In a move intended to strengthen its future performance Banco Popular de Puerto Rico completed the sale of a $438 million portfolio of nonperforming residential mortgage loans at a loss.
The portfolio, whose unpaid principal balance is approximately $511 million, was sold through an all-cash transaction, executives said.
The purchase price for the loans was approximately $244 million, or 47.75% of the unpaid principal balance of the loans.
The transaction is expected to result in an after-tax loss of approximately $127 million that will be recognized in the second quarter of 2013.
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Over 2012 alone “we significantly improved our credit risk profile,” said Popular Inc. chairman and CEO Richard Carrion.
The sale takes those measures one step further, he said, by ensuring stronger credit-performance ratios and reduced credit-related expenses. Hence, the focus of a greater part of its resources will be “on improving profitability.”
Due to the sale the bank’s nonperforming residential mortgage loan portfolio is reduced by 73% and the total nonperforming loans by 42%.
Popular’s pro-forma NPL ratio as of March 31, 2013 decreases from 4.86% to 2.89%.
