PR Banking Industry Report – January to March 2013

The local banking industry reached a pre-tax ROE of 7% in Q1 2013 once we eliminate the negative impact from the sale of non performing loan (NPL) portfolios by Popular and FirstBank. The current environment of low leverage and still high provision expenses, is preventing the industry from reaching profitability levels in line with the pre-crisis period. The recent sales of NPL portfolios have helped decrease the delinquency levels but may also impact the local property prices given the discounts involved in the purchase prices which have ranged between 32% and 53% of the unpaid principal balance (UPB).