Carlos Vazquez: Yes. I mean we are – as you know, Kelly, we haven’t provided that information in the past, and we are all done with adding guidance and emission.
Kelly Motta: Fair enough. I thought I could slip one by the goalie. Thank you.
Carlos Vazquez: But I mean obviously, this will vary, but you have the yields of our different books in our levels and yields in the press release, and you can work off of that as a guide, at least to start your work up front and back.
Kelly Motta: Awesome. Thanks so much.
Carlos Vazquez: You’re welcome.
Operator: Our next question comes from Brody Preston of UBS. Brody, please go ahead.
Brody Preston: Hi. Good morning everyone.
Ignacio Alvarez: Hi Brody. How are you?
Brody Preston: Good. How are you? I just wanted to ask within the NII guidance. I think I heard you that you got two cuts in the back half of the year, but wanted to ask what you all are assuming for a retail and commercial deposit beta within that NII growth guidance.
Carlos Vazquez: We have not discussed for looking betas, Brody. But I think it’s not unreasonable to assume that the rate of increase in beta should subside with stable rates and more so if rates start to drop. But we have not given details on the forward-looking beta.
Brody Preston: Got it. Okay. I wanted to circle back to the consumer credit discussion. I just want to make sure the consumer credit allowance is about 5.25%, right? So, that looks relatively unchanged quarter-over-quarter. It actually came down just a little bit, just given the growth of the loan portfolio. I guess the first question there is what’s the life of loan assumption for the consumer book under CECL?
Lidio Soriano: I would say a lot of our consumer books is pretty short dated in terms of duration. So, we will call it – let’s call it, a year or 2 years thereabout.
Brody Preston: Okay. And is this the 3% level that you had for annualized charge-offs in the consumer book, when I just kind of quickly look back at my model, it looked like outside of a couple of quarters, during COVID, this is the highest period for consumer credit losses that you all have had either from a dollar amount or from an NCO rate perspective. And so is this the kind of new level that we should expect to see here? And if it is, if it’s 2 years, and we are talking about 3% of charge-offs, is there a case to be made that we need to walk the consumer reserve incrementally higher from here than where it actually is?
Lidio Soriano: You are asking a lot of questions, but I will say this. I mean we will go back to what I mentioned in our prepared remarks, our outlook for – in terms of losses is, we expect losses next year to be between 65 – 35 basis points. A lot of the drivers in the losses are associated with our retail book. We expect normalization to continue in those portfolios. So, we will see, and we are growth in terms of the losses that we experienced prior to the pandemic vis-à-vis the losses that we are experiencing today. As I also mentioned, we remain positive for the outlook of our consumer books, given the strength of the economy and the liquidity of our clients.
Brody Preston: Got it. So, is there anything specific going on that’s causing the charge-off rate to move to a level that’s kind of at the high end, I guess of what you would consider normal just given the strength of the economy and given the fact that employment is so strong in the island?
Ignacio Alvarez: I think as part of the conundrum that Carlos referred to, we have seen – you have also seen banks in the U.S. experienced the same in terms of even in the face of a very strong economy, you are seeing consumer portfolios deteriorate. If you wanted me to expect it, I could say, I mean there is potentially a couple of things. I would say played out of inflation on higher rates as having an impact in the cash flows of some of our customers that we might be leading to strategic defaults. And I mean there is – if you look at some of the analysis and started some by the credit bureaus, there is something that relates – they call FICO inflation, in which after the pandemic, the FICOs of a lot of the consumers went up, and that also created an environment in which now FICOs are behaving a little bit worse than they behave prior to the pandemic.
Carlos Vazquez: Brody, one more thing, you have heard Lidio before say that historically, our losses have gravitated in a range between 75 basis points and 125 basis points. So, the range of loans as we are talking about 65-35 is sort of in the low end of that historic range. So, I wouldn’t characterize that range is a very high level of losses is the low end of our historic range.
Brody Preston: No. The commercial book and then the resi mortgage has been great for you guys. I was speaking more specifically, Carlos, to the consumer book standalone by itself. So, thank you. Thank you very much for taking my question guys.
Ignacio Alvarez: Thank you, Brody.
Operator: [Operator Instructions] Our next question comes from Gerard Cassidy of RBC. Gerard, please go ahead.
Thomas Leddy: Good morning everyone. This is Thomas Leddy calling on behalf of Gerard.
Ignacio Alvarez: Hi Thomas.
Thomas Leddy: The commercial relationship in the PR commercial portfolio that you guys called out is driving the NPL inflows in the quarter. I think you said it was in the renewable energy sector. Is there any further color you can give us there? Are you guys keeping a closer eye on similar relationships?
Ignacio Alvarez: Yes. This is Ignacio. Lidio can answer in more detail, but really, that’s – that case is idiosyncratic. I mean the things that led to that problem have nothing to do with the industry in general. It’s more internal to that client.
Lidio Soriano: We don’t have any significant exposure in that industry either.
Thomas Leddy: Okay. Got it. That’s helpful. And then just high level, given the positioning of the balance sheet today, you guys mentioned pretty rate neutral over the short-term. What kind of an interest rate environment would be ideal for Popular over the next 12 months to 24 months, both on the short and long end of the curve?
