Popular (BPOP) Q4 2014 earnings summary

Executive summary

• FY14 reported net loss $313.5M, including major TARP repayment and U.S. restructuring items; adjusted net income was $300.7M from continuing operations and $343.6M including discontinued operations.

• Adjusted results improved on higher net interest income, lower provisions and lower operating costs; non-performing loans ended at 2.95% of total loans, excluding the sold regions for year-over-year comparability.

• Year-end Tier 1 common equity ratio reached 15.89%; after-year-end acquisition of selected Doral Bank assets and deposits expands Puerto Rico and New York operations.

Financial highlights

• Net interest income $945.1M reported versus $1.345B in 2013; adjusted taxable-equivalent net interest income was $1.398B versus $1.343B.

• FY14 reported net loss from continuing operations $190.5M versus income of $558.8M in 2013; discontinued operations contributed a $123.0M loss.

• Adjusted net income from continuing operations $300.7M versus $215.7M in 2013; adjusted total net income $343.6M versus $256.2M.

• Provision for loan losses from continuing operations fell to $270.1M from $606.1M; adjusted non-covered provision, excluding bulk loan sales, was $211.2M versus $218.6M.

• Operating expenses were $1.194B, down 2% YoY; excluding specified one-time items, expenses declined $22.3M. Q4 net income was $48.8M versus $163.0M a year earlier.

Outlook and guidance

• U.S. reorganization savings forecast at ~$34–35M annually, expected to offset a similar revenue reduction; transfer of support functions was targeted for completion in H1 2015.

• Doral acquisition expected to be accretive within the first 12 months, with transaction costs estimated at $20–25M; integration, customer retention and conversion remain execution risks.

• Priorities include U.S. legacy portfolio run-off and selective asset growth, and Puerto Rico credit performance, organic growth and opportunistic loan portfolio acquisitions.