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First BanCorp Shines, OFG Bancorp Fizzles in Fourth Quarter

By on February 5, 2016

Executives comment on impact of island’s fiscal and debt woes

As the island’s No. 2 and No. 3 financial institutions by assets reported on their fourth-quarter (4Q) and full-year 2015 results, First BanCorp and OFG Bancorp, respectively, remained focused on successfully carrying out their business plans as Puerto Rico is still grappling with its fiscal and debt challenges.

On Jan. 29, First BanCorp, the bank holding company of FirstBank Puerto Rico, reported net income of $15 million in 4Q and net income of $21.3 million for 2015.

Due to macro events that dominated the second half of 2015, First BanCorp’s financial results were affected through other-than-temporary-impairment (OTTI) adjustments and increased provisioning for government-related exposure.

“Uncertainty is dominating the macros, and there’s not a definitive timeline for resolution of fiscal matters. Everyone is clear on that,” said Aurelio Alemán, president & CEO of First BanCorp, during the earnings call webcast following the release of financial results last Friday.

In First BanCorp’s case, its government-debt exposure remained at similar levels in 4Q, Alemán said. The bank took an additional OTTI charge in its Puerto Rico securities and increased its reserves based on qualitative adjustments by some $19 million.

“We continue to stay comfortable with our exposure to municipalities. These municipalities are very well-managed entities that have a strong source of repayment assigned to credit facilities. With 80% of our municipal exposure from four of the largest municipalities in Puerto Rico with the best tax base, we feel comfortable with this exposure,” Alemán commented.

The First BanCorp executive noted the bank needs to focus on carrying out its business plan and taking advantage of market opportunities, while also continuing its efforts to grow its business in Florida and the U.S. Virgin Islands.

OFG Bancorp

On Feb. 1, OFG Bancorp, the bank holding company of Oriental Bank, reported a net loss of $4.4 million for 4Q and a net loss of $16.4 million for 2015.

Despite the challenging economy and Puerto Rico’s difficult fiscal situation, José Rafael Fernández, OFG president, CEO & vice chairman, noted the bank’s core business performed well in 4Q and throughout 2015.

For Fernández, it is clear that market valuations and sentiment regarding OFG outside of Puerto Rico appears to be incongruent with the bank’s core performance and asset-quality trends and positions. Shares of OFG have dropped 23% since the beginning of the year, while the stock has dropped 65% in the past 12 months.

“We are cognizant of the high level of uncertainty regarding Puerto Rico’s future. While lower fuel prices have significantly enhanced personal disposable income and reduced operating costs for businesses, the [local] government lost an opportunity to take a major step in solving the fiscal situation when the Legislature, for a second time, delayed voting on the [Puerto Rico Electric Power Authority’s] Revitalization Act,” Fernández said.

Despite the difficult environment in which the bank operates, he reaffirmed Oriental remains steadfast in its longstanding management strategies—maintaining discipline in underwriting, pricing, operations and expenses.

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