Popular, Inc.

Inc. 4Q earnings call. My name is Jordan and I'll be coordinating your call today. If you're dialing in and like to register an audio question, you may do so by pressing star followed by one on your telephone keypad. I'm now going to hand over to Paul Cardillo, the investor relations officer at Popular. Paul, 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 begin, I would like to remind you that on today's call, we may make forward-looking statements regarding POPULAR, such as projections of revenue, earnings, expenses, and capital structure, as well as statements regarding POPULAR's plans and objectives. These statements 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 release and our SEC filings. You may find today's press release and our SEC 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. In 2023, we delivered solid results in a challenging environment. Our annual net income of $541 million compared to net income of $1.1 billion in 2022. Our adjusted 2023 adjusted net income was $587 million compared to adjusted net income of $808 million in 2002. The variance was mainly driven by a higher provision for loan losses and higher operating expenses. We grew our loan portfolio by $3 billion or 9.3% during the year. BPPR generated loan growth across most business segments led by commercial loans, reflecting the continued strength of the local economy and our diversified product offerings. Popular banks achieved growth in commercial and construction loans. During the fourth quarter, we increased our quarterly common stock dividend by $0.07 to $0.62 per share. Credit quality remained solid throughout 2023, as evidenced by lower non-performing loans even though our unsecured consumer portfolios did begin to normalize during the second half of the year from historically low levels. Our capital levels are strong, with year income and equity tier one ratio of 16.3%. Our tangible book value ended 2023 at $59.74, a 33% increase year over year, primarily due to lower unrealized losses on investment securities and the year's earnings. Over the past year, we have been executing on a broad-based multi-year technological and business process transformation. While many of these investments are foundational in nature and will take time to show meaningful results, we have already began to see tangible revenue uplift from several of our early stage initiatives. In Puerto Rico, these include enhanced pricing segmentation in our commercial cash management business and streamlined processing of small business loans. Our technology and business transformation continues to be a priority. We believe that there are opportunities to grow in our primary market as well as within our existing customer base, and these efforts will help us capitalize upon that opportunity. We are confident that these investments will make us a stronger, more efficient, and profitable company. We continue to target a 14% return on tangible common equity by the fourth quarter of 2025. Please turn to slide four. Adjusted net income in the fourth quarter, excluding the impact of the FDIC special assessment, totaled $140 million, flat from the last quarter. Our loan balances grew by $1 billion, with $729 million at BPPR and $287 million at Popular Bank. Our net interest margin was 3.08%, increasing by one basis point, primarily driven by higher loan balances and the repricing of loans and securities in a higher interest rate environment. This was offset by higher deposit costs. Non-interest income remained solid, increasing by $9 million. Excluding the FDIC assessment, operating expenses decreased by $6 million. Credit quality trends remain generally positive with lower MPLs once again. However, we did continue to see credit normalization in the Puerto Rico unsecured consumer segment which began in the second half of the year. We have taken actions to address these developments and are attentive to the evolving credit landscape. Deposit balances increased by approximately 300 million, primarily due to a higher level of online deposits at popular bank. The $9.54 increase in tangible book value per share in the quarter was primarily driven by a decrease in unrealized losses in our investment portfolio. Please turn to slide five. During 2023, we added 34,000 new customers in Puerto Rico and now serve more than 2 million unique customers. Utilization of digital channels among our retail customers also remains strong. Active users on our Mibanko platform exceeded 1.1 million or 54% of our customer base. In addition, we continue to capture more than 60% of our deposits through digital channels. Consumer spending remain healthy. combined credit and debit card sales fell by 1% compared to the fourth quarter of 2022, which was a historically strong quarter. Our auto loan and lease balances increased by 61 million compared to the third quarter as demand for new cars continued to be strong in Puerto Rico. Mortgage loan balances at BBBR increased by 103 million in the fourth quarter, driven primarily by home purchase activity and our strategy to retain FHA loans. The Puerto Rico economy performed well during the quarter. Business activity is solid as reflected in the 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. Passenger traffic at the San Juan International Airport increased by 18% in 2023 compared to the previous year. And both the hotel occupancy rate and the average daily rate reflected a 5 to 6% increase over 2022. There are roughly $50 billion of committed federal funds that have yet to be dispersed. The pace of disbursement of these funds has accelerated and we anticipate that these funds will support economic activity for several years. We are encouraged by the performance of the Puerto Rico economy. We remain optimistic about the future of our primary market and are well positioned to support our clients during this historic period. We are pleased with our results for the quarter and the year. particularly our strong loan growth in both Puerto Rico and the U.S., as well as the continued strength of our deposit base, which positions us well for 2024. Finally, I'd like to take this opportunity to recognize Carlos, who will retire in March after 27 years of service to Bubble R. As our CFO since 2013 and in various senior leadership positions before that, he excelled due to his strategic mindset, analytical skills, and discipline. He has been an important contributor to our growth and financial strength, and we are thankful for his leadership throughout all these years. On a more personal note, I am sincerely grateful for his support since I joined Popular and for his friendship, which began long before. Jorge Garcia, our Comptroller since 2012, has worked alongside Carlos for many years, helping to build a strong finance team. He is widely respected within the organization, and we are confident he will do a great job as our new CFO. On that note, I will now turn the call over to Carlos for more details on our financial results.