PR Banking Industry Report – January to December 2012

The profitability of the Puerto Rico banking industry in 2012 was positive for the second consecutive year (3.4% ROE in 2012 and 6.3% in 2011) thanks to the reduction in the provision expense. However, higher profitability levels are not likely to materialize in an environment of still high charge-offs and slow credit activity. The debt burden that Puerto Ricans face in the coming years is likely to push credit activity further down and maintain delinquency at higher levels compared to pre crisis years. In this context, there will be pressure to increase pricing and fees and leverage economies of scale with additional consolidation.