This could be love. Oh, I know Banco Popular
It's a tough year and it has been a lousy quarter. We can point to the flat yield curve, the economic environment and the fiscal crisis in Puerto Rico, our main market, but I consider these just excuses. . Our job is to produce results, irrespective of the economic environment we're in.
How do you not love that?
The CEO was right -- this was a pretty lousy quarter. Net income fell by more than 25% as the company faced single-digit declines in revenue and a double-digit increase in operating expenses. Although net interest income was up a bit before loan loss provisions, those losses moved the final tally to negative 2.3%; the company's net interest margin slid about 12 basis points from last year. Non-interest income was no help, either, falling more than 3%.
Turning to the balance sheet, we see loans up about 10% and total deposits up almost 3%, with interest-bearing deposits up around 6%. Unfortunately, the spread between loan rates and deposit payouts continues to move against the company. In addition, credit quality is still something of a concern, and the company continues to keep a significant position in brokered deposits.
Much as I like Popular management, I'm not keen on investing in Puerto Rico right now. The banking sector has been plagued by scandal (courtesy of the likes of Doral
Good (or at least honest) management is sadly a rarity, though, so I can't quibble with investors who want to just batten the hatches and stick by Popular. Just don't expect a dramatic overnight improvement in the business or its stock price.
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Banco Popular is a Motley Fool Income Investor recommendation. Lloyds is an Inside Value recommendation, while Doral is a former Inside Value pick.
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).