Popular, Inc. Q4 FY2024 earnings call

• 2024 was a strong year with adjusted net income up 10% driven by higher net interest income, despite higher provisions and expenses.
• Fourth quarter net income was $178 million, boosted by higher net interest income and lower provision for credit losses.
• Loan growth was robust in the fourth quarter, with balances increasing by $913 million (2.5%).
• Puerto Rico's economy remained solid with favorable trends in employment, consumer spending, and tourism.
• Resumed share repurchases with a $500 million authorization and increased the quarterly common stock dividend by $0.08 to $0.70 per share.
• Sold the daily car rental business from Popular Auto, which had minimal impact on net income, and reinvested bond maturities into two-to-three-year US treasury notes.

In 2024, Popular Incorporated achieved an annual net income of $614 million, compared to $541 million in 2023. On an adjusted basis, net income was $646 million, a 10% increase. The fourth quarter saw net income of $178 million, a $23 million increase from the third quarter. Loan growth was strong, with total loans up $2 billion for the year (5.8% increase) and $913 million in the fourth quarter. BPPR had loan growth across segments, led by commercial loans, and Popular Bank saw growth in commercial and construction loans. Net interest income increased in the fourth quarter, with the net interest margin expanding to 3.35%. Credit quality remained stable, with non-performing loans decreasing slightly and net charge-offs below historic normalized levels.

• 2025 consolidated loan growth expected to be 3%-5% with growth improving as the year progresses.
• NII anticipated to increase 7%-9% in 2025 driven by reinvestment of lower-yielding securities, loan originations, and lower deposit costs.
• NIM expansion expected to continue in 2025.
• Net charge-offs for 2025 expected to be between 70 basis points to 90 basis points.
• Effective tax rate expected to be in the range of 19%-21% in 2025.

• Risk to NIM expansion from ability to reduce deposit costs in the US and deposit mix in Puerto Rico.
• Potential deposit outflows in the range of $600 million to $800 million, which are part of the guidance and need to be managed through retention efforts.

Q: Brett Rabatin asked about funding costs and deposit trends.

A: Jorge Garcia responded that deposits increased in the fourth quarter, with non-public deposits in Puerto Rico up $600 million, and activity with high-net worth and commercial clients continued, with assets under management up over 30%.

Q: Kelly Motta inquired about deposit outflows and fee guidance.

A: Jorge Garcia said the guidance includes potential outflows but efforts are in place to retain deposits, and fee income is expected to be supported by credit card activity and price-for-value efforts with commercial clients.

Q: Frank Schiraldi asked about buybacks and CET1 ratio.

A: Jorge Garcia stated buybacks would be flexible based on stock price, and CET1 ratio is expected to be gradually reduced as a more normalized level.

Q: Gerard Cassidy asked about Puerto Rico infrastructure and loan growth.

A: Ignacio Alvarez discussed federal recovery funds for infrastructure, including electric grid, water, and housing projects, and loan growth expected to ramp up in the second half of 2025.

Q: Kelly Motta asked about seasonality in deposits and expense guidance.

A: Jorge Garcia explained seasonality in deposits, with first quarter benefiting from tax refunds, and expense guidance is on a GAAP basis with a 4% increase expected for the year.