Fitch Affirms & Removes Popular, Inc. from Rating Watch Negative

Business Wire, Jan 23, 2008

NEW YORK -- Fitch Ratings has affirmed the long-term Issuer Default Rating (IDR) of 'A-' for Popular, Inc. (Popular) and removed it from Rating Watch Negative. This action follows the sale of a large part of Equity One's loan portfolio to American General Finance, Inc. (AGF). Popular will receive approximately $1.5 billion cash in this transaction, which is expected to close by the end of first-quarter 2008 (1Q'08). Cash proceeds will sharply reduce liquidity pressure at Popular, Inc. and its sub-holding company, Popular North America (PNA).

Popular has a Negative Rating Outlook stemming from continued profitability and asset quality pressures. A stabilization of core profitability and asset quality would have to be achieved before the Outlook returns to Stable. A complete list of ratings is included at the end of this release.

In its core operations in Puerto Rico, Popular is experiencing asset quality pressures due to the difficult economy. However, its lead bank, Banco Popular de Puerto Rico (BPPR), is expected to be able to maintain a sound financial profile. Asset quality problems appear manageable, while its capital ratios remain well above regulatory minimums. On the U.S. mainland, Popular continues to drastically restructure its operations. In 4Q'07, charges are being taken to substantially downsize E-Loan along with the aforementioned sale of Equity One's portfolio. Sales of mainland branches have also been undertaken.

Looking at the short-term ratings, Fitch continues to differentiate between the holding company and the bank level ratings. Despite the large cash infusion and subsequent paydown of borrowings, there will remain a considerable amount of debt at the holding company and PNA. BPPR will continue to have a comparatively stronger liquidity and funding profile in Fitch's view. BPPR continues to benefit from its leading franchise in Puerto Rico and its solid deposit base.

The following ratings have been affirmed and removed from Rating Watch Negative; the Rating Outlook is Negative:

Popular, Inc.

-- Long-term IDR 'A-';

-- Senior unsecured 'A-';

-- Preferred stock 'BBB '.

Popular North America, Inc.

-- Long-term IDR 'A-';

-- Senior unsecured 'A-'.

Banco Popular North America

-- Long-term IDR 'A-';

-- Long-term deposits 'A';

-- Short-term IDR 'F1';

-- Short-term deposits 'F1'.

Banco Popular de Puerto Rico

-- Long-term IDR 'A-';

-- Long-term deposits 'A';

-- Short-term IDR 'F1';

-- Short-term deposits 'F1'.

BanPonce Trust I

-- Trust preferred 'BBB '.

Popular Capital Trust I

-- Trust preferred 'BBB '.

Popular Capital Trust II

-- Trust preferred 'BBB '.

Popular North America Capital Trust I

-- Trust preferred 'BBB '.

The following ratings have been affirmed:

Popular, Inc.

-- Short-term IDR 'F2';

-- Commercial paper 'F2';

-- Individual 'B/C';

-- Support at '5'

-- Support floor 'NF'.

Popular North America, Inc.

-- Short-term IDR 'F2'

-- Commercial paper 'F2';

-- Individual 'B/C';

-- Support at '5';

-- Support floor 'NF'.

Banco Popular de Puerto Rico

-- Individual 'B/C';

-- Support '4';

-- Support Floor 'B'.

Banco Popular North America

-- Individual 'B/C';

-- Support '5';

-- Support floor 'NF'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.