Popular (BPOP) Q4 2008 earnings summary

Executive summary

• Net loss was $1.244B in 2008 versus $64.5M in 2007; results reflected a sharp rise in credit provisions, PFH exit losses and a full U.S. deferred-tax valuation allowance.

• Continuing operations recorded a $680.5M net loss versus $202.5M income in 2007; discontinued PFH operations lost $563.4M.

• Actions during 2008 included asset sales, preferred-stock and debt issuance, lower dividends and U.S. restructuring to strengthen liquidity, capital and risk position.

Financial highlights

• Net interest income was $1.279B, down from $1.306B in 2007; provision for loan losses rose to $991.4M from $341.2M.

• Non-interest income was $830.0M versus $873.7M; operating expenses were $1.337B versus $1.545B, including $12.5M of goodwill and trademark impairments.

• Net loss applicable to common stock was $1.279B; basic and diluted loss per share was $4.55 versus a $0.27 loss in 2007.

• Q4 net loss was $702.9M, including a $627.7M continuing-operations loss; continuing net interest income was $288.9M and loan-loss provision was $388.8M.

Outlook and guidance

• BPNA expected to sell, close or consolidate ~40 of 139 branches and reduce its workforce by ~640 FTEs by Q3 2009; annual recurring savings targeted at ~$50M.

• E-LOAN expected ~$37M in annualized savings; restructuring completion and workforce reductions were targeted for Q3 2009.

• February 2009 common dividend was cut to $0.02 per share per quarter, expected to conserve $68M of capital annually; further cost-control steps included compensation and benefit changes.

• Management expected continued pressure on credit quality in 2009 amid economic uncertainty and housing-market weakness; additional loan-loss provision could be required.