serve the evolving needs of our growing customer base,” Álvarez said.