Popular, Inc.

Hey everyone and welcome to today's conference call titled Popular Inc Q2 2023 Earnings Call. My name is Ellen and I'll be coordinating the call for today. During the presentation, if you would like to ask a question, please press star followed by one on your telephone keypad to join the question queue. I will now hand over to Paul Cardillo, Investor Relations Officer to begin. Paul, please go ahead whenever you're ready.

Good morning and thank you for joining us. With us on the call today is our CEO Ignacio Alvarez. our CFO, Carlos Vasquez, and our CRO, Lidio Soriano. They will review our results for the second quarter and then answer your questions. Other members of our management team will also be available during the Q&A session. Before we begin, 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 RCC filings on our webpage at popular.com. I will now turn the call over to our CEO, Ignacio Alvarez.

Good morning, and thank you for joining the call. The second quarter was another strong one in which we achieved net income of $151 million, $8 million lower than the first quarter results of $159 million. Net interest income and non-interest income remained strong. The decrease in net income was driven by high operating expenses, offset in part by a lower provision for credit losses. We grew loan balances by $693 million during the quarter. Banco Popular generated loan growth across all segments, while Popular Bank achieved growth in commercial and construction loans, offset in part by runoff in the mortgage and consumer portfolios. Year to date, loan balances have grown by more than approximately $953 million. Our net interest margin decreased by eight basis points to 3.14% in the quarter, primarily as a result of a 29 basis point increase in deposit costs. This was partially offset by higher loan balances and the repricing of adjustable rate loans in a higher interest rate environment, as well as higher balance of money market investments driven by a strong deposit growth. Non-interest income continued to improve, excluding the $7 million insurance claim reimbursement recorded in the first quarter, fee income was $5 million higher. Revenues related to customer transaction activity were particularly strong, and we also began to see some early results from our various transformation initiatives. Operating expenses increased by $20 million as we continued to strategically invest in our people in areas such as regulatory compliance and technology and projects related to our transformation. Credit quality trends remain positive. NPLs once again decreased in the period, and net charge-offs remain well below pre-pandemic levels. We maintain robust liquidity anchored by our deposit franchise and our high levels of cash reserves and unplugged securities. Overall, deposits were up $3.1 billion and a quarter, and liquidity sources increased by $1.9 billion. We have a well-diversified deposit franchise in Puerto Rico with an average balance of less than $10,000 per retail account. Our total consolidated borrowings remained flat during the quarter. Regulatory capital levels remained strong. Our common equity Tier 1 ratio in the second quarter was 16.9%. Additionally, tangible book value per share ended the quarter at $51.37, an increase of $1.22 per share. Earlier this month, we announced that August 14th, we will redeem at par all outstanding 300 million aggregate principal amount of our senior notes that mature in September of 2023. Please turn to slide four. Our customer base in Puerto Rico grew by approximately 9,500 during the quarter, reaching nearly 2 billion unique customers. Adoption of digital channels among our retail customers remains strong. Active users on our Mibanko platform exceeded 1.1 million, or 56% of our customer base. In addition, we continue to capture more than 60% of our deposits through digital channels. This trend remains significantly higher than pre-pandemic levels, demonstrating our customers' adoption of this technology. In the second quarter, consumer spending remained healthy, with combined credit and debit card sales up 3%, compared to the second quarter of 2022. Our auto and lease originations increased by 29% compared to the first quarter, as demand for cars has continued to be strong in Puerto Rico. Mortgage production in Puerto Rico appears to have stabilized in the second quarter. The dollar value of mortgage originations at Banco Popular increased by 20% compared to the second quarter of last year, driven primarily by home purchase activity. The Puerto Rico economy performed well during the second quarter. Business activity is solid and remains in good shape as reflected in the continued positive trends in total employment and other economic data. The tourism and hospitality sector continues to be a source of strength for the local economy. Year to date San Juan airport has seen record levels of passenger traffic. Hotel demand has also been very strong. Year-to-date occupancy, average daily rates, and REVPAR are all at the highest level seen in nearly a decade. There are still approximately $45 billion of hurricane disaster recovery funds yet to be dispersed. We expect that these funds will support economic activity in many sectors in the coming years. In fact, we are beginning to see these funds being dispersed into local construction projects. As this infrastructure investment in the economy expands, We are well positioned to serve the needs of our customers and benefit from such activity. In short, we are pleased with our results for the quarter, particularly our strong loan growth in both Puerto Rico and in the U.S., as well as the continued strength of our deposit base, liquidity, and credit quality. We're encouraged by the resiliency of the U.S. economy and strong economic activity in Puerto Rico. We remain optimistic about the future of Puerto Rico, our primary market. and our ability to manage and serve the needs of our growing customer base. I now turn the call over to Carlos for more details on our financial results.