Despite reporting lower fourth-quarter earnings Wednesday, Popular Inc. has taken a more optimistic tone - something it lacked for much of last year.
The San Juan, Puerto Rico, company's net income fell 54% from a year earlier and 27% from three months earlier, to $59.6 million. Earnings per share of 20 cents fell 4 cents short of analyst estimates, according to Thomson Financial.
For the year the $47.4 billion-asset Popular said it earned $357.7 million, down 34%. Earnings per share for the year were $1.24.
The lower profit is attributable in part to Popular's moves to address issues that affected its mainland operations last year. It is revamping its U.S. business by exiting the unprofitable nonprime lending business, and it is investing in other units, including E-Loan Inc.
It did not break out earnings for the nonprime unit, but Jorge A. Junquera, Popular's chief financial officer, said the unit had a big role in the fourth-quarter profit decline.
On Jan. 9 the company said that getting out of the nonprime business would lead to about $40 million of charges. It took $21.4 million of those during the fourth quarter and expects to book $20 million in the first half of this year.
"It was something that we needed to do with the change in the market," Mr. Junquera said, referring to the U.S. impact of the flat yield curve and the housing industry slowdown. "With the reduced volume and reduced profitability, we had to go back and look at our business platform."
Richard L. Carrion, Popular's chairman and chief executive, called its second- and third-quarter results "lousy." In a press release issued Wednesday, he sounded more upbeat.
"This has not been a good year, primarily because of the performance of our nonprime mortgage operations, but we have taken action on this front," he said in the release. "On the other hand, we have seen good performance in our Puerto Rico operations in spite of a difficult environment."
Popular's loan portfolio was $32.7 billion at yearend, up 3% from three months earlier and a year earlier. Net chargeoffs were $73.4 million in the fourth quarter, up 23% from the end of the third quarter and 43% from a year earlier.
Its loan-loss provision rose 71% from three months earlier and 112% from a year earlier, to $108.3 million.
Deposits rose 6% quarter to quarter and 8% year over year, to $24.4 billion. E-Loan brought in more than $1 billion of new deposits in the quarter, Mr. Junquera said.
Popular's fourth-quarter net interest margin of 3.27% was about 22 basis points better than the third quarter. However, Joseph Gladue, an analyst with Cohen & Co., said a more accurate reading would be about 10 basis points, because Popular took a one-time charge in the third quarter when it changed its accounting for interest rate swaps.
