Popular, Inc. (BPOP) Q4 2025 earnings review
NIM Expansion Drives Earnings Beat; One-Offs Mask Core Expense Trends
Popular, Inc. closed FY25 with accelerating momentum, delivering Q4 EPS of $3.53 (up 12% QoQ). The headline story is the breakout in Tax-Equivalent Net Interest Margin (NIM), which breached 4% for the first time in recent cycles (4.03%), driven by aggressive asset repricing and a lag in deposit costs. While Net Income surged 11% QoQ to $234M, quality was aided by significant one-offs: a $15.3M FDIC assessment reversal and a $7.7M tax benefit. Adjusting for these, core earnings growth was still positive but more modest (~6%). Credit quality stabilized sequentially, but NPLs remain elevated (+42%) versus the prior year.
🐂 Bull Case
NIM expansion is accelerating, jumping 13 bps QoQ to 4.03%. The bank is successfully recycling low-yield assets into higher-yielding Treasuries while managing deposit costs (Total deposit costs fell 11 bps QoQ to 1.68%).
BPOP repurchased $148M in stock in Q4 alone and $501.5M for the full year. Combined with a 15.7% CET1 ratio, the bank retains massive capacity for continued buybacks.
🐻 Bear Case
While NPLs stabilized sequentially ($498M vs $502M in Q3), they remain 42% higher than Q4 2024 ($351M). The Consumer portfolio NPLs are up significantly YoY (Credit Cards +$24M, Auto +$35M).
Total deposits fell $323M QoQ, driven by a $662M outflow in Puerto Rico public deposits. While likely seasonal, reliance on public funds remains a swing factor for liquidity.
⚖️ Verdict: 🟢
Bullish. The NIM expansion story is stronger than expected, and the bank is over-earning its cost of capital (ROTCE >14%). Concerns about credit normalization are valid but appear priced in given the massive capital buffer and reserve coverage.
Key Themes
NIM Expansion Acceleration
Accelerating. Management's strategy of reinvesting cash flows into higher-yielding Treasuries is paying off faster than anticipated. Tax-equivalent NIM expanded 13 bps QoQ to 4.03%. Popular U.S. segment NIM jumped 17 bps to 3.11% due to Treasury purchases and a 10 bps drop in deposit costs. This is the primary engine of earnings growth.
One-Time Benefits Mask Expense Reality
Operating expenses nominally decreased $22M QoQ to $473M. However, this includes a $15.3M reversal of FDIC special assessments. Without this one-off, expenses would be $488.5M. Additionally, a $7.7M tax benefit boosted the bottom line. Investors should normalize Q4 EPS closer to $3.25-$3.30 rather than the reported $3.53 for run-rate modeling.
Puerto Rico Private Sector Strength
Stable. While public deposits saw outflows, the private sector in Puerto Rico remains robust. Excluding public funds, BPPR deposits grew $339M. Commercial loan demand in BPPR increased $5.6M in NII QoQ. The macro backdrop in PR (employment, federal funds flow) continues to provide a floor for the bank's core franchise.
Consumer Credit Normalization
Deteriorating YoY. Consumer credit continues to normalize from pandemic lows. In BPPR, consumer NPLs are up significantly YoY (Auto NPLs $187M vs $135M in 24Q4; Credit Cards $52M vs $28M in 24Q4). While stable QoQ, the YoY trend indicates the credit cycle has turned, necessitating higher structural provisioning ($72M this quarter).
Other KPIs
Accelerating. Up $3.53 per share (+4.5%) from Q3 and up 21% YoY ($68.16 in 24Q4). This rapid accumulation of tangible equity validates the buyback strategy (repurchasing shares below TBV or at low multiples) and drives shareholder value.
Accelerating. The U.S. operation is gaining efficiency. Net Interest Income rose $6.4M QoQ to $111.6M, driven by a 27 bps jump in investment securities yields (purchasing Treasuries) and a 45 bps drop in money market costs. This segment is becoming a significant contributor to margin expansion.
Stable. Down slightly from $75.1M in Q3 but remains elevated vs $66.1M in 24Q4. The provision to NCO coverage remains healthy at ~145%.
Guidance
Management did not provide specific FY26 numerical guidance in the press release text. However, prior quarters targeted a long-term ROTCE of 14%. Popular achieved >14% ROTCE in Q4 (14.39%), suggesting they are hitting long-term targets ahead of schedule.
Key Questions
Sustainability of NIM > 4.0%
NIM expanded rapidly to 4.03% this quarter. With Fed cuts potentially on the horizon/continuing, how much of the asset repricing benefit is left, and where do you see the terminal NIM for 2026?
Expense Run-Rate Normalization
Expenses were artificially low this quarter due to the $15.3M FDIC reversal. Should we consider the $488.5M (adjusted) figure as the baseline for 26Q1, and what is the expected inflation rate on that base?
Consumer Credit Vintage Performance
Auto and Credit Card NPLs in Puerto Rico are up 40-80% YoY. Are you seeing stabilization in the 2024/2025 vintages, or should we expect provisioning to remain elevated near $70M/quarter throughout 2026?
Capital Deployment Priorities
With CET1 at 15.7% and TBV compounding at 20%+, do you plan to accelerate buybacks further, or are there inorganic opportunities (M&A) in the U.S. market being considered?