Popular, Inc. · NASDAQ:BPOP
Popular — Investor Day (December 2011)
41 slides from Popular's investor day presentation, Dec 2, 2011
Slide 1: Investor Day
Exhibit 99.1 Investor Day December 2, 2011 San Juan, Puerto Rico
Slide 2: Forward Looking Statements
Forward Looking Statements Statements contained in this presentation that are not based on current or historical fact are forward- looking in nature. Such forward-looking statements are based on current plans, estimates and expectations and are made pursuant to the Private Securities Litigation Refo
Slide 3: Meeting Agenda
Meeting Agenda • WelcomeRemarks, Corporate Overview& P.RBusiness - RichardL.Carrión,Chairman& CEO 10:00 a.m. (9:00 a.m. EST) • U.S.Business Overview- CarlosJ.Vázquez,President, U.S.Operations, EVP 10:30 a.m. (9:30 a.m. EST) • CreditRiskManagement- LidioV. Soriano,RiskManagement, EVP 10:50 a.m. (9:50
Slide 4: Corporate Overview
Corporate Overview
Slide 5: Senior Management Team
Senior Management Team Richard L. Carrión • Chairman of the Board since 1993 and CEO since 1994 • President from 1991 to January 2009 and since May 2010 • BS (Wharton School of the University of Pennsylvania), MS of information technology (M.I.T.) Jorge A.Junquera • CFO and Head of Finance Group sin
Slide 6: Senior Management Team
Senior Management Team Juan Guerrero • EVP of Financial and Insurance Services Group since 2004 • Director of Popular Securities since 1995, Popular Insurance since 2004 and Director of the Popular Family of Funds since 2001 • BS (Fairfield University), MBA (Indiana University) Gilberto Monzón • EVP
Slide 7: Where We Are Coming From
Where We Are Coming From 2005/2006 2007/2008 2009/2010 2011/2012 • Aggressive diversification • Reorganized U.S. operation • Focused on ensuring • Focused on: Strategy consisting of Puerto Rico, to exit high-risk businesses capital and BHC liquidity Puerto Rico the U.S. and the Caribbean; • Shut dow
Slide 8: Puerto Rico Business Overview
Puerto Rico Business Overview
Slide 9: P.R. Franchise Value Built Over Years: Market Leadership
P.R. Franchise Value Built Over 118 Years • Indisputable, sustained market leadership Market Share Trend (20002011) – Total Deposits (Net of Brokered) Total Loans Source: Puerto Rico Office of the Commissioner of Financial Institutions Category Market Position as of Market Share Top Competitor Q2 20
Slide 10: P.R. Franchise Value Built Over Years: Client Base
P.R. Franchise Value Built Over 118 Years • Extensive, loyal client base Client Penetration (%) 2010 2000-2010 BPPR 68 80 Credit Unions 29 60 Doral 17 40 Scotiabank 14 20 Santander 14 0 FirstBank 13 Percentage of interviewees who state they are clients of each institution. Source: Inmark/Gaither Int
Slide 11: Puerto Rico Business – Financial Overview
PuertoRicoBusiness – FinancialOverview $ in millions (unaudited) 2008 2009 2010 Q1 11 Q2 11 Q3 11 Net Interest Income $959 $867 $1,096 $295 $325 $321 Non Interest Income 532 667 448 122 114 118 Gross Revenues 1,491 1,534 1,544 417 439 439 Provision (BPPR) (519) (623) (610) (51) (71) (131) Provision
Slide 12: P.R. Banking Sector Has Been Contracting
P.R. Banking Sector Has Been Contracting • Contraction in the market as a result of economic recession • High loan to deposit ratio • Reliance on brokered deposits • Further consolidation likely *Source: Puerto Rico Planning Board / Fiscal Years 11
Slide 13: Westernbank Acquisition
Westernbank Acquisition • Vital strategic transaction that further solidified our leadership position amid a contracting market • Largest FDIC-assisted transaction in 2010 in terms of assets • Required important actions Common equity raise of $1.15 billion Sale of 51% of EVERTEC • Execution highligh
Slide 14: Puerto Rico Business – Moving Forward
PuertoRicoBusiness – MovingForward Actions Taken Moving Forward • Closed consumer-finance subsidiary • Continue to pursue sales of Credit Risk • Strengthened collection areas loans held for sale Management • Emphasized loss-mitigation efforts • Emphasize resolution of large • Sold $128 million (book
Slide 15: U.S. Business Overview
U.S. Business Overview
Slide 16: Popular's U.S. Operations Have Changed Dramatically Since 2008
Popular’s U.S. Operations Have Changed Dramatically Since 2008 Operation was repositioned from a unit-based national lender to a footprint-based relationship community bank ¹ Total Loans includes held-for-sale loans 15
Slide 17: Popular's U.S. Operations Have Changed Dramatically Since 2008
Popular’s U.S. Operations Have Changed Dramatically Since 2008 Theloanportfoliocontinuesto evolve,reflectingthe strategyshift U.S. Business - Loans by Category 2008-2011 ($ in millions) 2008 - 2008 2009 2010 9/30/11 9/30/11 Other Loans Held for Sale $2.7 $1.8 $1.7 $3.2 $0.5 Commercial Real Estate 2,
Slide 18: Popular Community Bank / BPNA – Overview
PopularCommunityBank(PCB)/ BPNA– Overview Regional Retail Breakdown $ in millions 9/30/11 CA IL NY CFL SFL Total Total Deposits $1,284.2 $792.9 $2,208.0 $235.7 $842.9 $5,363.7 ¹ No. of Branches 24 12 39 9 11 95 Financial Performance $ in millions ² 2008 2009 2010 9/30/11 YTD Pre Provision Revenue $4
Slide 19: PCB/BPNA Credit Trends Have Driven Changes in Financial Performance
PCB/BPNA Credit Trends Have Driven The Changes in Financial Performance Credit Metrics U.S. • Net charge offs and non-performing loans peaked in 2009; have since decreased and should continue to improve • Non-performing loans as a percentage of total portfolio have declined despite a shrinking loan
Slide 20: U.S. Business – Moving Forward
U.S. Business – MovingForward • Solidify trend of improving credit quality Continue roll off or disposition of discontinued portfolios Actively and aggressively manage existing classified portfolio New asset growth in selected categories • Enhance community banking strategy and profitability Improve
Slide 21: Risk Management
Risk Management
Slide 22: Risk Model Overview
Risk Model Overview • Board committee oversees risk program Governance • Risksarejointly managedby businessunits andcentralizedrisk group • Centralized risk group is responsible for assessing and reporting risk positions • Management committees provide direct oversight • Simple community banking bus
Slide 23: Credit Risk Management
Credit Risk Management • Management’s top policy-making body Credit Strategy • Reviews the adequacy of the allowance for loan losses, establishes credit Committee exposure reporting standards and monitors asset quality • Independentof the lendingfunction– identifies,measuresandcontrolscreditrisk Cre
Slide 24: Loan Portfolio Detail
Loan Portfolio Detail • Diversified across two regions: P.R. –76% U.S. –24% Loan PortfolioQ3 - 2011 % of • There are no significant borrower or industry concentrations $ in millions PR US Total Total Loans Held to Maturity: • Top 20 non-covered relationships are only 4% of Construction $ 164 $ 194 $
Slide 25: Credit Summary
Credit Summary Credit quality information excludes covered assets • NPAshavedecreasedsinceQ111 principallydriven by the saleof non-performingloans • NCOshave remained relatively flat, although experiencing variability within the portfolios • Provisionfor loanlosseshasincreasedsignificantlysinceQ111
Slide 26: Allowance for Loan and Lease Losses (ALLL)
Allowance for Loan and Lease Losses (ALLL) GeneralReserve-ASC450(FAS5) + SpecificReserve-ASC310(FAS114) = TotalALLL • Generalreserve- Basedon historicallossesadjustedfor arecenttrend factor + Methodology environmental factor. • Specificreserve- Attributedto loansdeemedimpaired(mostlycommercialloanso
Slide 27: NPL Coverage Ratio & Moving Forward
NPL Coverage Ratio & Moving Forward ALLL and NPL coverage ratio remain adequate NPLs subject to specific impairment analysis (49%) Asof September30, 2011 - $ in thousands • 49% of NPLs subject to specific analysis NPLs $843,031 Prompt charge-off of impaired portion of - Mortgage -$205,758 (2% Lifeti
Slide 28: Puerto Rico Mortgage Business
Puerto Rico Mortgage Business
Slide 29: P.R. Mortgage Business Continues to Increase Market Share
P.R. Mortgage Business Continues to Increase Market Share Popular has a strong, 100% Total Originations (in millions $) 400 seasoned team and most 327 extensive origination 80% 277 300 60% 77% network 60% 50% 65% 67% 55% 60% New Money 200 • Mortgage originations during 40% PurchasedMix (%) 2011 have
Slide 30: Mortgage Portfolio Overview
Mortgage Portfolio Overview P.R. Mortgage Portfolios As of Sept. 30, 2011 (1) Average Loan Uninsured Uninsured Book Value % # of Loans Balance 90+ DPD 90+ DPD (in millions) Insured(2) (in thousands) (in millions) (%) Regular portfolio $4,189.4 7.4% $116.4 36,000 $340.6 8.1% Repurchased portfolio 443
Slide 31: Total Delinquent Balances Are Decreasing in Regular & Recourse Portfolios
Total Delinquent Balances are Decreasing in Both Regular & Recourse Portfolios. However, the 24+ MPD Bucket Has Been Slower to Stabilize Uninsured 90+ DPD $ Monthly Evolution Uninsured 90+ DPD $ Monthly Evolution Regular portfolio(1) Recourse portfolio + total repurchases • Stabilizationin delinquen
Slide 32: Penetration of Loss Mitigation in 90+ DPD Buckets
Penetration of Loss Mitigation (LM) in 90+ DPD buckets has been increasing, but opportunity to impact more cases is still high 1 % of Total Mortgage Owned 90+ DPD Dollars (as of September 30, 2011) • Active cases in LM have 100% increased rapidly during 2011, from 19% of total 90+ DPD 28.1% balance
Slide 33: Credit Losses Increased from 2008 to 2010 and Stabilized in 2011
Credit Losses Increased from 2008 to 2010 and Stabilized in 2011 HistoricalPuertoRicoSegmentMortgageCreditLosses 2006- 2011 • Mortgage net losses have historically stayed at very low levels • Despite increase in NCOs from 2008 to 2010, losses remain low (<1% of total portfolio) • Credit losses have
Slide 34: P.R. Mortgage Business Moving Forward
P.R. Mortgage Business Moving – Forward • Continue to maintain or grow market share under expected favorable conditions in 2012 Continue capitalizing on broad package of government incentives, which have been extended until December 2012 with some minor modifications Combine extensive distribution n
Slide 35: Earnings Potential
Earnings Potential
Slide 36: Current Situation: Driving forward against economic headwind
Current Situation: Driving forward against economic headwind • The company reported net income of $27.5 million in Q3 11 • Tepid results show that in spite of strong and consistent top line revenues, high credit costs are the main factor preventing Popular from reaching its profitability potential •
Slide 37: Potential Normalized Net Income Before Revenue Enhancing Opportunities
Potential Normalized Net Income Before – Revenue Enhancing Opportunities Annualized Normalized Q3 2011 Net Interest Income $ 1,480 $ 1,400 Non-int Income 490 500 Top Line Revenue 1,970 1,900 Expenses (1,130) (1,100) Pre-provision Net Revenue 840 800 Provision (705) (305) Pretax Income 135 495 Tax (2
Slide 38: Further Opportunities to Enhance Net Income
Further Opportunities to Enhance Net Income As economic conditions and the regulatory environment allow, we will take advantage of opportunities as they arise • Dominant franchise in P.R. is capable of ramping up profitability as the economy improves • Lower expenses from the unwinding of the credit
Slide 39: Strategy Moving Forward
POPULAR. Strategy Moving Forward
Slide 40: Moving Forward
Moving Forward Strategy Puerto Rico BPNA • Improve credit-risk profile • Continue implementation of • Expand efficiency efforts community banking strategy • Add low-risk assets to existing • Keep focus on asset quality and infrastructure efficiency Challenges • Pace of economic recovery in P.R. • Ch
Slide 41: Investor Day
Investor Day December 2, 2011 San Juan, Puerto Rico