Popular Inc (BPOP) 2015 Q3 法說會逐字稿

Good day, and welcome to the Popular, Inc. Q3 2015 earnings conference call and webcast. All participants will be in a listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Mr. Brett Scheiner, Investor Relations Officer. Please go ahead, sir.

Good morning, and thank you for joining us on today's call. Today, I am joined by our Chairman and CEO, Richard Carrion; our CFO, Carlos Vazquez; and our CRO, Lidio Soriano, who will review our third quarter results and then answer your questions. They will be joined in the Q&A session by other members of our management team.

Before we start, I would like to remind you that on today's call, we may make forward-looking statements that are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these forward-looking statements are set forth within today's earnings press release and are detailed in our SEC filings, our financial quarterly release and supplements. You may find today's press release and our SEC filings on our web page at popular.com.

I will now turn the call over to Mr. Richard Carrion.

Good morning and thank you for joining the call. I'd like to first address the highlights and key events of the third quarter. Then, I will present an update on our business and our thoughts regarding the fiscal and economic situation in Puerto Rico, Carlos will comment on the quarter's financial results, and Lidio will provide an update of credit trends and metrics.

With that, please turn to slide number 2. In the third quarter, Popular earned adjusted net income of $93 million, up $3 million from both last quarter and last year's third quarter. We continued to generate strong revenues with capital levels well above peer averages. Tangible book value was $42.71, up from $41.73 last quarter. Our net interest margin of 4.39%, decreased 15 basis points from last year's 4.54% on lower income from our run-off Westernbank portfolio. Our spreads remain strong relative to peers with our Puerto Rico net interest margin of 4.75%.

Total NPAs this quarter of $878 million including covered loans were up $72 million from last year's $806 million mostly due to a single large commercial relationship that has continued to [meet its debtors]. Non-covered NPLs were $635 million or 2.8% of non-covered loans, up $59 million from last quarter. NPL inflows increased $82 million when compared to the previous quarter, driven by three large commercial relationships, including the one I've just mentioned.

Our net charge-offs were $46 million or 83 basis points, essentially flat from last quarter's $46 million or 89 basis points. At quarter-end, available holding company liquidity stood at approximately $221 million. This liquidity position provides in excess of two year's debt service coverage with no maturities until 2019. In addition, the market value of our stake in EVERTEC is approximately $211 million and significantly exceeds our position's current book value of $31 million.

As investors, we will continue to participate in our proportionate share of the Company's income, while our investment also represents an additional source of capital flexibility and potential holding company liquidity. Last month, we reinstituted a common stock dividend and intend to return additional capital to our shareholders over time. We're also encouraged by the trends in our US business, particularly the strong commercial loan products.

Please turn to Slide 3. Before I turn it over to Carlos, let me comment on our Puerto Rico government exposures and the Puerto Rico economy. Regarding our exposure to the Puerto Rico government, our underwriting profits, the structure and the size of our exposure relative to our capital base gives us comfort. Keep in mind that the majority of our direct Puerto Rico government exposure is in loans to municipalities not publically traded securities of the central government or its public corporations. Our direct exposure is down $94 million from the previous quarter as a large majority of our PRASA exposure was repaid and we sold approximately half of our Puerto Rico central government bond portfolio.

Last quarter, we decided to sell our PREPA exposure and move the loans to held for sale writing it down by $30 million or 40%. As disclosed in last quarter's 10-Q, this loan remains available for sale. We will monitor developments in this portfolio closely and we'll make future adjustments as needed, while selectively participating in funding the Puerto Rico government's capital needs where we feel the risk reward is in our favor.

The government of Puerto Rico faces multiple fiscal and liquidity challenges in the coming weeks and months. We believe that any successful solution will likely require three things. Number one, a legal framework for debt restructuring. Two, an effective fiscal control board. And three, a meaningful economic stimulus plan. A resolution will need bipartisan support from the Puerto Rico legislature and the communities at large, as well as the active participation of the US government's executive and legislative branch. We hope that the political leadership will arrive at solutions that will achieve fiscal balance and more importantly, put the economy back on a growth track, and we will do everything in our power to support that result.

We believe that the US treasury proposal recently announced is promising. This proposal includes many of the elements I mentioned earlier, and is worthy of bipartisan support both locally and in the US Congress. We encourage all of the political parties of Puerto Rico and the private sector who rally behind this plan.

While the Puerto Rico economy has been relatively resilient of late, unfortunately, the longer these issues drag on, the more negative an impact they will have. In the interim, the current uncertainty harms both commercial investment and consumer confidence. However, our strong market position, significant liquidity, excess capital levels, and internal capital generation will be key to our future performance. We've operated in a weak economy for the past nine years, and despite that, the strong revenues generated by our Puerto Rico bank have produced positive earnings in each of those years.

In the last few years, we have shifted the risk profile of our credit portfolio, enhanced our operations, increased profitability and grown our capital. With that progress in mind, we are confident, we are prepared to manage through a variety of potential scenarios. The strength of the capital position and the future earnings power of the bank gave us the confidence to resume a dividend this quarter, an important milestone for us.

So please turn to Slide 4 as our CFO, Carlos Vazquez, discusses our financial results in further detail.

Thank you, Richard, and good morning.

On slide 4, we present our adjusted financial summary for the third quarter. This quarterly data is reconciled to GAAP figures in the appendix to the slide deck. Today's earnings press release details variances from the second quarter, the largest being lower net interest and non-interest income offset by lower loan loss provision and lower operating expenses. Net interest income for the third quarter was $351 million, down $12 million from the second quarter on lower income from our Westernbank portfolio and a $4 million interest reversal from FHA mortgage loans.

We are pleased to have achieved organic growth of 7% in US commercial loans this quarter. This healthy growth follows last quarter's 9% increase. Despite this US base growth, our outlook for stable overall loan balances remains unchanged. For 2016, we anticipate that US loan growth will compensate for run-off in Puerto Rico. On the Island, we have set limited organic growth with selective loan portfolio purchases over the last few years. We'll continue to pursue this acquisition strategy if attractive transactions become available.

The average yield of our $2.2 billion Westernbank loan portfolio decreased to 8.59% from 9.44% last quarter. This decrease is due to ongoing loan resolutions, repayments and the quarterly recast the portfolio's expected cash flows. We expect similar yields on this portion of our loan book for the next few quarters, slowly declining thereafter.

Our interest bearing deposit costs rose 4 basis points from the prior quarter to 54 basis points. This was mainly due to last quarter's accelerated amortization of premiums related to deposits acquired from the FDIC in the Doral transaction, which had the effect of lowering funding cost. Our third quarter deposit cost is roughly in line with the first quarter.

Non-interest income excluding FDIC-loss share activity decreased by $10 million compared to last quarter. This was mostly the result of last quarter's reduction of indemnity reserves on previous loan sales which were not present this quarter. Popular's Puerto Rico mortgage business originated [$327 million] of loans in the third quarter, down from [$399 million] last quarter, though up from [$314 million] in the third quarter of last year.

Total operating expenses for the quarter were down $22 million to $301 million. The decrease was mostly driven by $15 million of lower OREO expenses, although we saw small decreases in nearly all operating expense lines. We expect quarterly operating expenses to be in the range of $305 million to $310 million through the end of 2016.

With the integration of Doral and the restructuring of the US business completed, moving forward, we do not expect any meaningful expenses related to these events. Even [last quarter this year we capture], our GAAP results were incorporated and effective tax rate were approximately 44%, when our US earnings beginning in the first quarter of 2016. For the remaining of 2015 results, we will continue to use a near 0% for marginal rate for our US business. Our adjusted effective tax rate for the third quarter was 22%. We continued to estimate a tax rate at the low end of a 20% to 29% range for the fourth quarter. For 2016, we expect to be at the upper end of that range, as a result of incorporating the aforementioned effective US tax rate.

Please turn to slide number 5. The loss share portion of our commercial LSA expired at the end of the second quarter. On slide 5, we provide an overview of the losses expected to be realized and collected from the FDIC through the close out period of the loss share agreement. Our total $312 million receivable from the FDIC includes $80 million related to the single-family mortgage loss share agreement, which expires in five years. The remaining $232 million includes $90 million already billed to the FDIC for second quarter losses and $142 million of reimbursable losses that remain in dispute. While we currently expect to collect the remaining balance, any amount remaining in the loss share asset not expected to be collected from the FDIC will be charged-off.

Please turn to the next slide. We continued to enjoy strong capital levels relative to mainland and Puerto Rico peers, as well as with respect to well capitalized regulatory reform. Our Tier 1 common equity ratio was up 25 basis points to 16.2% primarily on our earnings for the quarter. All of Popular's capital ratios remain robust and well above regulatory requirement.

Our Dodd-Frank stress test released earlier this year showed strong results. Please note that due to adjustments in the regulatory schedule, we will file our next visas in July of 2016 instead of the end of the first quarter. As Richard mentioned, this quarter we resumed payment of $0.15 per share quarterly common stock dividend. We continue to pursue opportunities to actively manage our capital, while being responsive to the challenging environment in our local market. Our future capital actions are more likely to be tied to improvements in the Puerto Rican fiscal and economic situation than to any specific regulatory filing. It continues to be our goal to maintain strong capital levels that are appropriate for Popular's risk profile. As we work towards our target of a double-digit return on tangible equity.

With that, I turn the call over to Lidio.

Thank you, Carlos, and good morning.

Despite challenging economic and fiscal conditions in our main market, overall asset quality remained stable during the quarter with a small number of large commercial relationship [may have been doubly affecting] some reported metrics. Although these cases are not directly related to the current fiscal situation and while there is no clear negative trend in our credit metrics, we are cautious given the current environment.

Please turn to slide number 7 to begin the discussion. This slide compares and contrasts Popular's current portfolio mix to the mix prior to the financial crisis. The key message is the changes in our portfolio composition, [top of the] changes in underwriting parameters have led to a lower risk profile and better credit performance. In the US, we no longer have a subprime consumer and mortgage business. Our US bank is now a community and niche lender with a much lower risk profile.

In Puerto Rico, our commercial and construction exposure has decreased from 55% of our total loan book to 43%. Construction lending has decreased [91%] and now stands at $109 million. On the bottom of the slide, we also segment that the commercial portfolio and included net charge-off distribution by segment since 2008. The important message from the table is our commercial mix has significantly improved by reducing exposure to asset classes with historically high losses.

In addition to the markedly improved risk profile, our recently publicly disclosed Dodd-Frank stress test provides us with additional comfort. This stress test incorporated a severe adverse scenario for Puerto Rico in which the unemployment rate fixed at 20.4% and economic activity, measured by GMP, decreases by 6.3% during the first calendar year. Under such a scenario, while we focus over 10 percentage loan losses in the nine-quarter period and reflect a [230 basis point] impact to our Tier 1 common equity ratio, we maintain a minimum cushion in excess of well capitalized status at all times.

As Richard talked about on slide number 3, our current outstanding direct exposure to the Puerto Rico government municipalities and other instrumentalities is $579 million, a decrease of $94 million from the previous quarter. The decrease is mainly due to $75 million we paid from our PRASA exposure, coupled with the sale of approximately half of our Puerto Rico central government loan portfolio. The remaining securities portfolio is primarily composed of senior COFINA bonds.

Our total exposure to the central government and public corporations is manageable representing only 2% of our total Tier 1 capital. As we have discussed in the past, most of Popular's direct Puerto Rico government exposure is in the form of municipal loans and net securities. Our municipality exposure consists of senior priority loans to a select group of municipalities, whose revenues are independent of the central government.

Our top four exposures are to Carolina, where our principal airport and several of our major tourist hotels are located; San Juan, the capital of Puerto Rico; [Guaynabo], the municipality with the highest per capita income and Bayamon, the second most populous municipality. These four municipalities comprise approximately 72% of our total municipality exposure and combined have an operating surplus of approximately $70 million and debt service capacity in excess of 2.2 times.

As discussed in previous earnings call, we're also having direct lending facilities in the form in which the government asks [our current inventory]. The largest such exposure is in the form of residential mortgage loans to individual borrowers in which the government provides a deficiency guarantee similar to FHA programs in the US.

In addition to these exposure to the Puerto Rico government, we also have commercial credits where a significant portion of the client's ability to service the debt comes from revenue derived from government sources and consumer credits where borrowers are employed by the Puerto Rico government and related agencies.

We have segmented our commercial portfolio exposure into multiple risk categories, based on dependence on government revenues and criticality of government service provided. We have also stressed our entire consumer portfolio assuming a representative proportion of our clients, our government employees that could be impacted by fiscal adjustment measures.

We continue to analyze and monitor these higher-risk segments, still at this time we feel confident that our exposures are both appropriately sized for our risk tolerance and are manageable, given our earnings power and strong capital base.

Please turn to the next slide to discuss additional credit metrics for the quarter. Non-performing assets, including covered loans, increased by $72 million to $878 million, driven by NPL increase of $56 million and an OREO increase of $16 million. The OREO increase is driven by lower OREO sales volumes in Puerto Rico compared to last quarter. The increase in non-performing loans is mostly associated with three large commercial loans in the Puerto Rico region.

Please turn to the next slide for a summary of trends in NPL inflows. Compared to the previous quarter, NPL inflows, excluding consumer loans, increased by $82 million, mainly driven by the previously mentioned large commercial loans in Puerto Rico, including a single $49 million credit relationship, which remains current. NPL inflows in the US were flat on a linked quarter basis at $16 million.

Please turn to the next slide. Net charge-offs, excluding write-downs, amounting to $46 million were essentially flat compared to the second quarter of 2015. The second quarter included a $5 million recovery from the sale of a portfolio of previously charge-off credit cards and auto loan. Excluding this impact, net charge-offs decreased by $4 million, mostly driven by lower commercial losses (inaudible) by higher mortgage losses in Puerto Rico.

The net charge-off ratio decreased [ to annualized 83 basis points] compared to 89 basis points in the previous quarter, mainly due to the impact in average balance of loans reclassified from the covered portfolio in the prior quarter. In the US, charge-off amounted to a recovery of $900,000 compared to losses of $1.3 million in the previous quarter, driven by the commercial and legacy portfolio. The adjusted provision for loan losses in the third quarter remained flat at $59 million. This provision represent [128%] of net charge-off compared to 130% in the previous quarter, driven by a slight decrease in the Puerto Rico region.

The corporation allowance for loan losses increased by $23 million on a linked quarter basis, driven primarily by the Puerto Rico commercial loan portfolio. In the US, the allowance was flat quarter-over-quarter. The ratio of allowance for loan losses to loans held in portfolio increased slightly from 2.3% in the previous quarter, 2.4% in this quarter. The ratio of allowance for loan losses to NPLs held in portfolio stood at 84% compared to 89% in the previous quarter.

With that, I would like to turn the call over to Richard for his concluding remarks. Thank you.

Thank you, Lidio.

Please turn to slide 11. Before we open the lines to questions, let me conclude today's remarks by reviewing the actions we're taking to drive shareholder value. Our healthy revenue generation and our leading market position in Puerto Rico allow us to earn above-average margins. Notwithstanding ongoing stability in our main credit quality indicators, we remain attentive to fiscal and economic trends. Popular's credit risk profile is meaningfully different from the one with which we entered this credit cycle, which together with our strong capital levels, improves our position.

We also benefit from our EVERTEC ownership and our stake in Banco BHD Leon, the second largest bank in the Dominican Republic. Given the fiscal and economic challenges we face on the Island, we are focused on the current situation while acting to minimize its risks. We've managed the bank within this environment for the last nine years, completing several troubled loan sales, refocusing our loan book from lower loss content business lines, raising approximately $2 billion of common equity and completing two in-market FDIC-assisted acquisitions, all while learning positive profits in our Puerto Rico business during the Island's prolonged recession.

More recently, in the past 18 months, we have repaid close to $1 billion in TARP, had two [credit MOUs listed], restructured our US balance sheet and back office, purchased $1.7 billion of loans in the Doral transaction, and reinstated our common dividend after more than six years. Nonetheless, we'll continue to seek additional opportunities in the current environment.

We're encouraged by the progress we are seeing in our US operation and by the strength of our Puerto Rico franchise, which has been demonstrated in the past few years. Our story is to a large extent linked to Puerto Rico, its economy and its future. We're aware of that and remain committed to working to improve the Island's prospects. Throughout its 122-year history, Popular have seen Puerto Rico thrive under a myriad of different situations. We remain confident that Puerto Rico will emerge from the current challenges as a more vibrant, robust and diversified economy, and we will do everything in our power to ensure this outcome. Although Popular is intrinsically linked to Puerto Rico, Popular's is also a story of a solid organization that has navigated through a complex environment and has emerged as a stronger, better capitalized, and more diversified institution. We look forward reporting on our progress in the next few months.

And with that, I'd like to open the call for questions.

We will now begin the question-and-answer session. (Operator Instructions) Brian Klock, Keefe Bruyette & Woods.

Richard, you talked about obviously the challenges, we read in the newspapers everyday about what's going on in Puerto Rico and the situation, you guys have still done a pretty good job generating some solid returns there. I guess maybe the first question, just thinking about what's in the near-term hear about if there is a -- if it does take a little longer on the fiscal situation, I guess, what are your thoughts about the liquidity situation at the GDP and if there is anything in the near-term and then I guess how you're handling that potential risk?

We don't have much in the way of loans to GDP. So in that sense, I think we are fairly immune from that. We are however concern about how the government navigates the next few months, absent any meaningful plan. We think as I mentioned in my remarks earlier that there will have to be some kind of restructuring and that ideally will have some legal framework, so that restructuring can take place in an orderly fashion.

There has to be some kind of oversight or fiscal control board, how you want to call it and there needs to be some kind of stimulus, you are not going to cost cut your way out of this. You do need the balanced budget, but you also need growth (inaudible). So we think whatever happens, we'll have to contain those elements. The question is how bad does it get before there's action on that front. We are prepared to manage through those scenarios. We would hope the political process can start moving before things get dicier.

When I think about Puerto Rico, I guess, when you make some adjustments for some of the non-recurring items that went through the margin and the non-covered piece of the non-Westernbank piece, loan yield actually looked to be pretty solid for the quarter. So maybe there is a question, just what you're seeing there. And then my second question is with all the challenges on Puerto Rico side, the US franchise is putting up some good growth and a good story there. So maybe talk about bolus, I mean how you are holding in on the margin in Puerto Rico and how you're growing in the US?

I let Carlos give you a little more color there, but you're right.

Yes, Brian, you're correct. If you look at the actual loan books, our margins are exactly holding pretty well on the lending book. This quarter, the variance was a bit large, but there is a couple of -- three specific things that drove it. Number one, the adjustment in deposit cost that we had a benefit last quarter we saw reverting to trend there. Number two, the reversal of the income on the [FHA], which again saw a unique situation to this quarter. And lastly, the change in the yield of our Westernbank portfolio.

As you know, the Westernbank portfolio has been volatile over time. The yield of that portfolio started in the 8%s in 2012, it went as high as almost 12% in 2014, it was down to 9% last quarter, a bit lower now. And the reason it move so much is because, as you know, (inaudible) accounting allow the changes in cash flows are reflected in the yield. Now moving forward, we hope that those variations will be less frequent and less large as we have completed the LSA -- commercial LSA part of the agreement. But overall, the lending market and the margin to Puerto Rico have helped pretty well in most part.

And then, like I said my last question, I'll get back in the queue. It's just a good story in the US, looks like you have momentum. Just maybe you can talk about the loan growth and the outlook, it seems like some pretty steady pretax ROE numbers there?

Yes, the US continues to perform well. They are -- we have a couple of commercial loan niches that continue to do well, the loan growth is there. We have finished basically with all the restructuring of our back office and that has lowered cost. So yes, we are absolutely very happy with the way the US is progressing.

And an important point to make on the US, Brian, is that this is not great crazy growth, we are actually being very cautious and attentive to returns. As you know, in some of our markets both New York and Florida are pretty held markets and some of the lending that's going on is fairly aggressive. So we are achieving the growth while passing on deals that we think the return doesn't make sense. So it's a very good start.

Alex Twerdahl, Sandler O'Neill.

I just want to circle back to something that Carlos said in his prepared remarks. He said when discussing the capital return, you said that you'll continue to pursue opportunities to actively manage capital that are tied more to the improvement in the fiscal and economic situation in Puerto Rico than to any specific regulatory filing. What does that mean?

That wasn't clear, Alex?

It really means that we are not subject as the CCAR banks are, we're not subject specifically to the results of the stress test and capital filing, so that our Board is free to make those decisions. Obviously, we don't do this in a vacuum and we have very active discussions with the regulators before any change and we will actively look to do more things in terms of capital returns, but we have to balance that with the environment we're operating in. We thought it was a good first step to reinstate the dividend and we'll be looking to do other things aside from dividend in the future, but right now, we want to see how the next few months play out.

Okay, that makes a lot of sense. So is the Board's decision and the timing of a buyback or dividend increases or any other activity, capital turn has nothing to do with when you file your next DFAST or your next any sort of specific date next year, it's more of the Board's decision.

That's it. That was exactly the point.

And then how are you guys thinking about the pace of run-off in the W Bank portfolio over the next couple of quarters and years?

I think if you look the historical run-off, Alex, it varies but if you round it to $100 million a quarter, you will be in the right ballpark. That's where we are right now. It's reasonable to assume, we may stall in a little bit moving forward, but how much is hard to tell. So if you go with the historical, you will probably be ahead of the game in the run-off, it's all been done ballpark.

Can you just remind us the loans the W Banks, the loans that you're selling, they had the extra provision for this quarter, what that portfolio is?

About $153 million is the carrying value of those loans.

And the $10 million you took this quarter as a provision against that and you expect that to -- do you expect to sell those loans sometime in the next couple of months?

Yes, correct.

Alex, that is part of our dispute.

As part of what we're arguing with the FDIC.

That will be resolved once all these questions are completed.

Do you know what they have on hand on the unpaid principal balance of that portfolio?

$896 million of the total portfolio.

But again the carrying value of the $153 million (multiple speakers).

Yes, $896 million.

Ken Zerbe, Morgan Stanley.

Just in terms of buyback, obviously the capital position has improved even further this quarter. I think that under almost any estimate, 16% CE Tier 1 is very, very high. I guess my question is why -- if you have the discretion to buy back shares and your stock is trading at a fraction of tangible book, and I understand you want to be conservative, and it sounds like everything is broadly fine with credit and your direct Puerto Rico exposure, I'm just trying to reconcile why [aren't] you being a little more aggressive when it comes to buying back stock well below tangible?

As Richard said, [we're sort of talking] about capital returning past tense now, but it just looks like that we paid our per dividend six years -- two weeks ago. So this is a very important first step, and we're trying to be deliberate on how we manage our capital return moving forward.

As Richard mentioned, our Board has discretion to do these things. This is a consultative process with our regulator. And what we try to do is to balance the feedback from our regulators and our outlook and how we'll see the market and our interest to return capital to our shareholders. Again, not everybody will agree on where that balance comes out any point in time, but that's what we're trying to achieve.

And obviously, the regulator's opinion weighs heavily on whatever is -- but we understand the math of buying back stock at less than book value, I mean we are very well aware of that.

Understood. So if I make the assumption that the regulator sort of this -- let's call the single biggest prohibition against buying back shares near term, at what point or in your view, what do you think changes their mind. I mean is it an 18% CE Tier 1 or (multiple speakers)?

No, no. I don't think it has as much to do with us as their concern with the general environment and the situation in Puerto Rico, unless -- until they see, things are a little clear not necessarily a total solution, but until they see clarity in that environment, I think, that's going to weigh heavily on what they think.

Jordan Hymowitz, Philadelphia Financial.

I was just wondering with the Cuba starting to open up a little bit, is there any potential interests that you guys have in expanding there?

There's plenty of interest. And I think, eventually, there will be some potential there that is going to take a while. I mean, I think there's been some positive steps for there to be meaningful progress there. Congress is going to have to move and frankly, we don't see that happening in an electoral year, given Florida politics. So, I think it's probably a process in the five-year range, but who knows (multiple speakers)?

The congress (technical difficulty)?

We are extremely interested in that possibility.

Can you say specifically what Congress would have to do for you to (multiple speakers)?

They would essentially have to repeal Helms-Burton, is the answer to that. Up until Helms-Burton, it was essentially a presidential directive. So it could have been eliminated by the administration. After Helms-Burton, it will require a congressional action and legislation.

Taylor Brodarick, Guggenheim Securities.

I think, just one last from me, for the large kind of commercial loans and PR that went to NPL status, any sort of color about why there is -- they are different from, maybe, the macro situation and maybe, a sense of which you would think that that would re-occur going forward?

I don't think we want to go into the details, but what we can tell you was what we said in the prepared remarks in a sense that this is not a case that is related -- directly related to the current fiscal situation, and again, that we see no negative trends in our portfolio. Having said that, we remain cautious given the current environment in Puerto Rico.

This concludes our question-and-answer session. Thank you for attending today's conference.

Thank you.

Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.