Buoyed by a reduction in the island’s corporate tax rate and the sale of its equity stake in Consorcio de Tarjetas Dominicanas, S.A., Popular Inc. Monday reported net income of $10.1 million for the first quarter ended March 31, an improvement over the net loss of $85.1 million during the same period the year before.
The parent company of Banco Popular de Puerto Rico, the island’s largest financial institution, said in its report that the results compare to a net loss of $227.1 million for the quarter ended Dec. 31, 2010. Its pre-tax income for the quarter ended March 31, 2011 amounted to $157.4 million, compared with a pre-tax loss of $238.9 million for the prior quarter and a pre-tax loss of $94.3 million for the same three-month period in 2010.
“While the results for the quarter were impacted by a number of significant items, they clearly reflect a return to operational profitability,” said Popular Inc. CEO Richard L. Carrión. “One quarter does not make a trend and we are very conscious of the fragility of the economic recovery. Nevertheless, these results, together with generally encouraging economic and credit metrics, make us feel optimistic.”
In its analysis of the results, Popular Inc. mentioned a number of events that contributed to its profitable first quarter:
- The signing in January of the new Internal Revenue Code represented a reduction in bank’s tax expense of $103.3 million, as a result of a drop in the rate to 30 percent from 39 percent.
- Popular Inc. added $16.7 million to its first quarter earnings column through the sale of its equity investment in the processing business of Consorcio de Tarjetas Dominicanas, S.A. The transaction was required under the terms of the sale of the majority interest in Evertec.
- The company also made money from the 49 percent equity stake it holds in Evertec, garnering about $13.8 million during the first quarter, an amount it writes up as operating income.
- The completion of the sale of $457 million in U.S. non-conventional residential mortgage loans by Banco Popular North America that were reclassified to loans held-for-sale during the fourth quarter of 2010. The sale had a positive impact of about $16.4 million during the first quarter of 2011.
Popular Inc. is the second local bank to report positive first quarter results so far this year. Last week, Doral Financial also said to be in the black, with a $3.3 million net income increase during the first three months of 2011. Popular Inc. is one of three companies that picked up the assets of the same number of banks that failed and were shut down last year in Puerto Rico.