Popular Inc.

The positive outlook on Popular Inc. reflects our view that we could raise the ratings within the next 12 months if we expect the bank's risk-adjusted capital (RAC) ratio, an S&P calculation, to remain within the 10%-15% range on a sustained basis. We expect the company's net interest margin to rise modestly over the next few years, given higher market interest rates, and we think loan performance could improve gradually due to a rebound in economic activity. A higher rating would also depend on continued momentum in the Puerto Rican economy and on vaccine distribution easing the effects of the pandemic, as well as on the inflow of funds from private insurance and government stimulus bolstering consumer health and aiding

...Popular Inc. maintains a very strong competitive position in Puerto Rico and has good revenue diversity. Popular has strengthened its already strong local market position in Puerto Rico and made substantial financial improvements in the past several years. For example, the bank increased its market share by acquiring the deposits of Doral Bank when it closed in 2015 and the acquisition of certain assets and liabilities related to Wells Fargo & Co.'s auto finance business in Puerto Rico in 2018. Like most rated U.S. banks, Popular's loan performance has held up well over the past year. Despite the global economic slowdown associated with the COVID-19 pandemic, Popular's asset quality has been resilient, aided by massive fiscal stimulus and accommodative monetary policy. However, Popular is geographically concentrated in Puerto Rico, which has been hurt by infrastructure issues, fiscal austerity, and outmigration. Popular has high regulatory capital ratios, however we expect capital returns...

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