Popular, Inc. · NASDAQ:BPOP
Popular — Investor Day (March 2013)
41 slides from Popular's investor day presentation, Mar 1, 2013
Slide 1: Investor Day
Exhibit 99.1 INVESTOR DAY March 1, 2013 1
Slide 2: Forward Looking Statements
Forward Looking Statements The information contained in this presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations and involve risks and uncertaintie
Slide 3: Meeting Agenda
Meeting Agenda • Welcome Remarks and Overview Richard L. Carrión, Chairman & CEO 10:00 a.m. (9:00 EST) • Puerto Rico Commercial Lending Business 10:15 a.m. (9:15 EST) Eli Sepúlveda, EVP, Puerto Rico Commercial Credit Group • Puerto Rico Consumer Lending Business 10:30 a.m. (9:30 EST) Gilberto Monzón
Slide 4: Overview
Overview 4
Slide 5: Investment Overview
Investment Overview • Unique franchise in Puerto Rico supports strong, stable revenue generating capacity • Popular executing actions to drive shareholder value creation – Stronger credit metrics • Improving credit metrics plus significant NPA sale announced today will drive these ratios closer to n
Slide 6: Popular, Inc. Profile
Popular, Inc. Profile th • 36 largestbankin the U.S.with $36.5billionin assets Overview • Largest bank in Puerto Rico; founded in 1893 • 2012 net income of $245.3 million • $27.6 billion in assets Banco Popular • 2012 net income of $290.8 million de Puerto Rico • No. 1 market share for loans ($19.3B
Slide 7: Strong Revenue-Generation Capacity
STRONG REVENUE-GENERATION CAPACITY 7
Slide 8: Puerto Rico Franchise Produces Strong Revenues vs US Peers
Puerto Rico Franchise Produces Strong Revenues vs US Peers Pre Provision Net Revenue (PPNR) / Average Assets (%) On average, BPPR has ranked in top 10 among peers since 2010 * Excludes $27M pre -tax HFS BPPR $10bn -$50bn asset U.S. bank median loan valuation adjustment and $25M debt prepayment expen
Slide 9: Bulk Sale of NPAs
BULK SALE OF NPAS 9
Slide 10: NPA Sale Overview
NPA Sale Overview • Pricing: – Purchase price: $347M (34% of UPB) – Book Value of assets sold: $568M – Popular will receive $112M in cash at closing • Deal structure: – Sale includes $447 million in commercial and construction NPLs and $121 million in residential and commercial OREOs – NPA sale to a
Slide 11: Bulk Sale of NPAs
Bulk Sale of NPAs By selling $568 million in NPAs, Popular will substantially derisk its balance sheet and improve future profitability • Significant reduction in NPAs: – Pro-forma NPAs/Total Assets at Dec. 31 decline from 5.48% to 3.95% – Sale focused on NPAs with highest loss severity: PR commerci
Slide 12: Puerto Rico Commercial Business
PUERTO RICO COMMERCIAL BUSINESS 12
Slide 13: Popular is the Leading Commercial Bank in PR
Popular is the Leading Commercial Bank in PR • Our size and capabilities drive strong client KeyBusiness Indicators relationships across various sectors Avg. Deposits $5.6B – 40%+ market share in commercial loans Non-interest – Over 72,000 commercial clients $2.6B bearing – Our clients are the major
Slide 14: Positive Prospects in Middle Market & Corporate
Positive Prospects in Middle Market & Corporate • Corporate sector activity increasing, Non-Covered Commercial Portfolio by Segment¹ with important transactions in pipeline – Strong, large companies looking for Balance ($) % of Total opportunities to grow – M&A activity increasing among clients Smal
Slide 15: Well Diversified Non-Covered Commercial Portfolio
Well Diversified Non-Covered Commercial Portfolio 1 Non-Covered Portfolio by % $ Loan Type • 73% of commercial portfolio is C&I or Commercial & Industrial 39% $2.4B owner-occupied CRE CRE Owner Occupied 34% $2.0B • Portfolio well diversified across sectors with CRE Non-Owner 23% $1.3B no industry co
Slide 16: Public Sector Exposure Benefits from Multiple Repayment Sources
Public Sector Exposure Benefits from Multiple Repayment Sources $ in millions Outstanding Unused Amount Total Credit Facilities 688.6 95.4 784.0 Uncommitted Lines of Credit 60.5 14.5 75.0 Total Credit Facilities 749.1 109.9 859.0 Municipal Bonds 217.2 - 217.2 Total 1 $966.3 $109.9 $1,076.2 Figures a
Slide 17: Puerto Rico Consumer Business
PUERTO RICO CONSUMER BUSINESS 17
Slide 18: Leading Consumer Bank in Puerto Rico
Leading Consumer Bank in Puerto Rico Non-covered Market Share – Market Consumer Effective Yield Main Main Strategies Share(1) $ in millions Loans Competitor(1) • Maintain market leadership and Mortgage $4,949 5.29% 30% 16% redesign key mortgage servicing processes • Restructure/refocus business to A
Slide 19: Leading Mortgage Originator and Servicer in P.R.
Leading Mortgage Originator and Servicer in P.R. Total Puerto Rico Mortgage Industry Market Share 2012 originations: Total Originations ($ in millions) • Increased 21% vs. Other Mortgage Institutions BPPR 2011 • Originations mix: • 77% GSEs and government • 23% non- conforming • 60% refinance, 357 3
Slide 20: Puerto Rico Mortgage Portfolio Overview
Puerto Rico Mortgage Portfolio Overview Average Loan Uninsured Uninsured Book Value % (in millions) Balance # of Loans 90+ DPD 90+ DPD Insured (1) (in thousands) (in millions) (%) Regular portfolio $4,594.9 12.5% $111.0 41,397 $304.5 6.6% Recourse 354.0 - 126.3 2,804 115.5 32.6% repurchased portfoli
Slide 21: Delinquent Balances Continue to Decrease
Delinquent Balances Continue to Decrease Uninsured 90+ DPD $ Monthly Evolution Uninsured 90+ DPD $ Monthly Evolution Regular portfolio(1) Recourse Portfolio + Uninsured Repurchases Portfolio Total 90+ DPD Total 90+ DPD 6-23 MPD 6-23 MPD 3-5 MPD 24+MPD 3-5 MPD 24+MPD Decrease in delinquency levels ha
Slide 22: 90+DPD and Loss Mitigation Alternatives
90+DPD and Loss Mitigation Alternatives 1 %of TotalMortgageOwned90+DPDDollars (asof December31,2012) 100% 21% 26.5% • Popular provided Loss Mitigation alternatives for potential restructurings to 29% over 300customers per month, to help individuals and families preserve their 28% credit and avoid ho
Slide 23: Growing Consumer Business While Improving Credit Quality: Portfolio Evolution
Growing Consumer Business While Improving Credit Quality Portfolio Evolution New Volume ($ in millions) Ending Portfolio ($ in million) Credit Card Credit Card (1) Originations Spending portfolio 140 Auto 650 1,300 acquisition of approximately 130 600 1,250 $130MM Credit Cards 1,200 120 550 Credit C
Slide 24: Growing Consumer Business While Improving Credit Quality: Credit Quality
Growing Consumer Business While Improving Credit Quality Credit Quality 1 Consumer Credit 30+ DPD % Monthly Net Charge Offs Monthly Evolution Evolution1 ($ in millions) Recovery from sales of previously charged-off loans Auto Credit Cards Credit Cards Personal Loans Personal Loans Auto • Delinquency
Slide 25: Accelerating Progress in U.S.
Accelerating Progress in U.S. 25
Slide 26: Continuing to Execute Plan to Improve Profitability
Continuing to Execute Plan to Improve Profitability • We continue to execute our plan to increase optionality for U.S. operations via improved performance • Focused on: • Improving profitability • Lowering NPLs • Reducing net charge-offs • Protecting margin and maintaining expense discipline ($ in m
Slide 27: Prepared to Move Decisively to Create Value
Prepared to Move Decisively to Create Value • Along with continuing to reduce NPLs and exiting TARP in the most shareholder-friendly fashion, improving the return on capital deployed at PCB is one of Popular’s highest priorities • We are considering all options to further enhance returns – Organic e
Slide 28: Risk Management
RISK MANAGEMENT 28
Slide 29: Strong Risk Management Framework
Strong Risk Management Framework Risk Management Committee (RMC) Responsible for overseeing and approving the Corporation’s risk management program Popular has implemented an Enterprise Risk Management (ERM) function within the Risk Management Group (RMG) to assist Risk Management Committee Manageme
Slide 30: Risk Management 2012 Main Initiatives
Risk Management 2012 Main Initiatives • Dodd Frank • Dodd Frank • Dodd Frank • Basel III • CFPB • CFPB • Basel III • Basel III • Annual Stress Test • Semi-annual Stress Test • Living Wills Actions taken to strengthen risk management functions Credit Administration Remediation Plan Completed the acti
Slide 31: Consistent Progress on Our No. 1 Objective: Reducing NPLs
Consistent Progress on Our No. 1 Objective: Reducing NPLs Credit Quality Metrics • Resolutions, sales, loss mitigation and stabilizing conditions have reduced NPAs ($ in millions) 2010 2011 2012 by $617 million or 26% over last two Total NPLs held-in- years portfolio $1,571.9 $1,737.9 $1,425.1 NPLs
Slide 32: Transaction Will Substantially Reduce NPAs
Transaction Will Substantially Reduce NPAs 12/31/2012 ($in millions) 12/31/2012 Change % Change Pro Forma Commercial and construction $708.6 $328.0 (380.6) (54%) NPLs held in portfolio* Other NPLs held in portfolio* 716.6 716.6 -0- -0- NPLs held for sale* 96.3 30.2 (66.1) (69%) Other Real Estate Own
Slide 33: Credit Quality Post-NPA Sale
Credit Quality Post-NPA Sale • Remaining NPLs are mostly in PR mortgage and US commercial portfolios Remaining Non-Performing Loans HIP (in millions) • In PR, mortgage OREOs had a realization rate at disposition of 83% in Q4 PR US • In US, NPLs and NPL inflows show clear Commercial $148 $142 downwar
Slide 34: Capital & Normalized Earnings
CAPITAL & NORMALIZED EARNINGS 34
Slide 35: Capital Remains Strong Post-NPA Sale
Capital Remains Strong Post-NPA Sale • Expect higher earnings post sale to help recoup approximate $250M capital reduction • $1.7 billion in excesspro forma CET1 capital over the Basel I “Well Capitalized” threshold,expected to remain above threshold under proposed Basel III rules • Continued improv
Slide 36: Potential Normalized Net Income of $370M & 12% ROCET1
Potential Normalized Net Income of $370M & 12% ROCET1 Estimated Q42012N Normalized Annualized Earnings Variances Leading to Normalized Earnings ($ in million) 81.4 Net Interest Income 1,401.6 1,333.8 (1) $370.2 Non-Int. Income 405.6 498.0 81.8 Top-line Revenues 1,807.2 1,831.8 (45.8) Expenses 1,186.
Slide 37: Concluding Remarks
CONCLUDING REMARKS 37
Slide 38: Conclusions
Conclusions • Unique franchise in Puerto Rico supports strong, stable revenue generating capacity • Popular executing actions to drive shareholder value creation – Stronger credit metrics • Improving credit metrics plus significant NPA sale announced today will drive these ratios closer to normalize
Slide 39: Appendix
Appendix 39
Slide 40: Appendix A – GAAP to Non-GAAP Reconciliation
Appendix A – GAAP to Non-GAAP Reconciliation PPNR/ AverageAssetCalculation– BPPR ($ in millions) 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 Net income (loss) $20 $16 $4 ($15) ($5) $127 $40 $18 Income tax (benefit) expense (3) 10 7 (12) 142 (42) 2 (2) Provision for loan losses (PLL) 108
Slide 41: Appendix B – Normalized Earnings Assumptions
Appendix B – Normalized Earnings Assumptions Assumptions: Current interest rate environment is assumed to prevail through normalized earnings period Increase in earning assets is offset by lower net interest margin as Covered Loan Portfolio runoff is replaced with lower yielding assets Non interest