Rating Action: Moody's upgrades Popular Inc.'s long-term senior unsecured rating to Ba3 from B1, concluding review; outlook stableGlobal Credit Research - 22 Apr 2021New York, April 22, 2021 -- Moody's Investors Service, ("Moody's") has upgraded the ratings of Popular, Inc. (Popular) including the long-term senior unsecured rating to Ba3 from B1 and the ratings and assessments of its bank subsidiary, Banco Popular De Puerto Rico, including the long-term deposit rating to Baa3 from Ba1 and the standalone baseline credit assessment to ba2 from ba3. While the bank's short-term deposit rating was upgraded to Prime-3 from Not Prime, its short-term counterparty risk rating and short-term counterparty risk assessment were confirmed at Not Prime and Not Prime(cr), respectively. The rating outlook is stable following the conclusion of the review for upgrade, which Moody's announced on March 15, 2021.The ratings upgrade reflects Moody's overall assessment that the bank's increased resiliency to still uncertain operating conditions in Puerto Rico, despite significant government stimulus.Upgrades:..Issuer: Popular, Inc.....Senior Unsecured Medium-Term Note Program, Upgraded to (P)Ba3 from (P)B1....Subordinate Medium-Term Note Program, Upgraded to (P)Ba3 from (P)B1....Pref. Stock Non-cumulative Preferred Stock, Upgraded to B2 (hyb) from B3 (hyb)....Senior Unsecured Regular Bond/Debenture, Upgraded to Ba3 from B1, Stable From Rating Under Review....Junior Subordinated Shelf, Upgraded to (P)B1 from (P)B2..Issuer: Banco Popular de Puerto Rico.... Adjusted Baseline Credit Assessment, Upgraded to ba2 from ba3.... Baseline Credit Assessment, Upgraded to ba2 from ba3.... LT Counterparty Risk Assessment, Upgraded to Ba1(cr) from Ba2(cr).... LT Counterparty Risk Rating (Foreign Currency), Upgraded to Ba2 from Ba3.... LT Counterparty Risk Rating (Local Currency), Upgraded to Ba2 from Ba3.... Issuer Rating, Upgraded to Ba3 from B1, Stable From Rating Under Review.... LT Deposit Rating, Upgraded to Baa3 from Ba1, Stable From Rating Under Review.... ST Deposit Rating, Upgraded to P-3 from NP..Issuer: Popular Capital Trust I....Backed Pref. Stock Preferred Stock, Upgraded to B1 (hyb) from B2 (hyb)..Issuer: Popular Capital Trust II....Backed Pref. Stock Preferred Stock, Upgraded to B1 (hyb) from B2 (hyb)....Backed Pref. Stock Shelf, Upgraded to (P)B1 from (P)B2..Issuer: Popular North America, Inc.....Backed Senior Unsecured Medium-Term Note Program, Upgraded to (P)Ba3 from (P)B1....Backed Subordinate Medium-Term Note ProgramUpgraded to (P)Ba3 from (P)B1..Issuer: Popular North America Capital Trust I....Backed Pref. Stock Preferred Stock, Upgraded to B1 (hyb) from B2 (hyb)Confirmed:..Issuer: Banco Popular de Puerto Rico.... ST Counterparty Risk Assessment,; Confirmed at NP(cr).... ST Counterparty Risk Rating (Foreign Currency), Confirmed at NP.... ST Counterparty Risk Rating (Local Currency), Confirmed at NPOutlook Actions:..Issuer: Banco Popular de Puerto Rico....Outlook, Changed To Stable From Rating Under Review..Issuer: Popular, Inc.....Outlook, Changed To Stable From Rating Under ReviewRATINGS RATIONALEThe upgrades of the ratings and the BCA reflect Moody's view that the bank's current strong capitalization and liquidity provide it with heightened resiliency to weather Puerto Rico's economic challenges, which include continued public sector austerity measures, a sectorial and geographically-concentrated island economy, and more recently, the economic disruption caused by the coronavirus pandemic. The ratings upgrade also reflects a long-term consolidation trend of the island's banking sector, which has led to higher operating margins for remaining banks.The bank's capitalization continues to remain strong, with Moody's adjusted tangible common equity (TCE) as a percentage of risk-weighted assets (Moody's TCE ratio) of 15.95% at 31 December 2020. Popular's capital position remains a key credit strength because it helps to buffer against unexpected credit and/or operational losses. While Popular has made capital distribution with dividends and share repurchases, Moody's believes the bank will continue to maintain capital levels higher than US mainland regional bank peers.Moody's said that Popular's deposit franchise value is primarily driven by its dominant market position in Puerto Rico, where it enjoys an approximate 50% deposit market share as of 30 June 2020. This affords Popular with market-leading pricing power supporting profitability. Additionally, the Puerto Rican banking system has undergone a period of rapid consolidation as foreign banks leave the island, creating an incrementally more favorable operating environment for incumbent banks as competition eases.Asset quality remains a ratings constraint, Moody's noted, as Puerto Rico's weak economy is reflected in Popular's relatively high problem loan ratio of 7.5% as at 31 December 2020, which is significantly higher than US mainland peer average of 1.6% for the period.The stable outlook is driven by Moody's view that the banks' credit fundamentals will remain broadly unchanged over the next 12 to 18 months, despite still weak though improving, operating conditions in Puerto Rico, despite generous federal government support.In line with global banks, governance risk is high for Popular though Moody's does not have any particular concerns around its governance arrangements.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSBanco Popular de Puerto Rico's BCA could be upgraded following further material improvement in the operating conditions for banks in Puerto Rico, which Moody's believes would lead to a reduction in asset risk. Improved asset quality while maintaining good capital levels and profitability could lead to a higher BCA. A higher BCA for Banco Popular de Puerto Rico would likely lead to rating upgrades.Banco Popular de Puerto Rico's BCA could be downgraded if there were an unexpected deterioration of bank operating conditions in Puerto Rico. It could also be downgraded if Popular's risk appetite increased, for example because of above-peer average loan growth or a notable increase in lending concentrations. Additionally, a sustained decrease in capital, liquidity or a deterioration in the bank's funding profile could lead to a downgrade in the BCA. A lower BCA would likely lead to ratings downgrade.The principal methodology used in these ratings was Banks Methodology published in March 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1261354. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issue with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Sadia Nabi Asst Vice President - Analyst Financial Institutions Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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