Puerto Rican financial institution Popular (NASDAQ: BPOP) fell short of the market’s revenue expectations in Q3 2026, with sales flat year on year at $816 million. Its non-GAAP profit of $4.21 per share was 8.5% above analysts’ consensus estimates.

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StockStory’s take

Popular’s third quarter results drew a negative market reaction, with sales growth trailing analyst expectations despite ongoing net interest income growth and credit stability. Management pointed to higher operating expenses and a dip in noninterest income as partial offsets, while highlighting stable core loan portfolios and favorable consumer trends. CEO Jorge Jose García explained that “both consumer and mortgage portfolio exhibited strong performance in the third quarter,” but acknowledged that credit results included isolated commercial loan issues. Management also cited a $2 million reduction in fee income from a reclassification of deposit products, a move designed to deepen customer relationships and respond to demand for simpler banking options.

Looking ahead, Popular’s forward outlook is shaped by moderate loan growth expectations, continued investment in digital and segment-focused products, and discipline around credit risk. Management expects net interest income to benefit from ongoing repricing of the investment portfolio, with CFO Lidio V. Soriano stating, “We do expect to continue to see creating operating leverage in 2027.” The team emphasized efforts to maintain a sustainable return on tangible common equity (RoTCE) within a 14% to 17% range, driven by deposit franchise strength and targeted efficiency initiatives. Management also flagged affordability pressures and the evolving rate environment as watchpoints for the coming quarters.

Key insights from management’s remarks

Management attributed Q3 performance to growth in core lending, disciplined deposit management, and ongoing cost control, while noting that new product rollouts and isolated commercial credit events shaped results.

• Deposit product simplification: Popular rolled out a new, streamlined deposit product targeting fee reduction and direct deposit usage, impacting over a million accounts. This initiative drove a $2 million quarterly decline in fee income but is intended to deepen customer relationships and improve long-term deposit retention.

• Segment-led strategy in action: The company expanded its segment-led approach with new offerings, including an account for college students and a healthcare professional program in Puerto Rico. Management credited these moves with supporting deposit retention and generating over $90 million in new loans from healthcare professionals year-to-date.

• Commercial cash management platform completed: Popular finished migrating commercial clients to a new cash management platform, enhancing flexibility, money movement, and mobile capabilities. Management views this as further differentiation for its commercial franchise and a foundation for future enhancements.

• Credit quality remained stable: Despite two isolated commercial loan issues, underlying consumer and mortgage portfolios continued to perform well. Net charge-offs declined from the previous quarter, and the company maintained strong reserve coverage.

• Expense management and efficiency gains: Operating expenses increased, primarily due to higher personnel costs and performance-based compensation. However, management implemented $50 million in recurring efficiency improvements and expects operational expense growth to remain near 2% for the year, which includes profit sharing.

Drivers of future performance

Popular’s guidance is driven by moderate loan growth, investment portfolio repricing, and continued focus on operational efficiency, but also reflects potential headwinds from inflation and credit costs.

• Investment portfolio repricing tailwind: Management expects ongoing reinvestment of maturing securities at higher yields to support net interest income growth into 2027. This is being achieved by shifting into shorter duration U.S. Treasury notes, which are yielding significantly more than legacy investments, helping to offset rate-sensitive deposit cost pressures.

• Moderating loan growth expectations: The company anticipates slower loan growth ahead, citing reduced auto and lease activity and a more disciplined approach to commercial lending in the U.S. Management stressed that future growth will be aligned with the Puerto Rico economy and focus on deepening customer relationships rather than accelerating single-product volumes.

• Efficiency and credit discipline: Popular aims to maintain expense growth near 2% and is targeting a sustainable annual RoTCE of 14% to 17%. The company is monitoring affordability risks related to inflation and fuel costs, as well as potential shifts in credit quality, particularly in commercial portfolios, as key variables for future performance.

Catalysts in upcoming quarters

In the coming quarters, the StockStory team will focus on (1) the effectiveness of Popular’s new deposit initiatives in driving customer retention and fee stability, (2) the impact of investment portfolio repricing on net interest income and margin trends, and (3) signs of sustained credit quality—especially in commercial loan portfolios—amid potential economic headwinds. Progress on efficiency measures and deeper client relationships will also be key markers of execution.

Popular currently trades at $155.36, down from $162.25 just before the earnings. Is there an opportunity in the stock? The answer lies in our full research report (it’s free).

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