PR Banking Industry Report – January to December 2016

Although local banks are operating against a backdrop of a deep economic malaise, an unre-lenting fiscal and debt crisis, and a persistent population decline, they have been able to maintain, on a consolidated basis, positive levels of profitability for three consecutive years. The local banking industry posted a Pre-Tax ROE of 4.3% in 2016, 5.7% in 2015, and 3.3% in 2014. Revised forecasts of economic growth point to a prolonged economic contraction which will keep local banks profitability levels subdued. In this issue we will highlight the difference in performance and financial condition of banks that are highly geographically diversified and the banks that are Puerto Rico-centric. Broadly speaking, Popular, FirstBank and Oriental have experienced increases in their market share in assets, deposits and loans & leases from the end of 2011 to the end of 2016. On the other hand, Santander and Scotia, which operate locally as affiliates of large multinational financial entities, have either maintained their market share or lost market share. With few possibilities of local growth, banks might be eyeing the market share of savings and credit cooperatives and nondepository entities.