Popular Inc. Lifts 2026 NII Outlook to 8-9% as Margin Hits 3.67%

Popular Inc. shares have climbed 23.4% over the past six months, outpacing the 12.9% industry average and lagging peers Flagstar Bank and Regions Financial. The stock's outperformance coincides with a fundamental shift in the bank’s earnings trajectory, driven by expanding margins and accelerated technology adoption.

Management has raised its full-year 2026 net interest income (NII) growth outlook to 8-9% and increased its quarterly non-interest income guidance to $165-$170 million. These revisions reflect a stronger-than-expected first half, where NII rose 10.2% year-over-year to $1.36 billion, supported by lower funding costs and higher loan balances.

Margin Expansion Drives Earnings Growth

The net interest margin expanded 22 basis points to 3.67% in the first half of 2026, continuing a multi-year trend that saw the margin grow from 2.88% in 2021. This improvement stems from a favorable mix of lower deposit costs and increased investment in U.S. Treasury securities, which offsets the impact of the Federal Reserve’s September 2026 rate hike to 3.75-4.00%.

Return on tangible common equity surged to 17.02% from 12.32% a year earlier, exceeding the company’s newly raised annual objective of 14-17%. This efficiency gain is attributed to digital transformation initiatives, including the acquisition of Evertec customer channels and a $300 million technology infrastructure investment made in 2023 to streamline operations.

Core Lending and Deposit Momentum

Despite headwinds in the U.S. construction portfolio and softer auto lending in Puerto Rico, Popular expects 2026 loan growth at the low end of its 3-4% range. The bank has maintained a compound annual growth rate of 6.2% in net loans and 3.1% in total deposits between 2020 and 2025, with both metrics continuing their upward trend in the first half of 2026.

Non-interest income, a key component of the fee-based strategy, increased 8% year-over-year in the first half of 2026. Growth was driven by the integrated marketplace within the Mi Banco app and the launch of new corporate credit cards, which deepen client relationships and reduce reliance on pure spread income.

Liquidity Position Supports Shareholder Returns

Popular holds a robust liquidity position of $4.6 billion as of June 30, 2026, against total debt of nearly $1.5 billion. This balance sheet strength allows the company to maintain aggressive capital return programs without compromising operational flexibility.

In August 2026, the board approved a 20% increase to the quarterly dividend, setting the payout at 90 cents per share. This move aligns with the company’s strategy of rewarding shareholders through dividends and buybacks while sustaining the higher ROTCE levels achieved in the first half of the year.