Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - POPULAR, INC. | d364899d8k.htm |
 Financial
Results Financial Results
2012 Morgan Stanley Financial Services
2012 Morgan Stanley Financial Services
June 13, 2012
June 13, 2012
Exhibit 99.1 |
 Forward Looking
Statements The information contained in this presentation includes forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are based on management’s current expectations
and
involve
risks
and
uncertainties
that
may
cause
the
Company's
actual
results
to
differ
materially
from
any
future
results
expressed or implied by such forward-looking statements. Factors that may cause such a
difference include, but are not limited to (i) the rate of growth in the economy and
employment levels, as well as general business and economic conditions; (ii)
changes
in
interest
rates,
as
well
as
the
magnitude
of
such
changes;
(iii)
the
fiscal
and
monetary
policies
of
the
federal
government and its agencies; (iv) changes in federal bank regulatory and supervisory policies,
including required levels of capital; (v) the relative strength or weakness of the
consumer and commercial credit sectors and of the real estate markets in Puerto Rico
and the other markets in which borrowers are located; (vi) the performance of the stock and bond markets; (vii)
competition in the financial services industry; (viii) possible legislative, tax or regulatory
changes; (ix) the impact of the Dodd- Frank Act on our businesses, business practice
and cost of operations; and (x) additional Federal Deposit Insurance Corporation
assessments. Other than to the extent required by applicable law, the Company undertakes no obligation to
publicly update or revise any forward-looking statement. Please refer to our Annual Report
on Form 10-K for the year ended December 31, 2011 and other SEC reports for a
discussion of those factors that could impact our future results. The financial
information included in this presentation for the quarter ended March 31, 2012 is based on
preliminary unaudited data and is subject to change.
1 |
 Q1 2012
Highlights •
Net income for the quarter amounted to $48.4 million; our fifth consecutive profitable
quarter
•
Continued improvement in credit quality trends in non-covered portfolio
NPLs declined by $56 million
NPL inflows (commercial and construction) declined by 21%
Net charge-offs decreased by $18 million
•
Provision for non-covered loans declined by $41.4 million
•
Newly created Commercial Credit Administration Group consolidates several divisions
performing commercial credit management and administrative functions
•
Maintained strong revenue generation, robust margins and further
strengthened
capital ratios
2 |
 Financial
Results 3
¹
Unaudited
²
EPS amounted to $0.46 in Q1 2012 and $0.02 in Q4 2011 after the 1-for-10 reverse stock
split effected on May 29, 2012.
2
$ in thousands (except per share data)
Q1 2012
1
Q4 2011
1
Variance
Net interest income
$337,582
$344,780
($7,198)
Service fees & other oper. income
129,710
113,848
15,862
Gain on sale of investments, loans & trading profits
9,453
18,064
(8,611)
Total revenues before FDIC (expense) income
476,745
476,692
53
FDIC loss-share (expense) income
(15,255)
17,447
(32,702)
Gross revenues
461,490
494,139
(32,649)
Provision
for
loan
losses-non covered loans
82,514
123,908
(41,394)
Provision
for
loan
losses-covered loans
18,209
55,900
(37,691)
Total provision for loan losses
100,723
179,808
(79,085)
Net revenues
360,767
314,331
46,436
Personnel costs
121,491
124,547
(3,056)
Other operating expenses
174,676
186,546
(11,870)
Total operating expenses
296,167
311,093
(14,926)
Income before Tax
64,600
3,238
61,362
Income Tax
16,192
263
15,929
Net income
$48,408
$2,975
$45,433
Financial Ratios
EPS
$0.05
$0.00
$0.05
NIM
4.27%
4.30%
-0.03% |
 4
¹
Unaudited
Significant Quarterly Variances
(1)
Net interest income
($7,198)
Service fees & other
oper. income
15,862
FDIC loss-share income
(expense)
(32,702)
Provision for loan losses-
non covered loans
(41,394)
Provision for loan losses-
covered loans
(37,691)
Personnel costs
(3,056)
Other operating expenses
(11,870)
Due to lower provisioning requirements
Driven by lower pension costs and salaries, mostly due to the
retirement window but partially offset by payroll taxes,
incentives and other benefits
Driven by lower business promotion ($6.4 million) and a benefit
from lower provision for unfunded credit commitments
($9.5 million), partially offset by higher OREO expenses
($4.3 million)
$25.2 million principally due to 80% mirror accounting from the
decrease in provision for loan losses of covered loans
$13.6 million from the covered portfolio related to certain pools
of mortgage loans with lower interest accretion in Q1 (extended
average life estimates) offset by lower interest expense on
deposits and repayment of FDIC note ($6.3 million)
$9.5 million higher other income mainly due to valuation in
investments accounted for under the equity method and
$5.9 million in other service fees (MSR valuation $11.5 million)
$17.9 million lower net charge offs and $25.3 million attributed
to the revision of the ALLL methodology for commercial and
construction (US $17.8 million & PR $7.5 million) |
 Capital
Ratios 5
•
Strong capital ratios above CCAR banks and peers
(1) (4)
Peers include: CMA, HBAN, ZION, FNFG, PBCT, SNV, FHN, BOKF, ASBC & FBP See the
earnings press release for reconciliation of Common Stockholders Equity (GAAP) to Tier 1 Common Equity (Non-GAAP)
Minimum Regulatory Requirements for Well Capitalized Peer
& CCAR ratios are as of December 31, 2011
1
2
3
4
Tier 1 Common
Tier 1 Capital
Total Capital
Tangible Common Equity
2
5%
6%
10
12.53
16.51
17.79
8.83
11.18
13.76
16.24
9.15
10.65
12.98
15.70
7.01
Popular Q1 2012
Peers Average
CCAR Average
3
3
3 |
 •
Total Loans
remained relatively flat
•
NPLs decreased
for the second consecutive
quarter driven primarily by lower levels in all
portfolios
•
US construction $32 million
•
PR commercial $10 million
•
PR mortgage $16 million
•
NCOs declined
due to positive variances in
commercial and construction, offset in part
by increases in mortgage
•
Reduction in NCO ratio from 2.46% in
Q4 2011 to 2.13% in Q1 2012
•
Provision for loan losses
in Q1 2012 was
down
33% compared to the Q4 2011
•
Allowance to loans & allowance
coverage
ratio remained relatively
flat
6
Consolidated Credit Summary (Excluding Covered Loans)
$ in millions
Q1 12
Q4 11
Q1 12 vs
Q4 11
Q1 11
Q1 12 vs
Q1 11
Loans Held to Maturity (HTM)
$20,479
$20,602
-0.60%
$20,677
-0.96%
Loans Held for Sale
362
363
-0.28%
570
-36.49%
Total Non Covered Loans
20,841
20,965
0.60%
21,247
-1.91%
Non-performing loans (NPLs)
$1,682
$1,738
-3.21%
$1,614
4.21%
Commercial
$819
$830
-1.33%
$700
17.00%
Construction
$70
$96
-27.08%
$127
-44.88%
Legacy
$79
$76
3.95%
$150
-47.33%
Mortgage
$667
$687
-2.91%
$578
15.40%
Consumer
$47
$49
-4.08%
$59
-20.34%
NPLs HTM to loans HTM
8.21%
8.44%
-0.23%
7.80%
0.41%
Net charge-offs (NCOs)
108
126
-14.29%
139
-22.30%
Commercial
$54
$71
-23.94%
$56
-3.57%
Construction
$0
$5
-100.00%
$9
-100.00%
Legacy
$4
$6
-33.33%
$20
-80.00%
Mortgage
$17
$9
88.89%
$8
112.50%
Consumer
$33
$35
-5.71%
$46
-28.26%
NCOs to average loans HTM
2.13%
2.46%
-0.33%
2.74%
-0.61%
Provision for loan losses (PLL)
83
124
-33.06%
60
38.33%
PLL to total loans HTM
1.62%
2.41%
-0.79%
1.16%
0.46%
PLL to NCOs
0.76x
0.98x
-0.22x
0.43x
0.33x
Allowance for loan losses (ALL)
665
690
-3.62%
727
-8.53%
ALL to loans (excl. LHFS)
3.25%
3.35%
-0.10%
3.52%
-0.27%
ALL to NPLs HTM
39.53%
39.73%
-0.20%
45.07%
-5.54% |
 Commercial &
Construction NPL Inflows Credit Quality Overview -
•
Total commercial and construction NPL
inflows
decreased
by
$37
million
or
21%
driven
by
decreases
in
both
PR
and
the
US
In PR, commercial and construction NPL inflows
decreased by $8 million or 8%
In the US, commercial and construction NPL
inflows decreased by $29 million or 38%
7
Selected Portfolios
Total
PR
Mortgage
Exposure
–
Owned
+
Recourse
•
Total PR mortgage exposure includes both:
On-balance sheet mortgage loans
Loans sold with recourse
•
Portfolio key statistics:
Recourse
balance
is
down
$1.1
billion
or
26%
since 4Q 2009
90+
days
past
due
percentage
delinquency
has
decreased by 14%
from its peak in Q3 2010
$
$
$119
$161
$149
$174
$133
$116
$223
$101
$93
$147
$104
$109
$136
$61
$79
$77
$77
$48
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
PR Inflows
US Inflows
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
11.3%
11.4%
11.8%
12.0%
12.7%
12.9%
13.2%
12.2%
11.8%
11.0%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Recourse Portfolio
Owned Portfolio
Contributed 90+%DPD |
 Methodology
ASC 450
General
Reserve-
ASC
450
(FAS
5)
+
Specific
Reserve-
ASC
310
(FAS
114)
=
Total
ALLL
Changes
Implemented
•
Revised to a more granular segmentation based on credit-risk characteristics
Enhances homogeneity of portfolios
•
Changed trend factor to 12 months for commercial and construction portfolios
Improves the methodology’s ability to calibrate the impact of current loss trends
•
Implementation resulted in a net reduction of approximately $25 million in ALLL balance
(mostly in the US)
Allowance for Loan and Lease Losses (ALLL)
•
Base loss -
36-month average net charge-offs for commercial/construction portfolios and
18-month average net charge-offs for consumer/mortgage portfolios
•
Trend
factor-
Replaces
base-loss
period
with
6-month
average
net
charge-off
when
it
is
higher than base loss (up to determined cap)
•
Environmental
factor
-
Captures
certain
credit
/
economic
trends
and
factors
not
considered in the base losses
8
•
General
reserve
-
Based
on
historical
losses
adjusted
for
a
recent
trend
factor
+
•
Specific reserve
-
Attributed
to
loans
deemed
impaired
(mostly
commercial
loans
environmental factor
over $1mm) |
 Coverage Ratio
1
Allowance to Loan Losses / Non-performing Loans
2
Allowance to Loan Losses + Lifetime Charge-offs / Non-performing Loans
3
Includes Legacy loans
The coverage ratio of 39.5% does not take into account the high
percentage of individually analyzed loans and lifetime charge-offs
Total NPLs
$1,682
Individually Analyzed
$849
Collectively Analyzed
$833
$ in millions
9
Coverage Ratio (CR)
1
:
3%
Adjusted Coverage Ratio (ACR)
2
:
33%
Coverage Ratio (CR)
1
:
76%
Adjusted Coverage Ratio (ACR)
2
:
104%
Mort.
Comm.
Const.
3
Cons.
Mort.
Comm.
3
Const.
3
Cons.
NPLs
$239
$510
$90
$9
$428
$358
$9
$39
Lifetime NCOs
$4
$166
$80
$0
$84
$130
$18
$0
Reserve
$16
$11
$1
$1
$109
$349
$17
$161
CR
7%
2%
1%
15%
26%
97%
198%
414%
ACR
8%
35%
90%
15%
45%
133%
410%
414%
3 |
 Summary &
Outlook 10
2012 Strategy
•
Further improve credit risk profile
•
Add low-risk assets
•
Continue efficiency efforts
•
Continue improvement at BPNA
•
Build on strong revenues and robust capital position |
 Appendix
Appendix |
 P.R. &
US Business 12
1
Excludes covered loans
$ in millions (Unaudited)
Q1 12
Q4 11
Variance
Q1 12
Q4 11
Variance
Net Interest Income
$290
$299
($9)
$74
$73
$1
Non Interest Income
114
136
(22)
16
21
(5)
Gross Revenues
404
435
(31)
90
94
(4)
Provision (non-covered)
68
88
(20)
15
36
(21)
Provision (covered WB)
18
56
(38)
-
-
-
Provision for loan losses
86
144
(58)
15
36
(21)
Expenses
234
253
(19)
65
60
5
Tax Expense
17
4
13
1
1
(0)
Net Income (Loss)
$67
$34
$33
$9
($3)
$12
NPLs (HTM) ¹
$1,343
$1,371
($28)
$338
$366
($28)
NPLs (HTM + HFS) ¹
1,570
1,620
(50)
344
379
(35)
Loan loss reserve
586
578
8
217
237
(20)
Assets
$28,027
$28,423
($396)
$8,665
$8,581
$84
Loans (HTM)
19,053
19,159
(106)
5,618
5,762
(144)
Loans (HTM + HFS)
19,406
19,507
(101)
5,626
5,778
(152)
Deposits
21,040
21,850
(810)
6,247
6,168
79
NIM
4.90%
4.97%
-0.07%
3.78%
3.68%
0.10%
PR
US |
 Credit Ratings
Update •
Our senior unsecured ratings have been gradually improving since
2010:
Moody’s:
Ba1
Negative Outlook
S&P:
B+
Stable Outlook
Fitch:
B+
Positive Outlook
•
April 2012: Moody’s placing most of the PR banks under review with the
possibility of downgrades, due to the state of the Puerto Rico economy
•
January 2012: Fitch raised BPOPs outlook to positive
•
December
2011:
S&P
raised
its
ratings
on
BPPR
to
BB
from
BB
-
and
changed
outlook to stable given revised bank criteria to Regional banks
•
July 2011: S&P raised our senior unsecured rating by one notch to B+
•
As the P.R. economy stabilizes and our credit metrics improve, we should see
upward pressure on the ratings
13 |
 Financial
Results Financial Results
First Quarter 2012
First Quarter 2012 |