Popular Q1 Earnings Call Highlights
by Teresa Graham · The Cerbat GemPopular (NASDAQ:BPOP) reported first-quarter 2026 net income of $246 million and earnings per share of $3.78, marking an increase of $12 million and $0.25 per share from the fourth quarter of 2025. President and CEO Javier Ferrer said the sequential improvement was driven by higher net interest income, net interest margin expansion, and lower operating expenses. Compared to the first quarter of 2025, Ferrer said net income rose 38% and EPS increased 48%.
The company posted a return on tangible common equity (ROTCE) of 15.5%, up from 14.4% in the prior quarter and 11.4% a year earlier. While Popular has exceeded its stated 14% profitability objective for two consecutive quarters, Ferrer told analysts the goal is to sustain that performance “through the cycle,” particularly in periods of economic stress.
Puerto Rico backdrop: steady employment and consumer activity
Ferrer said business activity in Puerto Rico “remained positive,” supported by steady employment and consumer trends, with manufacturing, construction, and tourism leading. He noted the company is monitoring geopolitical developments, particularly the potential impact of sustained higher oil and commodity prices, but said Popular had not seen “significant signs of economic stress” as of quarter-end.
Ferrer cited Puerto Rico’s unemployment rate of 5.6%, which he said remained stable near historic lows. He also pointed to healthy consumer activity, noting that combined credit and debit card purchases by Banco Popular customers increased by about 5% year-over-year. Mortgage balances at Banco Popular increased modestly during the quarter, and Ferrer said the bank continues to see healthy home demand.
Tourism metrics were also highlighted. Ferrer said year-to-date through February, hotel occupancy increased to 83% from 76% a year earlier, while revenue per available room (RevPAR) rose 6%. He added that cruise arrivals accelerated sharply in the first two months of 2026, with arrivals through February up 40% year-over-year. Passenger traffic at Luis Muñoz Marín International Airport declined 2% in the first quarter after a record 2025, but Ferrer noted JetBlue announced an expansion of its San Juan hub with five new nonstop domestic routes beginning in spring 2026.
Net interest income rises as margin expands
CFO Jorge Garcia said net interest income (NII) was $670 million, up about $13 million from the prior quarter, driven by fixed-rate asset repricing, a higher balance of investments tied to higher deposits, and lower deposit costs “at both banks.” Net interest margin expanded five basis points to 3.66% on a GAAP basis; on a taxable equivalent basis, Garcia said margin increased 11 basis points to 4.14%, primarily due to lower interest expense, including a “meaningful reduction” in the cost of Puerto Rico public deposits.
Garcia said ending loan balances were essentially flat at $39.3 billion, down about $38 million from the fourth quarter. The decline was driven by lower balances at Popular Bank, reflecting paydowns in the construction segment and runoff from the exited residential mortgage business. At Banco Popular de Puerto Rico (BPPR), Garcia said modest growth in mortgage and commercial loans was partially offset by weaker auto lending trends.
Given slower demand in consumer and auto segments, Garcia said Popular expects 2026 consolidated loan growth to be at the low end of its original 3% to 4% range.
On the investment portfolio, Garcia said Popular continued reinvesting bond maturities into U.S. Treasury notes and bills. During the quarter, the company purchased about $1.9 billion of Treasury notes with a 2.6-year duration and an average yield of around 3.7%.
Garcia raised the company’s outlook for 2026 net interest income growth to the upper end of its 5% to 7% guidance range, citing “positive deposit trends in Puerto Rico.” In response to analyst questions on margin, Garcia said he expects margin to grow by year-end, though he anticipated a slower pace of expansion in the second quarter following a first-quarter benefit from public deposit repricing.
Deposit growth tied to tax refund season; costs fall
Deposit balances ended the quarter at $67.6 billion, up $1.4 billion from the fourth quarter. Garcia attributed a $1.2 billion rise in retail and commercial deposits largely to tax refund activity. Puerto Rico public deposits increased by $250 million to $19.7 billion; management reiterated expectations for public deposits to remain in an $18 billion to $20 billion range for the year.
Total deposit costs fell 12 basis points quarter-over-quarter to 1.56%. Excluding Puerto Rico public deposits, deposit costs decreased five basis points to 1.09%. Garcia said BPPR deposit costs declined 11 basis points, largely due to public deposits repricing lower by 31 basis points, while Popular Bank’s deposit cost decline was driven by lower online savings costs and time deposit repricing.
In the Q&A, management said deposits typically rise in the first quarter and may trend lower in ending balances in the second quarter, with seasonal patterns often showing more pronounced declines in the third quarter. However, executives said they expect greater retention this year than in 2024, contributing to the improved NII outlook.
Fees steady, expenses lower; capital return continues
Non-interest income was $166 million, in line with the fourth quarter and at the high end of quarterly guidance, according to Garcia. Compared to the first quarter of 2025, non-interest income rose 9%, driven by growth in debit and credit card fees (up 14% and 6%, respectively) and a 13% increase in asset management and insurance fees. The company reiterated expectations for quarterly non-interest income of $160 million to $165 million.
Total operating expenses were $467 million, down $6 million sequentially. Garcia said the reduction was primarily due to lower personnel costs, noting the fourth quarter included a profit-sharing accrual of about $13 million, and the first quarter had fewer calendar days. He also cited lower employee healthcare costs, lower seasonal business promotion expenses, and lower professional fees, partly offset by higher technology and software expenses tied to ongoing transformation initiatives. Garcia said the company now expects full-year expenses to rise 2% to 3%, improved from prior guidance of 3%.
Popular’s effective tax rate was 16% in the quarter, and Garcia said the company expects the full-year tax rate to be at the low end of its 15% to 17% guidance range due to higher projected exempt income.
Tangible book value per share ended the quarter at $84.98, up $2.33 per share, driven by net income and partially offset by capital return. Garcia said Popular repurchased about $155 million in common stock during the quarter and ended with $126 million remaining under its current authorization, which it expects to exhaust in the second quarter. He added the company is “targeting an update on capital actions before the second quarter’s earnings call” and said management expects to pursue a dividend increase during the year, subject to market conditions, regulatory considerations, and board approvals.
Credit: NPLs fall; charge-offs rise on specific items
Chief Risk Officer Lidio Soriano said credit metrics were stable in the first quarter, with lower early delinquency, lower non-performing loans (NPLs) and inflows, but higher net charge-offs. He characterized consumer and business performance as resilient, adding that portfolio data showed “normal seasonal behavior and no deterioration.”
Non-performing assets and loans fell $37 million and $40 million, respectively, driven mainly by BPPR. Soriano said NPLs at BPPR declined $39 million due to reductions in commercial and consumer portfolios, including an $11 million charge-off tied to a commercial real estate facility that had been classified as NPL in the third quarter of 2025 and lower auto NPLs due to increased payment activity. The NPL ratio improved to 1.17% from 1.27% in the prior quarter.
Net charge-offs totaled $60 million, or 61 basis points annualized, compared with $50 million, or 51 basis points, in the prior quarter. Soriano said the prior quarter included $5 million in recoveries from sales of previously charged-off auto loans and credit cards, and that BPPR net charge-offs increased due to the $11 million commercial charge-off. Management reiterated 2026 net charge-off guidance of 55 to 70 basis points.
The allowance for credit losses increased $16 million to $824 million. Soriano said the change was mostly in Puerto Rico, reflecting higher commercial reserves due to loan modifications and additional specific reserves for a single telecommunications borrower, as well as a slight increase in mortgage reserves based on macroeconomic scenarios. These increases were partly offset by a reduction in consumer loan reserves, mainly in auto, tied to improved credit quality. The ACL coverage ratio rose to 2.10% from 2.05%, and ACL-to-NPL coverage increased to 180% from 162%.
In the Q&A, Soriano said loan modifications in commercial were “one-offs” and not indicative of broader portfolio stress. He also said tax refunds supported consumer liquidity, citing local IRS data indicating about $2.2 billion in refunds, roughly $300 million ahead of last year’s pace.
Management also addressed concerns about elevated oil prices, with Soriano saying the impact would depend on how long prices remain high. He compared it to 2022, when oil price increases were “short-lived” and had minimal effect on delinquencies. While acknowledging Puerto Rico’s reliance on oil for electricity generation, he said the company had not seen credit deterioration so far and expected the second quarter to provide more clarity if geopolitical conflicts persist.
About Popular (NASDAQ:BPOP)
Popular, Inc, headquartered in San Juan, Puerto Rico, is a financial holding company and a leading provider of banking services in the United States mainland and Puerto Rico. Through its primary subsidiaries—Banco Popular de Puerto Rico and Popular Bank—the company delivers comprehensive commercial and consumer banking solutions. It offers deposit products, lending facilities, cash management services and payment-processing solutions designed for individuals, small businesses and large corporations.
The company’s product suite encompasses checking and savings accounts, certificates of deposit, residential and commercial mortgage loans, business lines of credit and credit cards.