Popular (NASDAQ:BPOP) CEO Javier D. Ferrer said the Puerto Rico economy continues to show “momentum” and described a broad-based recovery that the bank expects to support loan growth and ongoing profitability initiatives. Ferrer spoke during a fireside chat in which he also addressed capital strategy, the bank’s approach to M&A, and the outlook for significant Puerto Rico government deposits.
Puerto Rico economy: “momentum” with broad-based strength
Ferrer said Puerto Rico’s economy “has not slowed down,” while acknowledging that geopolitical events can affect confidence and behavior before showing up in economic data. He pointed to low unemployment and a higher labor participation rate, which he said is now in the “low 40s” (about 44% to 45%), roughly five percentage points higher than a few years ago.
Given Popular’s footprint and long history on the island—he noted the bank will mark 133 years in October—Ferrer said the company expects to benefit from Puerto Rico’s growth. He added that Popular participates in policy discussions and maintains relationships with the Puerto Rico government and the Financial Oversight Board.
Onshoring and investment: “early innings” but tangible activity
Ferrer said the post-pandemic push for onshoring has moved from promise to results for Puerto Rico, describing the island as being “on the right side of the fence.” He highlighted activity from the island’s economic development efforts and cited “over $2.6 billion” in announced new investment last year, along with “close to 5,000” direct jobs. He said Puerto Rico has also benefited from improved relations between the current governor and the White House.
On demographics, Ferrer said outmigration appears to have leveled off, while acknowledging limitations in the timeliness and precision of available data. Anecdotally, he said he is seeing talented workers interested in returning to Puerto Rico, including for high-paying and high-tech roles such as data, analytics, cyber, and fraud. He identified housing affordability as a key constraint, noting that it is expensive to build new homes and that projects take time to deliver. He also referenced government efforts to reduce tax burdens for young professionals to encourage talent to return.
Regulation and capital: conservative posture, focus on returning excess
On regulation, Ferrer said Basel III “is still not applicable” to Popular, but emphasized that the bank takes regulatory expectations seriously and does not allow a more flexible regulatory environment to drive its strategy. He also noted that Popular’s U.S. bank is chartered by the New York Department of Financial Services and described the regulatory framework as a “pendulum” that can shift depending on Washington.
On capital, Ferrer acknowledged that investors frequently question Popular’s high capital levels. He said some view the bank as 500 to 600 basis points above where it needs to be and attributed the posture to a conservative mindset shaped by past shocks, including hurricanes, earthquakes, economic stress, and Puerto Rico’s bankruptcy process.
Ferrer said that if capital cannot be deployed constructively to generate shareholder value, it should be returned. He pointed to Popular’s share repurchase program and said the company has communicated that repurchases would be “around $150 million a quarter.” He also emphasized the importance of continuing to increase the dividend alongside sustainable profitability and earnings growth. In addition, he said the bank is considering ways to “optimize” its capital stack, including potential actions involving Tier 1 capital.
Shareholder value priorities: sustainable profitability and ROCE
Ferrer said Popular’s focus for creating shareholder value centers on stewardship of capital, rational growth, and “transformation” efforts aimed at strengthening profitability across business lines. He said the bank is emphasizing profitability “by product, by segment, by service,” along with service quality and an “excellent omnichannel experience.”
He identified return on common equity (ROCE) as the public measure Popular highlights, while noting the company also monitors ROA and ROE. Ferrer added that sustainable profitability supports not only shareholders but also employees and the communities served through Popular’s foundations in Puerto Rico and the United States.
Looking ahead, Ferrer said Popular expects a good year, including loan growth, though he noted the bank has “tempered” projections compared with the prior three to four years. He said credit “feels okay” and should remain fine absent external shocks, while noting the need to monitor factors such as energy prices that could affect small businesses.
M&A and government deposits: niche opportunities, difficult to forecast balances
On M&A, Ferrer said Popular remains open to specific types of opportunities, including FDIC-assisted transactions at the right price and portfolio acquisitions, referencing the company’s prior experience, including consolidating an auto portfolio from Wells Fargo. He said whole-bank deals would be difficult for Popular at this stage given its investment in transformation, and that any potential deal would need to be compelling, accretive, supportive of deposits, close to current operations, and culturally aligned.
Ferrer also discussed the bank’s substantial Puerto Rico government deposit relationship, calling it complex and broader than deposits alone, encompassing credit and services. He said the relationship involves more than 2,000 accounts and that government deposits currently total about $18 billion to $20 billion. However, he said Popular has been “very bad at projecting” when those balances will decline, noting that the timing depends on factors such as reconstruction spending and developments tied to the Puerto Rico Electric Power Authority (PREPA) bankruptcy process.
On PREPA, Ferrer said the message this year is: “This is the year,” adding that “the drums are beating louder” around a potential resolution, though he cautioned that the outcome remains uncertain and complex. He said any resolution must be sustainable for Puerto Rico’s economy while addressing bondholder interests.
Asked for a single takeaway for investors, Ferrer said Popular is “walking our talk,” anchored by its “fortress” position in Puerto Rico, with additional operations in the United States and investments in the Virgin Islands and the Dominican Republic. He emphasized that the bank aims to deliver sustainable profitability through transformation, defend its market amid competition, and maintain a long-term commitment to Puerto Rico.
About Popular (NASDAQ:BPOP)
Popular, Inc, headquartered in San Juan, Puerto Rico, is a financial holding company and a leading provider of banking services in the United States mainland and Puerto Rico. Through its primary subsidiaries—Banco Popular de Puerto Rico and Popular Bank—the company delivers comprehensive commercial and consumer banking solutions. It offers deposit products, lending facilities, cash management services and payment-processing solutions designed for individuals, small businesses and large corporations.
The company’s product suite encompasses checking and savings accounts, certificates of deposit, residential and commercial mortgage loans, business lines of credit and credit cards.
