Puerto Rico Banking Report: Q1 2024

July 1, 2024

Main Highlights:
• The banking sector reached a Pre-Tax ROE of 21.7% in Q1 2024. The industry’s Pre-Tax ROA (1.42%) remained flat compared to 2023. The banking profitability remained significantly above the 2005-2017 period when the Pre-Tax ROA was consistently below 1%.

• Oriental Bank and FirstBank showed a Pre-Tax ROE above 20% for the third consecutive year. These banks achieved healthy efficiency levels in Q1 2024 and in 2023 with Cost to Income ratios just north of 50%.

• The large public deposits portfolio, which has to be invested in liquid assets, explains the much higher leverage ratio of Banco Popular compared to Oriental Bank and FirstBank. The loan portfolio represented 43% of total assets for Banco Popular in Q1 2024 compared to 69% for Oriental Bank and 65% for FirstBank.

• The banking sector continued to be very well capitalized with the Tier 1 Risk Based Capital Ratio at 16.1% in Q1 2024. Banks are likely to continue returning capital to shareholders through share buy backs and dividends.

• Loan delinquency remained at historically low levels despite a Q4 2023 increase in the Puerto Rico consumer loan portfolio. The Non-Performing Loans Ratio was 1.9% in Q1 2024, the lowest level since 2005.

• Loan balances grew by 2.4% in Q1 2024 on an annual basis, below the 8.2% increase achieved in 2023. The CRE and auto businesses drove the loan portfolio growth, more than offsetting reductions in commercial and personal unsecured loans. Despite high interest rates, the mortgage portfolio remained stable partly driven by Popular’s strategy to retain Government insured loans.

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