BPOP — Q2 2026 Financial Report Analysis
Q2 · Fiscal year 2026 · Published by Pham Hop
Popular's Q2 2026 profit rose 32% to $278M ($4.35/share) as Treasury reinvestment and cheaper Puerto Rico public deposits lifted net interest income 9.8%, offsetting a $71M commercial charge-off; NII guidance raised to 8-9%.
- Net interest income
- $693M
- +9.8% YoY
- Net interest margin
- 3.66%
- Net income
- $278M
- +32.2% YoY
- Diluted EPS
- $4.35
- +40.8% YoY
- Net charge-off ratio
- 1.05%
- CET1 capital ratio
- 16.1%
- Return on tangible common equity
- 17.0%
Net interest margin (NIM): what a bank earns on its loans and securities minus what it pays for deposits and borrowing, as a share of those assets. Efficiency ratio: operating costs per dollar of revenue (lower is better). Net charge-off (NCO) ratio: loans written off as unrecoverable, net of recoveries, as a share of average loans. CET1: the bank's core capital cushion against losses, as a share of risk-weighted assets.
This period vs a year ago
- Same period last year
- This period
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
Popular earns $278 million as Puerto Rico deposits and Treasury yields lift interest income, despite one large commercial write-off
Popular, Inc., the holding company of Banco Popular de Puerto Rico (BPPR) and Popular Bank on the US mainland, earned $278.2 million, or $4.35 per diluted share, in the second quarter of 2026. That is up from $210.4 million ($3.09) a year earlier. Most of the gain came from net interest income, the bank's core earnings: the gap between what it earns on loans and securities and what it pays depositors. It rose 9.8% to $693.4 million as Popular moved cash into higher-yielding US Treasury securities and paid less on Puerto Rico government deposits. Profits rose even though the bank wrote off $71 million on a single commercial borrower. Management raised its full-year interest-income guidance in the same release.
At a glance
- Net interest margin 3.66%, up from 3.49%. The bank now keeps about 3.7 cents of interest spread per year on each dollar of earning assets. That is the main reason revenue grew 9.2% while loans grew 4.1%.
- Net charge-off ratio 1.05%, up from 0.45%. One $155 million commercial loan accounts for most of the jump. Without that loan's $71 million charge-off, the ratio was 0.33%.
- Return on tangible common equity 17.0%, up from 13.3%. This is profit relative to shareholders' equity excluding goodwill and intangibles, on Popular's adjusted basis. The bank also bought back $125 million of stock this quarter and announced a 20% dividend increase plus a new $1 billion buyback authorization.
Key figures
| Metric | Q2 2026 | Q2 2025 | YoY Change |
|---|---|---|---|
| Total revenue (net interest income + non-interest income) | $874.0M | $800.0M | +9.2% |
| Net interest income | $693.4M | $631.5M | +9.8% |
| Net interest margin | 3.66% | 3.49% | +17 bps |
| Non-interest income | $180.5M | $168.5M | +7.2% |
| Operating expenses | $484.1M | $492.8M | -1.8% |
| Provision for credit losses | $65.9M | $48.9M | +34.6% |
| Net income | $278.2M | $210.4M | +32.2% |
| Diluted EPS | $4.35 | $3.09 | +40.8% |
| Net charge-off ratio (annualized) | 1.05% | 0.45% | +60 bps |
| Non-performing loans / loans held in portfolio | 1.04% | 0.82% | +22 bps |
| Loans held in portfolio (period-end) | $39,750M | $38,185M | +4.1% |
| Deposits (period-end) | $70,233M | $67,217M | +4.5% |
| CET1 capital ratio | 16.08% | 15.91% | +17 bps |
| ROTCE (non-GAAP, as reported) | 17.02% | 13.26% | +376 bps |
| Tangible book value per share (non-GAAP) | $87.94 | $75.41 | +16.6% |
"bps" = basis points; 100 bps = 1 percentage point. CET1 (Common Equity Tier 1) is regulators' main measure of a bank's loss-absorbing capital, shown as a share of risk-weighted assets.
Takeaway: Popular is earning more because it is reinvesting a large, cheap deposit base, a third of it Puerto Rico government money, into higher-yielding Treasuries. Loan growth is not the main driver. That lifts the margin, but it depends on public deposits that management expects to shrink from $22.7 billion to $20–22 billion. Meanwhile, commercial problem loans in Puerto Rico are rising faster than the consumer book is improving.
Where the extra income came from
Securities, not loans, drove the margin. The bank's investment securities rose to $31.3 billion from $28.3 billion a year earlier. Popular says it reinvested maturing holdings into "higher yielding U.S. Treasury securities." Money-market and securities yields (fully taxable-equivalent) rose to 3.69% from 3.50%. The loan yield barely moved: 7.53% versus 7.50%. The 10-Q attributes the $61.9 million year-over-year rise in net interest income to "higher investments in U.S. Treasury securities at higher yields, loan growth and lower cost of deposits, mainly P.R. public deposits."
Deposit costs fell. Total deposit costs dropped to 1.57% from 1.78% a year ago. Puerto Rico's public sector (government and agency accounts) holds $22.7 billion of Popular's $70.2 billion in deposits. The bank paid 2.61% on those deposits this quarter. Excluding them, core deposit costs were 1.10%. Puerto Rico public deposits grew $3.0 billion in the quarter alone. Popular says that is why it raised its net interest income outlook.
Both banks improved, but Puerto Rico drives the results. BPPR earned $589.9 million of net interest income, up 9.6% year over year, at a 3.85% margin. Popular Bank in the US earned $113.1 million, up 10.6%, at a 3.17% margin, with deposit costs of 2.73%. About 70% of the loan book is in Puerto Rico.
Fees grew on card spending. Non-interest income rose $12.1 million year over year to $180.5 million. Debit card fees rose $3.6 million and credit card fees $2.3 million. The 10-Q partly credits newly launched corporate credit card products. About $3 million of the quarter-on-quarter fee gain came from an unrealized valuation gain on an equity-method investment, which may not repeat.
Credit: one big loss, and new commercial problem loans
In BPPR's commercial book, Popular decided to sell a $155 million non-performing relationship. It charged off $71 million, moved the remaining $84 million to loans held for sale, and sold the loan on July 2, 2026. That single loan explains most of the jump in net charge-offs (loans written off as uncollectible, net of recoveries) to $104.1 million from $42.2 million a year earlier.
The more important development for the next few quarters is new problem loans. Two unrelated commercial-and-industrial borrowers, totalling $129 million, became non-performing this quarter. Excluding consumer loans, BPPR's inflows of new non-performing loans rose $123 million from the prior quarter. Management says these inflows "stemmed from issues specific to the individual borrowers" and do not signal a broader decline. Non-performing assets, including the loan held for sale and foreclosed real estate, rose to $546.7 million from $357.8 million a year ago.
Consumer credit moved the other way. Consumer net charge-offs fell $10 million from Q1, mainly in auto loans. The consumer allowance fell $12 million, mostly for auto loans and credit cards. The allowance for credit losses covered 1.97% of loans, down from 2.10% in Q1, partly because the reserve held against the sold loan was used up when it was charged off. Popular US credit remained clean, with a 0.08% net charge-off ratio.
What the headline numbers hide
- Earnings per share rose faster than profit. Net income rose 32.2%, but EPS rose 40.8%. Buybacks cut the average diluted share count by 6.1%, to 63.9 million from 68.1 million. Popular has repurchased $280 million of stock so far in 2026.
- A lower tax rate added about $14 million. The effective tax rate fell to 14.1% from 18.5%, which Popular attributes to "higher exempt income and other tax benefits, including the vesting of stock awards, the purchase of tax credits." At last year's rate, Q2 net income would have been about $264 million rather than $278 million. Pre-tax income rose 25.4%, so the operational gain was still large.
- Lower expenses partly reflect a weak comparison. Operating expenses fell $8.6 million year over year, mainly because of "lower operational loss reserves and lower professional services expense." Technology spending rose $6.3 million. Expenses were 55% of revenue, down from 62% a year ago (our calculation; Popular does not publish an efficiency ratio). Q2 2026 personnel costs also include about $10 million of profit-sharing accrual, which rises with earnings.
- Cash generation matches reported profit. Operating cash flow for the first half was $538.8 million, slightly above net income of $523.9 million. There is no gap between accounting earnings and cash.
- Part of the deposit growth may be temporary. Most of this quarter's deposit growth came from Puerto Rico public deposits. Management expects those to fall back to $20–22 billion for the rest of the year. Those deposits are funding Treasury purchases, so some of the margin gain could fade with them.
Guidance and outlook
Management updated its full-year 2026 outlook alongside the results:
| Item | Original FY2026 guidance | Updated |
|---|---|---|
| Net interest income growth | 5%–7% | 8%–9% |
| Non-interest income per quarter | $160M–$165M | $165M–$170M |
| Net charge-offs (annualized) | 55–70 bps | 65–80 bps |
| Operating expense growth | ~3% | 2%–3% |
| Effective tax rate | 15%–17% | 14%–15% |
| Loan growth | 3%–4% | Low end of range |
The pattern is clear: revenue guidance went up, credit-loss guidance went up, and loan growth guidance went down. Popular is earning more on its funding base, but it is not lending much more, and it now expects more commercial losses.
The second-quarter run rate already supports the higher net interest income target. Year-to-date net income of $523.9 million is up 35.0%. CET1 of 16.08% leaves room for the new $1 billion buyback. The bigger risk is credit. If the two new $129 million problem loans end in charge-offs, the full-year net charge-off ratio could reach the top of the new 65–80 bps range. Management changed on September 1: CEO Javier Ferrer retired, CFO Jorge García became CEO, and Chief Risk Officer Lidio Soriano became CFO.
In the Q3 report, due around late October, watch three things: whether Puerto Rico public deposits stay within the guided $20–22 billion and what that does to the 3.66% margin, whether new commercial non-performing loans keep arriving at BPPR, and how quickly the new buyback authorization is used.
Source: Popular, Inc. Form 10-Q for the quarter ended June 30, 2026, and the Q2 2026 earnings release (Form 8-K, Exhibit 99.1, July 23, 2026). Figures are GAAP unless marked non-GAAP; ROTCE and tangible book value are Popular's own non-GAAP measures.