The various impacts of the sharing economy are being felt worldwide, and Puerto Rico is no exception. The Island's hospitality sector is being transformed by the short-term rental business, with rental platforms like Airbnb and HomeAway generating new vacation-related business and spreading tourist dollars beyond the typical hotel and tourism districts.

Los cinco principales bancos múltiples de la República Dominicana (Top 5 consolidado) siguen mostrando una alta rentabilidad al cierre del tercer trimestre del 2018, con un ROE antes de impuestos de 23.6% anualizado, impulsado por una economía en franco crecimiento (i.e. variación interanual del PIB real durante el periodo de enero a septiembre de 2018 de 6.9%). Vemos también un crecimiento saludable en la cartera de crédito de los bancos y gastos sobre ingresos relativamente bajos, factores que inciden también en la rentabilidad. Popular, BHDLeón y Banreservas, los principales bancos que conjuntamente administran 90% del total de activos del Top 5 y 77% de la industria, reportaron los niveles de rentabilidad más altos al cierre del tercer trimestre de 2018, con ROE pre-impuestos de 27.4%, 26.6% y 23.5%, respectivamente. Progreso y Scotia, bancos que gestionan el restante 10% de activos del Top 5, registraron ROEs pre-impuestos de 17.2% y 9.6%, respectivamente. Además, el índice de solvencia del Top 5 se situó en 17.0% en agosto del 2018, muy por encima del mínimo regulatorio de 10% establecido por ley. Finalmente, en este número analizamos la evolución de las carteras de crédito de la banca múltiple, donde observamos crecimientos elevados acompañados de una mejora en la tasa de morosidad para la mayoría de bancos.

Hurricane María was particularly harmful for one of the key economic sectors of Puerto Rico, tourism. After one year and three months, the tourist sector is showing positive signs of growth and encouraging new dynamics. The traditional hotel sector is rapidly moving towards pre-hurricane business levels, the cruise ship industry is booming, and tourists seem to be increasingly relying on short-term rentals to visit Puerto Rico.

The positive momentum in the local banking industry continued to build in the third quarter of 2018, following the historic and highly disruptive 2017 Atlantic hurricane season. The industry-wide Pre-Tax ROE in Q3 2018 reached 13.7%, following a strong first half of 2018 (Pre-Tax ROE of 8.3% in Q1 2018 and 17.4% in Q2 2018), yielding a YTD 2018 Pre-Tax ROE of 13.1%. These profitability levels have not been seen since 2005, prior to the onset of the prolonged and deep economic downturn. Concerns over the deterioration of asset quality have further abated given the latest quarterly delinquency levels. The Q3 2018 industry-wide nonperforming loans ratio stood at 7.6% from a peak of 9.2% in the wake of the hurricanes. Furthermore, after the temporal and non-recurring impact of Hurricanes Irma and Maria on the banks' income and expenses, banking productivity levels improved materially, reaching a cost to income ratio of 56.5% in YTD 2018 from 63.8% in 2017. Capital buffers remain exceedingly strong, with a consolidated Tier 1 Risk-Based Capital ratio of 20.9%. Going forward, strong banking performance is expected to continue given the billions of dollars in public and private post-disaster reconstruction funds that will be increasingly flowing through the economy and financial system. Lastly, in this issue, we benchmarked the profitability performance of local banks against that of similar-sized United States peer banks since 2015, also breaking down profitability by income and expense levers to help explain what drove the differences in YTD 2018.

Post hurricane recovery efforts drive a turning point in the local labor market', '', 'Employment is finally growing again in Puerto Rico driven by the efforts to rebuild the infrastructure damaged by hurricane María. Most economic sectors will benefit, not only from the improved infrastructure, but by ripping the benefits of more consumption from a larger labor force. Employment growth has spread unevenly with some municipalities struggling to recover while others already experiencing higher employment than before María.', 'Employment is finally growing again in Puerto Rico driven by the efforts to rebuild the infrastructure damaged by hurricane María. Most economic sectors will benefit, not only from the improved infrastructure, but by ripping the benefits of more consumption from a larger labor force. Employment growth has spread unevenly with some municipalities struggling to recover while others already experiencing higher employment than before María.

El 16 de agosto Scotiabank (SB) anunció el acuerdo de compraventa del Banco Dominicano del Progreso (BDP) por el 97.44% de las acciones, por una cifra estimada de USD $330 MM. Con esta compra Scotiabank se consolida como el tercer banco privado del país, con un 9% de los depósitos totales, el 10% de la cartera crediticia, y el 14% de las sucursales a nivel nacional.

Los cinco principales bancos múltiples de la República Dominicana (Top 5) siguen mostrando un alto nivel de rentabilidad en la primera mitad del 2018 (ROE antes de impuestos del 23.8%). Les acompaña un crecimiento económico superior al 6% que podría peligrar si los precios del petróleo siguen subiendo y el Banco Central Dominicano tiene que seguir aumentando la tasa de intermediación bancaria. El semestre cierra con la noticia de la compra de Banco del Pro-greso Dominicano por parte de ScotiaBank. Esta compra deja a tan solo 4 bancos con el 86% de los activos de la banca múltiple (75% de los activos del sistema financiero dominicano) y a otros 13 bancos con el 14% restante. Por tanto, las oportunidades de seguir creciendo inorgánicamente por parte de los cuatro grandes se reducen considerablemente, dada la limitada cuota de mercado de los demás bancos múltiples. Como veremos en el informe, Scotia se afianza en la cuarta posición aunque lejos todavía de BHDLeón y tendrá oportunidades de consolidación de sucursales dada la ubicación de las del Banco del Progreso.

On August 16th, the Federal Housing Administration (FHA) announced, among other things, a 30-day foreclosure moratorium extension for certain FHA-insured mortgages secured by properties located in Presidentially-Declared Major Disaster Areas (PDMDAs) in Puerto Rico and the U.S. Virgin Islands. This is the 4th moratorium extension since Hurricane Maria.

The local banking industry's profitability on a consolidated basis has rebounded strongly in the wake of Hurricanes Irma and Maria, reaching a Pre-Tax ROE of 17.4% in Q2 2018, making it the highest quarterly profitability level in a decade. The liquidity position of local banks, particularly of Popular, has experienced a material improvement, with total deposits reaching $54.1 billion as of the end of Q2 2018 from $48.8 billion in Q3 2017, a $5.3 billion or 10.9% increase. Hurricane-related private insurance claims paid out to policyholders and post-disaster federal assistance funds deposited in private banks have largely driven this surge in deposits. This newfound liquidity will need to be put to productive use, either through increased lending or investments. The unadjusted nonperforming loans ratio showed some improvement in Q2 2018, decreasing from 9.2% to 8.8%, temporarily appeasing concerns of a spike in delinquencies. Capital positions of banks continue exceedingly strong, reporting an industry-wide Tier 1 Risk-Based Capital Ratio of 21.5%. The deployment of excess capital through organic and inorganic growth opportunities (e.g. Popular's Reliable purchase), stock repurchases or dividend payments to shareholders must be strategically pondered. Moreover, in this revamped issue we analyze Post-Hurricane Maria foreclosure relief efforts and their impact on banks and the housing market.