Popular doesn’t expect a recession in Puerto Rico

After returning about $631 million to its shareholders in 2022 and increasing the dividend on common stock, bringing another benefit of about $164 million to investors, Popular company (NASDAQ: BPOP) will suspend its capital return program, its CEO said yesterday, Ignacio Alvarez.

That’s about a six-month hiatus, and that in turn will depend on the economic outlook that the bank has, for both Puerto Rico As for United StateThe banker confirmed. He added that they are closely watching upcoming adjustments in the federal funds rate and the path that inflation will eventually take.

I still think there will not be a recession in Puerto Rico. The numbers we’re seeing in employment continue to be strong. The consumer continues to spend…the (expected) growth rate may decline, but our baseline forecast (probably) does not point to a recession in Puerto Rico,” Alvarez said.

The banker added that the situation in the United States is more complicated, but in his opinion, the picture of stagnation in that economy or low growth will not matter either, unless there is some “shock” such as a rise in prices. of crude oil for geopolitical reasons or for inflation.

Alvarez explained that the economic information run by Popular envisages another rate hike by the Federal Reserve, in the range of 25 basis points, once the FOMC first meets.

However, Alvarez’s reading, in terms of borrowing activity in Puerto Rico, is that 2023 will be as good or better than last year.

Alvarez made his remarks during a session with reporters, on the background of the results of the parent company of Banco Popular during the year 2022.

Last year, the conglomerate reported net income of $1.1 billion, compared to $935 million a year earlier. For shareholders, annual management meant $14.65 per common share versus $11.49 during 2021. In contrast, the conglomerate closed the year with the lowest level of non-performing loans in the past two years, which is the net interest margin (NIM, in English) at 3.11%. And basic capital in the range of 16%.

Tax adjustment feature

The numbers for 2022 were possible in part because of what was accomplished in the last quarter of the year. In this period, Popular has earned a net income of $257 million.

The figure included about $86 million, the result of readjustment of deferred tax assets (DTA, in English) that the corporation has for its US operations.

Alvarez explained that other unique events also affected the annual management. Among these is the sale of Popular’s stake in Evertec, a deal worth $227 million.

Alvarez indicated that the institution increased its loan portfolio in all sectors, with the exception of mortgages, which must be repeated this year, a dynamic that requires more staff and resources to strengthen the bank’s service structure.

Fine from the Federal Reserve

Alvarez, on the other hand, characterized as an unfortunate reality the fine imposed by the Federal Reserve as a result of granting six potentially fraudulent Paycheck Protection Program (PPP) loans that were granted at a branch of a People’s Bank in New York in the midst of the pandemic. The People’s Central Bank fined about $2.3 million, but did not request other measures from the institution. The six loans together totaled $1 million.

Alvarez indicated that it was the institution that notified the Federal Reserve of the failure they had discovered, and disciplinary measures were taken with the employees that caused the situation.