Popular (BPOP)

Puerto Rican financial institution Popular (NASDAQ:BPOP) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 11% year on year to $817.7 million. Its GAAP profit of $3.14 per share was 6.4% above analysts’ consensus estimates.

Company Overview

Founded in 1893 as the first bank in Puerto Rico to serve the working class, Popular (NASDAQ:BPOP) is a financial holding company that provides retail, mortgage, and commercial banking services primarily in Puerto Rico and the mainland United States.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Popular's competitors include other major financial institutions operating in Puerto Rico such as FirstBank Puerto Rico (NYSE: FBP), OFG Bancorp (NYSE: OFG), and in the mainland United States, regional banks like Citizens Financial Group (NYSE: CFG) and KeyCorp (NYSE: KEY).

In general, banks make money from two primary sources. The first is net interest income, which is interest earned on loans, mortgages, and investments in securities minus interest paid out on deposits. The second source is non-interest income, which can come from bank account, credit card, wealth management, investing banking, and trading fees. Over the last five years, Popular grew its revenue at a decent 5.8% compounded annual growth rate. Its growth was slightly above the average banking company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Popular’s annualized revenue growth of 6% over the last two years aligns with its five-year trend, suggesting its demand was stable. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Popular reported year-on-year revenue growth of 11%, and its $817.7 million of revenue exceeded Wall Street’s estimates by 2%.

Net interest income made up 77.2% of the company’s total revenue during the last five years, meaning lending operations are Popular’s largest source of revenue.

Our experience and research show the market cares primarily about a bank’s net interest income growth as non-interest income is considered a lower-quality and non-recurring revenue source.

Topline growth is certainly important, but the overall profitability of this growth matters for the bottom line. For banks, we look at efficiency ratio, which is non-interest expense (salaries, rent, IT, marketing, excluding interest paid out to depositors) as a percentage of total revenue.

Investors focus on efficiency ratio changes rather than absolute levels, understanding that expense structures vary by revenue mix. Counterintuitively, lower efficiency ratios indicate better performance since they represent lower costs relative to revenue.

Over the last five years, Popular’s efficiency ratio couldn’t build momentum, hanging around 61.6%.

In Q3, Popular’s efficiency ratio was 60.6%, close to analysts’ expectations. This result was 2.9 percentage points better than the same quarter last year.

For the next 12 months, Wall Street expects Popular to rein in some of its expenses as it anticipates an efficiency ratio of 59.6%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Popular’s EPS grew at an astounding 15.2% compounded annual growth rate over the last five years, higher than its 5.8% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its efficiency ratio didn’t improve.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Popular, its two-year annual EPS growth of 7.5% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, Popular reported EPS of $3.14, up from $2.16 in the same quarter last year. This print beat analysts’ estimates by 6.4%. Over the next 12 months, Wall Street expects Popular’s full-year EPS of $11.30 to grow 13.1%.

Banks are balance sheet-driven businesses because they generate earnings primarily through borrowing and lending. They’re also valued based on their balance sheet strength and ability to compound book value (another name for shareholders’ equity) over time.

Because of this, tangible book value per share (TBVPS) emerges as the critical performance benchmark. By excluding intangible assets with uncertain liquidation values, this metric captures real, liquid net worth per share. On the other hand, EPS is often distorted by mergers and flexible loan loss accounting. TBVPS provides clearer performance insights.

Popular’s TBVPS grew at a decent 5.1% annual clip over the last five years. TBVPS growth has accelerated recently, growing by 26.9% annually over the last two years from $49.09 to $79.12 per share.

Over the next 12 months, Consensus estimates call for Popular’s TBVPS to grow by 14.3% to $90.40, top-notch growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Popular has averaged a Tier 1 capital ratio of 16.2%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, Popular has averaged an ROE of 15.5%, exceptional for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This shows Popular has a strong competitive moat.

It was encouraging to see Popular beat analysts’ revenue expectations this quarter. We were also happy its tangible book value per share narrowly outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 4% to $119.99 immediately following the results.

Updated: December 4, 2025 at 11:19 PM EST

Before making an investment decision, investors should account for Popular’s business fundamentals and valuation in addition to what happened in the latest quarter.

In our opinion, Popular is a solid company. Although its revenue growth was uninspiring over the last five years, its expanding net interest margin shows its loan book is becoming more profitable. And while its net interest income growth was weak over the last five years, its remarkable EPS growth over the last five years shows its profits are trickling down to shareholders.

Popular’s P/B ratio based on the next 12 months is 1.3x. Looking at the banking space right now, Popular trades at a compelling valuation. If you trust the business and its direction, this is an ideal time to buy.

Wall Street analysts have a consensus one-year price target of $143.11 on the company (compared to the current share price of $116.97), implying they see 22.4% upside in buying Popular in the short term.