Popular's New CEO Has a Deposit Story. Credit Is Still Writing the Punchline.
Jorge García's first call leans on segment-led deposits and buybacks, but a $74 million nonaccrual and a higher charge-off guide keep the rerating on hold.
BPOP · Earnings Call · 2026-10-22
The First Call Is a Strategy Reset
Popular's Q3 was the first under new CEO Jorge García, and the language changed. The top of the call was no longer public-fund balances or capital-stack optimization, the themes that dominated last quarter's keyword set. It was number 1 bank ambition, segment-led strategy, and deposit franchise. García framed the bank around three objectives: be the No. 1 bank for customers, be simple and efficient, and be a top-performing bank. That is a relationship-banking story, not a spread-capture story. The new deposit product reclassified more than a million accounts, with García saying “a reduction in the quarter of around $2 million decrease in fee income” — Jorge Jose García, President and CEO · 2026-10-22 and an annualized hit of $8-10 million. Management expects deposit growth to offset it. The health-care professional program has generated more than $90 million in loans, and the commercial cash-management platform is now fully onboarded.
The shift matters because Popular's prior calls were about defending capital and public deposits. In Q2, public funds ranked as the top company keyword. In Q3, public funds still moved the numbers, but the narrative moved to customer primacy and deeper relationships. That is a genuine change in emphasis. The question is whether it is a change in economics.
Credit Is the Counterweight
The operating quarter was solid: net income of $266 million, EPS of $4.21, ROTCE of 15.8%, and NII of $699 million. But the Q&A was dominated by credit. Lidio Soriano disclosed “a $74 million relationship on non accrual status and recorded a $34 million partial charge-off on a credit that entered non performing status in the second quarter.” — Lidio V. Soriano, Chief Financial Officer · 2026-10-22 The NPL ratio rose to 1.16% from 1.04%, and net charge-offs were $73 million, or 73 basis points. Management's message was that these are borrower-specific, in different industries, with no common risk factor. The block quote is the cleanest statement of the position:
The 2 credits are in different industries, and do not share a common risk factor. In each case, the deterioration was driven primarily by borrower specific issues.
The market may accept that for one quarter. The problem is the guidance arc. In January, management's initial 2026 net charge-off guide was 55-70 basis points; Kelly Motta of KBW pressed on it then, and Soriano corrected the range on the call: “Small correction, Kelly. I mean, we provided for 55 to 70 basis points.” — Lidio Soriano, Chief Risk Officer (CRO) · 2026-01-27 Nine months later, the full-year guide is 80-90 basis points, with an initial 2027 range of 60-75. That is a meaningful upward reset. The current quarter's annualized 73 basis points is not alarming in isolation, but it sits inside a rising guide. The global keyword tape also has NPA ratio as a top-15 theme this quarter, a reminder that regional-bank asset quality is being watched again. Popular's issue is idiosyncratic, but the market rarely pays for idiosyncratic credit stories when the guide is moving the wrong way.
García's explanation was candid. On the telecom credit, he said “the integration of the acquisition did not go well.” — Jorge Jose García, President and CEO · 2026-10-22 On the food-service credit, he described a long-standing client hit by competition and market conditions. The lesson he drew was about extending into new ventures and staying closer to clients, not about loosening underwriting. That is credible, but it also means the "core is clean" argument now depends on the next two quarters being boring.
Loan Growth Is Supply-Constrained, Not Demand-Starved
The other disappointment was loan growth. Management now expects full-year 2026 growth of about 2%, down from prior expectations, reflecting lower auto and lease activity and more moderate commercial growth. In Puerto Rico, García argued the constraint is supply, not demand: “In Puerto Rico, you know, there is still good demand. I think the issue in Puerto Rico is more about supply.” — Jorge Jose García, President and CEO · 2026-10-22 He also said the U.S. commercial team is being pushed toward full relationships rather than single-product budget hits, which slows production but should improve returns. Auto originations were still about $450 million in the quarter. The loan demand keyword is not new, but the explanation is more nuanced than a simple macro slowdown.
NII remains the offset. Net interest income rose $6 million to $699 million, and management still expects 2026 NII growth of about 8.5%. The investment portfolio is the tailwind: $1.4 billion was reinvested at a 4.3% average yield, a 206-basis-point pickup over maturing notes, with $1.5-1.6 billion rolling each quarter. The $693 million last filed quarter understates the current run rate, but the direction is right. NIM still slipped 3 basis points to 3.63% as public deposits repriced higher. That is the tension: NII growth can continue even while NIM compresses, as long as the balance sheet grows and the securities book keeps repricing.
Deposits are the swing factor. Ending deposits were $68.7 billion, down $1.5 billion, mostly Puerto Rico public deposits. Ex-public customer balances fell about $289 million, consistent with seasonality. Management still expects public deposits between $20 billion and $22 billion. The customer balances line is why the new deposit product matters: if the fee give-up buys stickier primacy, it is a good trade; if it just gives away fees, it is a cost.
Capital Return Is Doing the Heavy Lifting
With the stock at 1.6x book, capital return is a different calculation than it was a year ago. The bank bought back $179 million of stock in Q3, raised the dividend 20% to $0.90, and expects $150-200 million of Q4 repurchases and a similar quarterly range in 2027. The ROTCE target is now 14-17%, and management is explicit that this is a through-cycle range, not a peak promise. The 41.7% efficiency ratio in the last filed quarter is already strong; the $50 million of recurring efficiencies are a nice tailwind, but not a transformation.
The hidden asset is the U.S. deferred tax asset. Gross DTA is about $100 million, offset by a $385 million valuation allowance, for a net $250 million. It expires mostly between 2028 and 2031. Management was clear that it is NOL-based and not part of regulatory capital, so a release would not help CET1. It is a profitability asset, not a capital asset. That is why the preferred-issuance question keeps coming up and keeps getting the same answer: “the rates continue to not be attractive to us.” — Lidio V. Soriano, Chief Financial Officer · 2026-10-22 That line is nearly identical to Q2, when Jorge said “the market rates are just not in our favor right now.” — Jorge Jose García, Chief Financial Officer (CFO) · 2026-07-23 The capital-stack optimization is still a waiting game.
What Would Make the Stock Care
Popular's 90-day tape is flat, down about 1.7%, and 11.4% below its August peak. The market is not pricing a crisis; it is pricing a pause. At 1.6x book and roughly 10.8x earnings, the shares already reflect a lot of the deposit-franchise and capital-return story. The next leg needs either cleaner credit or faster loan growth. The new CEO's segment-led strategy is the right long-term answer, but it is a slow variable. Credit is the fast variable. If the 2027 charge-off guide holds at 60-75 basis points and the two C&I credits are truly isolated, the buyback can compound book value and the rerating can resume. If "borrower-specific" becomes a recurring phrase, the multiple is the first thing that breaks.
For now, Popular is a bank with a better story than tape. The first call under García was polished and strategically coherent. The market's question is simpler: show me two boring quarters of credit.