Safe and Sound

Banco Popular de Puerto Rico

San Juan, PR
3
Star Rating
Banco Popular de Puerto Rico is an FDIC-insured bank founded in 1999 and currently based in San Juan, PR. Regulatory filings show the bank having equity of $3.72 billion on $34.73 billion in assets, as of December 31, 2017.

Thanks to the work of 6,511 full-time employees, the bank currently holds loans and leases worth $17.86 billion, $11.86 billion of which are for real estate. U.S. bank customers currently have $28.77 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Banco Popular de Puerto Rico exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three key criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for depositors when a bank is experiencing financial instability. It follows then that when it comes to measuring an a bank's financial fortitude, capital is key. From a safety and soundness perspective, more capital is better.

On our test to measure the adequacy of a bank's capital, Banco Popular de Puerto Rico received a score of 10 out of a possible 30 points, below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Banco Popular de Puerto Rico's Tier 1 capital ratio was 18.44 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, Banco Popular de Puerto Rico held equity amounting to 10.72 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of problem assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

Having a large number of these kinds of assets could eventually require a bank to use capital to absorb losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, diminishing earnings and increasing the chances of a future failure.

On Bankrate's asset quality test, Banco Popular de Puerto Rico scored 28 out of a possible 40 points, falling short of the national average of 37.49 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 10.39 percent of Banco Popular de Puerto Rico's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Banco Popular de Puerto Rico's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or use them to address problematic loans, likely making the bank better prepared to withstand economic trouble. Conversely, losses take away from a bank's ability to do those things.

On Bankrate's test of earnings, Banco Popular de Puerto Rico scored 16 out of a possible 30, better than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Banco Popular de Puerto Rico was 7.38 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $272.0 million on total equity of $3.72 billion. The bank experienced an annualized return on average assets, or ROA, of 0.85 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.