Spain’s Banco Popular earned EUR 104 million in the first quarter, up 4% from the year-ago quarter (and compared with a loss of EUR 2.5 billion in the trailing quarter on heavy loss provisioning). Net interest income fell 14.5% compared with the year-ago quarter as Popular, like many banks, saw continued low rates squeeze margins. EUR 194 million of gains on asset sales offset the impact of this. While the quarterly results put the bank ahead of our full-year projections, we remain wary of what the rest of the year may hold and are maintaining our extreme uncertainty rating on the no-moat bank. While financial asset impairment charges fell 19.5% year over year (to EUR 250 million), the non-performing loan ratio grew to 9.94% from 8.98% sequentially and from 6.35% a year ago. At the same time, the stock of provisions slipped to cover just 59% of NPLs at the end of the first quarter compared with 65% at year-end. We’re pleased that Popular is continuing to focus its attention on costs, closing 68 branches since year-end and cutting personnel costs 6%. While we remain cautious, we note that the bank repaid EUR 2.5 billion of its EUR 17.2 billion of LTRO funding during the quarter and plans to continue to pay it down, which may show that management thinks the bank is at a inflection point. Capital levels were flat with the trailing quarter with core Tier 1 capital at 10.1%. We plan to maintain our fair value estimate.