FirstBank acquires Banco Santander Puerto Rico

On October 21st First BanCorp., the bank holding company of FirstBank Puerto Rico (FirstBank), announced the acquisition of Banco Santander Puerto Rico (BSPR) for a $63M premium to BSPR’s core tangible common equity ($362M) in an all cash transaction. In this insight we will analyze the expected new market shares in the Puerto Rico banking sector after this acquisition and the recently announced purchase of Scotiabank operations by Oriental Bank.

Mixed Economic Perspectives for Puerto Rico

The available indicators related to the Puerto Rico economy show mixed signs for the short and medium terms. There seems to be an economic deceleration despite still robust business activity in certain sectors. In this insight we evaluate the most recent economic indicators’ trends and detail the sectors driving the recent private employment increases in Puerto Rico.

The Puerto Rico Banking Sector Continues to Consolidate

The announced acquisition of Scotiabank’s operations in Puerto Rico by Oriental Bank comes after a long period of consolidation in the island’s banking sector. Through this acquisition, Oriental Bank will increase its assets and deposits market shares from 10% and 9% to 16% and 14%, respectively, and will significantly strengthen its position in the mortgage origination and servicing businesses.

Significant Footprint Reduction in the Puerto Rico Banking Sector

The PR banking sector footprint has reduced significantly in the past years. Despite having fewer branches, banks have managed to increase deposits by 28% since 2016. As we will explain in this insight there is opportunity for footprint expansion in some areas as well as further consolidation in others. In the short term the footprint reduction is likely to continue driven by the Scotiabank acquisition by Oriental.

Difficult times for the hospital sector in Puerto Rico

Hospitals play a key role in the provision of health services to Puerto Rico citizens. In recent years they have been operating in a complicated environment where several industry trends have been hurting their profitability. That situation has only been aggravated by Hurricane María. Consolidation, both across the hospital sector but also vertically along the health system may help turn these trends around.

Resultados del Primer Trimestre del 2019 de la Banca de Puerto Rico

El Portal de indicadores de la banca de V2A ya está actualizado con los resultados del primer trimestre del 2019 de los bancos de Puerto Rico ( En líneas generales estos resultados muestran la dificultad por aumentar la actividad crediticia en el difícil contexto económico de Puerto Rico, al tiempo que siguen indicando un desempeño financiero extraordinario.

¿Cuán preparado está el sector de la salud para afrontar otro huracán como María?

Con la temporada de huracanes a la vuelta de la esquina, hay que recordar que las personas con problemas cardíacos y respiratorios, diabéticos y enfermos de Alzheimer son los más vulnerables, y que los accidentes, los suicidios y las septicemias se multiplican tras un huracán. Aparte de ver las causas del aumento de muertes por María, en este Insight nos preguntamos qué se ha hecho para mitigar el impacto de futuros huracanes.

Post-2017 Hurricane Season: Latest Trends and Developments

Much has transpired since Hurricanes Irma and Maria swept through Puerto Rico 18 months ago resulting in over $80 billion in damages and more than $25 billion in lost output, decimating the Island’s vulnerable electric grid and other critical infrastructure systems, disrupting normal economic and social life, and inducing tens of thousands of Puerto Ricans to flee the Island. While the progress made should not be understated, given the noble, and at times heroic, work of those individuals and organizations (public and private) committed to the Island’s recovery and reconstruction, the pace of the process has been painstakingly slow and the impact of the incoming Federal funds on the local economy has been limited. Many saw the billions of dollars in post-disaster relief funds flowing into the Island as a silver lining and as a source of a much-needed boost in economic activity. However, the pace of disbursements has been slow and, consequently, the impact on the local economy has been limited thus far. Furthermore, as commonly occurs in post-disaster efforts, nonlocal entities, mostly US mainland contractors, have greatly benefited from the inflow of billions of dollars for disaster recovery and reconstruction, while local contractors have been awarded a small fraction of contracts.

2018, a turning point for the profitability of local banks?

2018 was an excellent year for the profitability of banks in Puerto Rico. At the industry level, Pre-Tax ROE reached 14%, aligned with the US banking industry profitability levels for the first time in ten years. We expect this trend to continue in 2019 since most of the profitability levers seem to be moving in the right direction.

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