Banco Popular 2Q15 Earnings Call Notes

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Thoughts on the Puerto Rico fiscal situation

“The government of Puerto Rico continues to face multiple fiscal challenges in the coming weeks and months. In order to address the challenges the government formed a working group task with creating a five year fiscal stability plan and started discussions over debt renegotiations.

The government has also proposed the creation of our financial control [ph] as detailed [indiscernible] we will continue to assist every way we can to enhance the execution of this plan. We hope that the political leadership will arrive at solutions that will achieve fiscal balance and more importantly put the economy back on the growth track. We will do everything in our power to support this result. However as a result of the work done in the last few years we shift the risk profile of our credit profile, enhance operations, increase profitability and grow our capitals. We’re prepared to manage through a variety of potential scenario.”

We are pleased that asset quality continues to improve

“While operating in a challenging economic environment, we are pleased to report that asset quality continues to improve during the second quarter as non-performing assets, non-performing loans, and NPR inflows improved over the previous quarters.”

Most Puerto Rico exposure is municipal loans

“As we have discussed in the past, more than Popular’s direct Puerto Rico government exposure is in the form of municipal loans, and not security. Having said that, we do have a small portfolio Puerto Rico government securities with a fair value of $44 million, which is totally quality with a corresponding on realized gains and often reflected in multi-year. ”

Central government exposure is nominal

“We believe our total exposure to the central government and public corporation is nominal representing only 4.6% of total Q1. Our municipality exposure is more than diversified portfolio of senior priority loans to a select group of municipality whose revenues are independent of the central government.”

We do recognize that our fate is tied to Puerto Rico

“Our story is to a large extent linked to Puerto Rico, its economy and future. We are aware of that and remain committed to working to improve the island’s prospects. But Popular is also a story of a solid organization that has navigated through a complex environment and has emerged as a stronger, better capitalized, and more diversified institution.”