Popular (BPOP) Q4 2007 earnings summary

Executive summary

• FY07 net loss $64.5M vs net income $357.7M; diluted EPS -$0.27 vs $1.24.

• Results reflected a $562.7M loan-loss provision, $90.1M pre-tax securitization recharacterization loss, and $231.9M in E-LOAN restructuring and impairment charges.

• A $118.7M pre-tax gain on the sale of TELPRI shares partially offset these pressures.

Financial highlights

• Net interest income was $1.449B, up $21.5M YoY; interest income was $3.128B and interest expense was $1.679B.

• Total revenue was $2.144B vs $2.237B in 2006; operating expenses reached $1.705B, up $219.5M.

• Provision for loan losses rose to $562.7M from $287.8M; net charge-offs increased to $423.1M from $229.7M.

• Assets ended at $44.4B, loans at $29.9B and deposits at $28.3B; loans fell 9% and deposits grew 16% YoY.

Outlook and guidance

• E-LOAN restructuring is expected to reduce 2008 operating expenses by $77M and estimated net losses by $15M.

• The Equity One asset sale closed March 1, 2008 for a portfolio of ~$1.4B; it generated an expected pre-tax gain of ~$50M and was associated with estimated restructuring charges of $19.5M.

• Puerto Rico’s difficult economic environment was expected to persist well into 2008; focus remained on disciplined execution and profitable growth.