Aug. 29 (Bloomberg) -- Popular Inc., the owner of Puerto Rico's largest bank, will sell subprime home loans and servicing assets of its U.S. mortgage subsidiary to Goldman Sachs Group Inc. affiliates. The firm rose 3.7 percent in New York trading.

The sale will result in a loss of about $450 million and increase liquidity by $700 million, the San Juan-based company said today in a statement. About $1.17 billion in loans and mortgage-servicing assets are included in the deal, scheduled to close in the fourth quarter. Terms were not disclosed.

``We are continuing to narrow the scope of our mainland U.S. operations that are most exposed to the credit and mortgage markets,'' Chief Executive Officer Richard L. Carrion said in the statement.

The company, which runs Banco Popular de Puerto Rico, has been retrenching and said last year it was shutting its wholesale non-prime mortgage origination business along with the wholesale broker, retail and call-center units. In January Popular sold $1.45 billion in loans to American International Group Inc., about half of which were subprime mortgages. The lender's market value has fallen 41 percent in the past year.

Popular in May sold $400 million in perpetual preferred stock, more than it had planned. The lender said it would use the proceeds to repay debt and shore up capital. Popular yesterday halved its quarterly dividend to help preserve $90 million a year.

The loan servicing assets are being transferred to Litton Loan Services, a Texas-based mortgage-servicing company affiliated with Goldman, said Michael DuVally, a spokesman for the New York-based bank. Popular is refocusing on its traditional market and last August bought Citigroup Inc.'s operations in Puerto Rico for $120 million.

``Our core retail banking franchise in Puerto Rico is strong and continues to perform well,'' said Carrion.

Popular rose 27 cents to $7.50 at 9:48 a.m. in Nasdaq trading.

Last Updated: August 29, 2008 09:50 EDT