Popular, Inc.

Hello and welcome to the Popular Inc Q4 2021 earnings call. My name is Emily and I'll be coordinating the call today. During the presentation, you will have the opportunity to ask a question by pressing start followed by one on your telephone keypads. I will now hand the call over to our host, Paul Cardio, Investor Relations Officer at Popular Inc. Please go ahead.

Good morning and thank you for joining us. With us on the call today is our CEO, Ignacio Alvarez, our COO, Javier Ferrer, our CFO, Carlos Vasquez, and our CRO, Lidio Soriano. They will review our results for the full year and fourth quarter and then answer your questions. Other members of our management team will also be available during the Q&A session. Before we start, I would like to remind you that on today's call, we may make forward-looking statements that are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these forward-looking statements are set forth within today's earnings press release and are detailed in our SEC filings. You may find today's press release and our SEC filings on our web page at popular.com. I will now turn the call over to our CEO, Ignacio Alvarez.

Good morning, and thank you for joining the call. Before I begin, I would like to acknowledge our recently appointed Chief Operating Officer, Javier Pereira. Javier joined Popular as Chief Legal Officer in 2014 and has made important contributions to our strategic initiatives these past years. As CEO, he will continue to provide strategic and operational guidance to our senior management team. Javier passes the legal baton to Jose Coleman, who has assumed the position of Chief Legal Officer. Jose has been with Popular since 2017. We are confident that each of these appointments will strengthen our senior management team. Today's results reflect another solid quarter and an outstanding year in which we achieved record earnings. Our results reflect the continued recovery in economic activity, our diversified sources of revenue, and prudent risk management. I am very pleased to report that in January, we announced a series of planned capital actions that we intend to execute this year. These actions include an increase in the company's quarterly common stock dividend of 22 percent to 55 cents per share beginning in the second quarter and a common stock repurchase program of up to $500 million. Additionally, we completed our 2021 capital plan in November with a redemption of $187 million of our 6.7 percent trust preferred securities. These actions evidence the strength of our capital position, which allows us to return capital to our shareholders while we continue to invest in our franchise. Please turn to slide three. Our annual net income of $935 million reflects an increase of $428 million above our 2020 annual net income of $507 million. The increase was largely driven by lower provision expense, higher fees, and higher net interest income, and was partially offset by higher expenses. 2021 results also benefited from strong deposit growth and a higher level of earning assets in both Puerto Rico and the U.S. Credit quality continued to improve throughout 2021. NPL decreased by 190 million, or 26 percent, and net charge-offs were seven basis points in 2021, compared to 66 basis points in the prior year. We are pleased with how our portfolios have performed, particularly with net charge-offs below 10 basis points for the year. Our capital levels are strong, with a year-end common equity tier one ratio of 17.5 percent. Our tangible book value ended 2021 at $65.39, a 4 percent increase year over year. Please turn to slide four. Our quarterly net income of $206 million was $42 million lower than the third quarter and $30 million higher than the same quarter of 2020. The sequential variance was driven by a lower benefit in the provision for credit losses, higher expenses, and lower fee income, partially offset by higher net interest income. Loan growth was solid in the quarter, particularly at Popular Bank, which saw commercial loans increase by 12 percent. Our margins continue to be impacted by the low rate environment and our asset mix. However, we are encouraged with the margin expansion in the U.S. business. Credit quality trends continue to be favorable in the period with lower MPLs and net recoveries in charge-offs. Please turn to slide five. Our customer base in Puerto Rico grew by 43,000 in 2021, of which 1,800 was in the fourth quarter to reach nearly 1.95 million unique customers. Adoption of digital channels among our retail customers continued to be strong. Active users on the Banco platform exceed 1.1 million and have grown by 3 percent since December 2020 and by 20 percent since December 2019. We captured two-thirds of our deposits during the period through digital channels. This trend remains significantly higher than pre-pandemic levels. The dollar value of credit and debit card sales for our customers have continued to trend higher. increasing by 7 percent compared to the same quarter a year ago and by 25 percent in 2021 as compared to 2020. Auto loan and lease originations at BPPR have remained very strong. While they decreased compared to the fourth quarter of 2020, they were 23 percent higher year-over-year in 2021. The housing market also continues to be robust. The dollar value of mortgage originations at BPPR decreased by 11% sequentially in the fourth quarter, but the four-year originations increased by 28% as compared to 2020. Please turn to slide six for an update on the current macro environment in Puerto Rico. In the fourth quarter, the economy performed well as business trends and customer activity remained solid. U-auto and used auto sales reflect strong consumer demand. For the year, 129,000 new units were sold compared to 95,000 units in 2020, and it is the highest annual level of reported sales since 2005. The Puerto Rico Economic Activity Index, which includes total employment, cement sales, electricity generation, and gasoline sales, has been improving, and as of November 2021, it has returned to pre-pandemic levels. Employment levels have also continued to improve. According to a recent study by the Federal Reserve Bank in New York, employment levels in Puerto Rico have recovered more quickly than in many other jurisdictions and have now surpassed pre-pandemic levels. Demand sales have remained strong. In 2021, sales were 13 percent higher compared to 2020. Airport traffic has also continued to improve. Passenger volumes doubled in 2021 compared to last year and increased by 3% compared to 2019, which itself was a strong year. Activity levels in the tourist and hospitality sector have also been a source of strength for the local economy in 2021. While the recent surge in COVID cases may impact the industry in the near term, Puerto Rico continues to be a popular destination for mainland residents. The recent court approval of the Plan of Adjustment should be an important catalyst for Puerto Rico's fiscal and economic recovery. The plan eliminates uncertainty and provides necessary clarity to confidently plan investments toward Puerto Rico's sustainable growth. A significant amount of time and effort has been invested to get us to this point, and we look forward to refocusing these resources on the island's long-term economic development. We are very pleased with our results for the fourth quarter. We continue to be optimistic about the prospects for the future, yet we'll remain attentive to how the evolving health situation may impact the economy. And I'll turn the call over to Carlos for more details on our financial results.