Popular Inc.'s top executives, who have been vocal in recent months about their desire to shore up profits, took yet another step last week to right the company.
The $47.3 billion-asset San Juan, Puerto Rico, company has shed its limping wholesale subprime mortgage unit and consolidated its mainland businesses. And on Friday it announced a plan to cut 513 positions, or more than two-thirds of the work force at its online mortgage unit, E-Loan, which it still plans to turn into a full-fledged online bank.
Popular also said in its quarterly filing Friday with the Securities and Exchange Commission that it plans to cut E-Loan's marketing budget. The company informed employees about the plans Thursday.
The restructuring would result in a $24.2 million fourth-quarter charge, Popular said.
"This was a very tough decision," Richard L. Carrion, its chairman and chief executive, said in an interview Friday. "We think … [E-Loan] is a great brand and a great technology platform."
The company still plans to follow through on a plan to expand E-Loan into an online bank and will introduce transaction accounts and more deposit and loan products next year, Mr. Carrion said.
E-Loan remains a growth business for Popular, he said. "Customers are doing more and more things over the Internet. It is a very important brand for us, in that it really gives us nationwide coverage." However, mortgage origination volumes are down, and "there is very little liquidity" to fund E-Loan's auto and home equity loans.
Mr. Carrion would not say what further restructuring actions are in the works, but he and other executives have left little doubt that Popular is looking at all its businesses.
After it reported a 58.3% drop in third-quarter earnings last month, Jorge Junquera, its chief financial officer, said bluntly: "We are reviewing all of our operations in a very serious way. We know there is very little tolerance left, given the disappointing earnings we have been showing."
Last month Popular said it would sell six branches in Houston — essentially its entire Texas retail banking business — for a $10 million after-tax gain.
Early this year it cut 625 mainland positions when it exited the wholesale subprime lending business here and took $15 million of related charges for the first two quarters. At the same time it consolidated its consumer finance and retail banking businesses, along with E-Loan, into a mainland banking unit, Popular North America. That unit swung to a $107.7 million loss for the first three quarters, from a $20.3 million profit a year earlier, though Banco Popular North America, the Chicago retail bank, remained profitable.
(During the same period the Puerto Rican banking unit's profits fell 11.2%, to $247.1 million, while earnings at Evertec, Popular's payment processing business, rose 20.3%, to $21.9 million.)
When it completes the latest round of layoffs, Popular would have reduced its work force by 10% this year.
Joe Gladue, an analyst with B. Riley & Co., said Popular may look to sell other lines. Equity One, part of its U.S. consumer finance business, which has 132 branches in 15 states, could be on the block, he said. Popular could sell parts or all of its banking operations in California, he said.