BPOP Posts Solid Earnings on EVERTEC Sale - Analyst Blog
January 27 2014 - 1:44PM
Zacks
Shares of Popular, Inc. (BPOP) rallied nearly
2% since it reported fourth-quarter 2013 results on Jan 23.
Earnings per share came in at 72 cents, beating the Zacks Consensus
Estimate of 67 cents. However, this came in below the prior-year
quarter figure of 81 cents.
For full-year 2013, Popular’s earnings per share of $5.78
significantly outpaced the Zacks Consensus Estimate of $2.69.
Further, it came in way above of the prior-year figure of
$2.35.
Popular’s results primarily benefited from top-line growth,
partially offset by higher expenses. Also, capital ratios and
profitability ratios improved in the quarter. Further, offloading
the majority stake in EVERTEC aided the favorable results.
The company’s adjusted net income stood at $74.6 million in the
reported quarter. Considering an after-tax gain of $99.4 million on
the sale of EVERTEC shares, net income was $163.0 million
reflecting a massive rise of 94.2% from the year-ago quarter.
Also, for 2013, it came in at $599.3 million, surging ahead of the
prior-year figure of $245.3 million.
Performance in Detail
The company’s total revenue came in at $640.3 million, up 8.7% from
the prior-year quarter figure. Further, revenues surpassed the
Zacks Consensus Estimate of $472.0 million.
For 2013, total revenue stood at $2.6 billion, up 11.9% year over
year. Further it beat the Zacks Consensus Estimate by 37.2%
Net interest income came in at $376.3 million, up 7.1% year over
year. The rise was primarily attributable to higher interest income
on loans and lower interest expenses. Net interest margin (NIM) was
up 32 basis points (bps) year over year to 4.74%
Non-interest income climbed 27.1% year over year to $191.2 million.
The rise was mainly driven by higher operating income, partially
offset by lower mortgage banking revenues and deposit service
charge revenues.
Total operating expenses rose 2.4 % year over year to $322.7
million. This was primarily attributable to higher personnel costs,
FDIC deposit insurance costs and equipment expenses.
As of Dec 31, 2013, total deposits dipped 1.1% year over year to
$26.7 billion, while net loans remained almost flat at $24.0
billion
Credit Quality
Popular reported a partial improvement in its credit quality.
Provision for credit losses declined 22.1% year over to $56.6
million, while annualized net charge-offs to average loans
held-in-portfolio declined 87 bps to 0.97%
However, allowance for loan losses to non-performing loans,
excluding loans held-for-sale significantly increased to 103.8%
from the prior-year figure of 48.7%.
Capital Position
Popular’s capital and profitability ratios improved in the reported
quarter. Tier I risk-based capital and total risk-based
capital stood at 19.41% and 20.69%, respectively, compared with
17.35% and 18.63% at the end of the prior-year quarter.
Return on average assets increased to 1.79% from the prior-year
figure of 0.92%. Return on average common equity significantly rose
to 14.59% from the prior-year figure of 8.50%.
Stake Sale
On Dec 13, 2013, Popular completed the sale of 5.8 million shares
of EVERTEC to Apollo Global Management, LLC (APO)
and some officers of EVERTEC. The company received around $117.9
million in cash proceeds while retaining 14.9% controlling interest
in EVERTEC.
Our Take
Though Popular encountered tough times in 2013, we expect the
company to benefit in the long run owing to its strong balance
sheet, organic growth strategies and efficient capital deployment
activities.
However, despite top-line growth in the reported quarter, we remain
cautious owing to the prevalent stringent regulatory landscape, low
interest rate environment and a weak mortgage market.
Popular currently holds a Zacks Rank #5 (Strong Sell).
Among other banks, F.N.B. Corp.’s (FNB)
fourth-quarter operating earnings came in at 21 cents per share,
which was in line with the Zacks Consensus Estimate, while
BancorpSouth, Inc.’s (BXS) fourth-quarter 2013
earnings per share of 29 cents outpaced the Zacks Consensus
Estimate of 18 cents.
APOLLO GLOBAL-A (APO): Free Stock Analysis Report
POPULAR INC (BPOP): Free Stock Analysis Report
BANCORPSOUTH (BXS): Free Stock Analysis Report
FNB CORP (FNB): Free Stock Analysis Report
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