Popular, Inc. reported strong fourth quarter and full year 2025 results, with Q4 net income increasing 11% sequentially to $234 million and EPS rising to $3.53. For the full year, net income grew 36% to $833 million, driven by an 11% increase in net interest income (NII) to $2.59 billion and a 6% increase in loan balances. The company achieved a 14% Return on Tangible Common Equity (ROTCE) in Q4, exceeding its target, aided by a 10 basis point expansion in net interest margin to 3.61% and a 21% year-over-year increase in tangible book value per share to $82.65. Management highlighted robust economic conditions in Puerto Rico, including record tourism and reshoring investments, while maintaining disciplined expense control. Looking ahead to 2026, the company provided guidance for 3-4% loan growth, 5-7% NII growth, and continued capital deployment through share repurchases and potential dividend increases.
| Metric | Value | Change |
|---|---|---|
| Net Income (Q4) | $234 million | +$23 million QoQ |
| EPS (Q4) | $3.53 | +$0.38 QoQ |
| Net Interest Income (Q4) | $658 million | +$11 million QoQ |
| Net Interest Margin (Q4) | 3.61% | +10 bps QoQ |
| Tangible Book Value Per Share | $82.65 | +21% YoY |
| Return on Tangible Common Equity (Q4) | 14% | Exceeded 14% target |
| Common Equity Tier 1 Ratio | 15.7% | Strong capital levels |
| Net Charge-offs (Q4 Annualized) | 51 bps | -9 bps QoQ |
| Loan Growth (FY 2025) | $2.2 billion | +6% |
Management emphasized a robust capital deployment strategy, repurchasing approximately $148 million in Q4 and signaling a run rate of roughly $500 million annually. With a Common Equity Tier 1 (CET1) ratio of 15.7%, significantly above peers, the company is actively optimizing its capital structure. They explicitly stated intentions to pursue a dividend increase later in 2026 and continue buybacks, viewing current valuation as attractive. This signals a shift toward aggressive shareholder returns while maintaining a buffer for geographic concentration risks.
The Puerto Rico economy is identified as a key strategic tailwind, characterized by record tourism (13.6 million passengers) and significant reshoring efforts. Management cited specific investments from Eli Lilly ($1.2 billion) and Amgen ($650 million) as evidence of a manufacturing boom that supports loan growth. This economic resilience underpins their credit quality stability and provides a competitive moat for local deposit gathering and lending operations.
Popular is executing a 'transformation program' focused on digitalization and efficiency to drive operating leverage. Key initiatives include the rollout of a new commercial cash management platform, a consumer credit origination platform in Puerto Rico and the Virgin Islands, and a migration to a modern cloud ERP. These investments aim to simplify operations, improve banker productivity, and sustain the expense discipline that allowed operating expenses to decrease 4.4% quarter-over-quarter.
The company is refining its US growth strategy to prioritize profitability over volume. While loan growth guidance for 2026 is conservative at 3-4%, management clarified this reflects a strategic choice to price for relationships and avoid 'irrational' competition. They remain open to bolt-on M&A in the US to enhance niche commercial businesses, provided it meets strict criteria for core deposits and cultural fit, rather than pursuing transformative whole-bank acquisitions.
Management guided for slower loan growth of 3-4% in 2026 compared to the 6% growth achieved in 2025. They explicitly noted a 'softening on the consumer, particularly around auto,' which could signal a demand slowdown in key segments. While they attribute this to a focus on profitable pricing, the deceleration suggests that the easy growth phase in Puerto Rico may be moderating.
The unresolved bankruptcy of the Puerto Rico Electric Power Authority (PREPA) was highlighted by the CEO as a significant external risk. Management noted that the situation acts as a 'tax on economic growth' and remains a wildcard for the island's economic trajectory. Any adverse developments or delays in resolving the utility's financial situation could dampen the positive economic momentum currently supporting the bank's loan growth and credit quality.
While NII is expected to grow 5-7%, the drivers imply a reliance on deposit cost reductions and securities reinvestment rather than robust asset yield expansion. Management noted that the yield uptake from reinvesting securities will be of a 'smaller magnitude' in 2026. Additionally, competition for deposits in the US remains 'very competitive,' potentially pressuring net interest margins if the Fed cuts rates faster than anticipated or if funding costs remain sticky.
Overall: Management exhibited a high level of confidence and discipline throughout the call. They expressed satisfaction with the 'high note' end to the year and the 'momentum' carried into 2026. Their tone was assertive regarding capital allocation, specifically stating shares are attractive, and they provided specific guidance ranges, indicating visibility into their performance drivers.
Confidence: HIGH - Management provided specific quantitative guidance for 2026, reaffirmed capital return targets, and spoke with certainty about the stability of the Puerto Rico economy and the benefits of their transformation initiatives. The specificity of their NII and expense guidance, coupled with the aggressive buyback activity, underscores their confidence.
3% to 4%
5% to 7%
$160 million to $165 million
Increase ~3% (GAAP)
15% to 17%
55 to 70 basis points
Hedging & Uncertainty: Management generally used direct language regarding past performance and capital allocation ('We believe that our shares are attractive,' 'We are very comfortable with that guide'). However, they employed hedging when discussing external factors and the 2026 outlook, using phrases like 'subject to market conditions,' 'albeit at a smaller magnitude,' and 'if you can imagine.' This suggests confidence in their internal execution but caution regarding macroeconomic variables and the pace of the economic cycle.
We believe that our shares are attractive at current prices. - Javier Ferrer-Fernández, President and CEO
We are very comfortable with that 5% to 7% guide. - Jorge Garcia, CFO
There is enough uncertainty in the world, and we want to make sure that we are absorbing any ups and downs to the cycle. - Jorge Garcia, CFO
We will not, however, lose good clients to pricing deposit pricing. - Javier Ferrer-Fernández, President and CEO
We are pushing ourselves to deliver more for our clients every day. - Javier Ferrer-Fernández, President and CEO
Analyst Sentiment: Analysts were generally inquisitive and positive, focusing heavily on the sustainability of net interest income, the drivers behind the conservative loan growth guidance, and the specifics of the capital allocation strategy. Questions regarding M&A and the 'onshoring' trend in Puerto Rico were also prevalent.
Management Responses: Management was responsive and detailed, often providing granular explanations for their guidance ranges. They defended the conservative loan growth outlook by pointing to a strategic shift toward profitable relationships and specific consumer softness, while remaining firm on their capital return capabilities.
Discussion on the drivers of the 5-7% NII guidance, specifically the balance between loan growth and deposit costs.
Detailed inquiry into the 'softening' consumer demand, particularly in the auto segment, and its impact on 2026 loan growth.
Clarification on capital management strategy, specifically the use of Additional Tier 1 capital and the pace of share repurchases.
Questions regarding the Puerto Rico economy, specifically the impact of reshoring and the risk posed by the PREPA bankruptcy.
Popular, Inc. presents a compelling investment case driven by its dominant franchise in a resurging Puerto Rico economy and a disciplined capital return strategy. The bank is efficiently converting strong economic tailwinds—such as record tourism and reshoring investments—into solid financial performance, evidenced by a 14% ROTCE and expanding net interest margins. While management has provided conservative guidance for 2026, their commitment to aggressive share buybacks ($148M in Q4) and dividend increases, supported by a robust 15.7% CET1 ratio, signals confidence in future earnings power. The successful execution of efficiency initiatives and the digital transformation further supports the thesis for sustained operating leverage and shareholder value creation.
Management highlighted strong economic indicators including a stable 5.7% unemployment rate and record tourism activity. A major driver is the 'reshoring' trend, with significant capital investments announced by pharmaceutical giants like Eli Lilly and Amgen, fueling construction and commercial loan demand.
The company is benefiting from a 'steeper positive slope yield curve' and recent rate cuts which have lowered the cost of public deposits. Management expects continued margin expansion in 2026 driven by reinvestment of securities and lower deposit costs.
The pending bankruptcy of the Puerto Rico Electric Power Authority (PREPA) remains a significant concern. Management described it as a 'tax on economic growth' and a key risk factor that could impact the island's economic recovery if not resolved rationally.