Popular (BPOP) Q4 2011 earnings summary

Executive summary

• 2011 marked a return to operational profitability: net income was $151.3M vs. $137.4M in 2010, following losses in 2009; Q4 net income was $3.0M vs. a $227.1M loss.

• Top-line income remained $2.0B; lower loan-loss provisions and stronger net interest margin were key drivers, while Puerto Rico credit quality remained challenged.

Financial highlights

• Net interest income was $1.432B, up from $1.295B; taxable-equivalent NIM rose to 4.47% from 3.82%.

• Provision for loan losses fell 43% to $575.7M; excluding covered loans, provision was $430.1M, down from $1.012B total provision in 2010.

• Non-interest income was $560.3M vs. $1.288B; excluding the $640.8M EVERTEC sale gain in 2010, it declined $87.1M, mainly on lower processing and card fees.

• Operating expenses declined 13% to $1.150B; reported results included $15.6M of voluntary retirement costs.

• Total assets were $37.3B, deposits $27.9B, and stockholders’ equity $3.9B at year-end; diluted EPS was $0.14.

Outlook and guidance

• 2012 outlook: Puerto Rico economy expected to remain flat and U.S. mainland growth moderate; credit conditions were improving but not normalized.

• Planned priorities include further Puerto Rico non-performing loan sales, loss-mitigation improvements, branch consolidation and acquisition of lower-risk assets; U.S. plans emphasize portfolio run-off, targeted growth and asset quality.

• Annual savings from the 369-person voluntary retirement program were estimated at $15M; eight remaining Puerto Rico branch consolidations were planned for 2012.

• Further loan-portfolio sales were planned for 2012; loans held for sale had declined to $363M from $894M at year-end 2010.