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EXCLUSIVE-UPDATE 2-Banco Popular parent to cut US branches, jobs
October 22, 2008 / 12:42 PM / 9 years ago

EXCLUSIVE-UPDATE 2-Banco Popular parent to cut US branches, jobs

* Bank to cut U.S. branch network to about 100 from 139

* U.S. workforce to be cut by one-third

* Q3 net loss of $2.42 per share

* Bank’s shares fall

(Recasts; adds CFO interview, datelines, bylines)

By Jonathan Stempel and Sweta Singh

NEW YORK/BANGALORE (Reuters) - Popular Inc (BPOP.O), the parent of Banco Popular, said on Wednesday it plans to eliminate more than one-fourth of its 139 U.S. branches and cut its U.S. workforce by 600 to cope with the nation’s economic downturn.

Puerto Rico’s largest bank also posted a third-quarter loss of $668.5 million, or $2.42 per share. This reflected higher loan losses and a charge tied to the sale of some U.S. mortgage loan and servicing assets to Goldman Sachs Group Inc (GS.N) affiliates, lowering exposure to subprime mortgages.

Four analysts on average expected a loss of $1.64 per share, according to Reuters Estimates. Popular’s loss from continuing operations was 79 cents per share. It had a profit of $36 million, or 12 cents per share, a year earlier.

“Given today’s environment, and how the business will look in the next few quarters, we need to downsize, and concentrate in areas where we can be most profitable,” Chief Financial Officer Jorge Junquera said in an interview. “We’re getting our proportionate share of problems affecting banks generally.”

Junquera said Popular plans through sales, consolidations and closures to reduce its U.S. banking network to about 100 branches by next June from 139.

He said the cutbacks will affect all markets, and include the elimination of all in-store branches in California. Popular has branches in California, Florida, Illinois, New Jersey, New York and Texas, which have large Hispanic populations.

Popular also said it plans to scale back underperforming businesses, and that its E-Loan unit will stop making mortgages in the next few weeks. It said staffing cuts will reduce its U.S. workforce by one-third to about 1,200 from 1,800. The company expects $50 million of annual cost savings.

Junquera nevertheless said Popular remains “comfortably well-capitalized,” and plans to better integrate its U.S. operations with those with Puerto Rico. The lender said it has enough liquidity to meet its obligations through 2009.

Popular set aside $252.2 million for credit losses in the third quarter, up from $86.3 million a year earlier. Net charge-offs increased to $170.5 million from $63.4 million.

Lending income fell 2 percent to $324.3 million, while non-interest income rose 6 percent to $187.9 million.

Earlier in 2008, Popular sold much of its U.S. consumer finance business Equity One to a unit of American International Group Inc (AIG.N) for about $1.5 billion.

In afternoon trading on the Nasdaq, shares of Popular were down 43 cents, or 6.5 percent, at $6.15. They began the year at $10.60.

Editing by Deepak Kannan and Gunna Dickson

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