Popular Inc., Puerto Rico's largest banking company, said Friday that its net loss narrowed sharply in the second quarter on improving credit trends in the mainland United States.

The San Juan-based lender reported a $55.8 million loss, an improvement of 34% from the prior quarter and 70% from a year earlier, as home equity and mortgage losses fell in its non-Puerto Rico operations.

The $32 billion-asset company's retrenchment helped too: its mainland operations — which it has drastically whittled — lost substantially less. The Puerto Rico business, which has stayed profitable, bolstered its position as the region's top player in April with the purchase of rival Westernbank Puerto Rico from the Federal Deposit Insurance Corp.

Popular's chairman and chief executive, Richard Carrion, said in an interview that Westernbank has already been "accretive" by adding $16.2 million in net interest income.

That deal and a $1.15 billion capital issuance in the quarter has him "definitely feeling a lot better" about the health of his company, Carrion said.

"We still have concerns," he said. "We are hesitant to call the end" of Popular's financial problems. "We're still seeing very sluggish demand in most of the categories."

The Puerto Rican economy remains stressed, and Popular's construction and development portfolio is particularly vulnerable. Higher commercial and construction provisions weighed on results in its home region.

Carrion told analysts in a conference call that the quarter was "noisy" but showed Popular getting stronger in Puerto Rico and healthier in the mainland.

Popular went on a stateside expansion spree last decade but began a retreat in 2008 on mounting mortgage and consumer finance losses. It announced an agreement last quarter to sell six branches in New Jersey and announced it would close half its branches in California. Interest income was stable in its 97-branch mainland division; its net loss there fell 44% from the prior quarter, to $58 million.

Net income in Puerto Rico was flat from the first three months of the year at $26 million; Westernbank boosted interest income but added to expenses. Popular aims to have about 185 branches in Puerto Rico after closing most of Westernbank's 46 branches.

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