BPOP Q3 Deep Dive: Loan Growth and Transformation Initiatives Offset Credit Event

Puerto Rican financial institution Popular (NASDAQ:BPOP) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 11% year on year to $817.7 million. Its non-GAAP profit of $3.14 per share was 8.1% above analysts’ consensus estimates.

Is now the time to buy BPOP? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Popular’s third quarter performance aligned with Wall Street’s expectations, highlighted by strong revenue growth, expanding net interest margin, and resilient loan demand across both Puerto Rico and U.S. operations. Management attributed the results to higher average deposit balances and robust commercial and construction lending, while noting that stable customer deposits underpinned the quarter. CEO Javier Ferrer-Fernández acknowledged that credit quality metrics were impacted by two isolated commercial loans, but emphasized these were not indicative of broader issues, stating, “excluding these two relationships, credit metrics remained stable.”

Looking forward, Popular’s guidance is shaped by ongoing investments in digital transformation, disciplined expense management, and targeted loan growth. Management expects loan growth to remain solid, particularly in Puerto Rico, with CFO Jorge Garcia highlighting continued net interest income expansion and a focus on cost control. While credit trends are expected to stay stable outside of isolated cases, management remains attentive to evolving market competition and plans to further enhance online and mobile banking capabilities. Ferrer-Fernández noted, “We plan to extend these digital capabilities to more products to further improve online and mobile experiences and support future growth.”

Key Insights from Management’s Remarks

Popular’s management cited robust commercial and construction lending, effective deposit retention strategies, and digital progress as key drivers of third quarter results. Isolated credit events and strategic cost actions also played a role.

• Commercial lending momentum: Management highlighted strong loan growth in both Puerto Rico and the U.S., driven primarily by new commercial and construction lending activity. This demand reflected ongoing investment in the local economy and increased business activity.
• Deposit retention strategies: The company maintained stable customer deposit balances through focused retention initiatives despite some outflows in public deposits. Management underscored that deposit discipline remains central to funding growth and supporting net interest income.
• Digital transformation progress: Recent launches of fully online loan origination for personal and credit cards, as well as expanded digital deposit products in the U.S., contributed to improved customer engagement and operational efficiency. These initiatives are part of a broader push to modernize channels and streamline processes.
• Expense discipline and restructuring: Popular continued to target operational efficiency with actions such as exiting its U.S. residential mortgage origination business and closing underperforming branches, which management expects will help slow expense growth while enabling reinvestment in core areas.
• Credit quality isolated event: The increase in nonperforming loans and charge-offs was attributed to two specific commercial exposures rather than systemic credit deterioration, with management reiterating comfort in the broader risk profile of the loan portfolio.

Drivers of Future Performance

Popular’s outlook centers on continued loan growth, digital investments, and disciplined cost management, balanced with vigilance on credit quality and competition.

• Sustained loan growth focus: Management expects consolidated loan growth to remain in the 4% to 5% range for the year, driven by healthy demand in Puerto Rico and ongoing commercial activity. This is supported by positive employment trends and strong consumer spending in the region.
• Digital and operational investments: Ongoing investment in digital banking platforms and operational streamlining is expected to enhance customer experience and improve efficiency. Management noted that over 80 transformation projects are underway, with expected cost savings reinvested into further growth initiatives.
• Credit and competition monitoring: While management views the overall credit environment as stable, they remain watchful for idiosyncratic credit events. Competition for deposits and loans, especially from other banks expanding in Puerto Rico and U.S. markets, is being closely monitored to ensure prudent underwriting and pricing discipline.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be focused on (1) the pace of adoption and impact of new digital banking solutions and transformation projects, (2) the sustainability of loan growth and deposit retention, particularly amid competitive pressures, and (3) the resolution of isolated credit events and any resulting impact on charge-offs. Developments in expense management and additional operational efficiency initiatives will also be key areas to watch.

Popular currently trades at $115.25, in line with $115.36 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).

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