Popular (BPOP) investor relations material

Puerto Rican economic outlook and positioning

• Puerto Rico's economy is experiencing strong momentum with low unemployment and increased labor participation, especially in construction, hospitality, and manufacturing sectors.

• The island's economic trajectory has recoupled with the U.S., making it sensitive to U.S. economic trends, particularly in hospitality and tourism.

• Onshoring trends post-pandemic have led to over $2.6 billion in new investments and nearly 5,000 direct jobs in the past year, with a positive multiplier effect.

• Population outmigration has leveled off, with anecdotal evidence of young professionals returning, especially in high-tech and financial sectors.

• Affordable housing remains a challenge, but government incentives are encouraging young talent to return.

Regulatory environment and capital management

• Basel III regulations are not yet applicable, but there is a strong focus on compliance and risk management, with adaptability to regulatory changes.

• The CET1 ratio is around 15.7%, significantly above requirements, reflecting a conservative approach shaped by past crises.

• Capital optimization is a priority, with ongoing share repurchase programs and consideration of adjusting the capital stack.

• Sustainable profitability and rational capital deployment are emphasized, with a focus on organic growth and transformation over M&A.

Shareholder value and strategic focus

• Value creation is measured by ROCE, with a strong emphasis on sustainable profitability, operational excellence, and omnichannel service.

• Community engagement and support through foundations are integral, alongside profitability.

• M&A activity is selective, focusing on niche opportunities or FDIC-assisted transactions, with cultural fit being critical.

• Whole bank acquisitions are currently less likely due to ongoing transformation and competitive pressures.