José R. Fernández: Complicated, Challenging Times for Puerto Rico’s Economy
SAN JUAN- Oriental’s Top Exec Insists Local Banks Have Strong Capital to Weather Storm
For José Rafael Fernández, president, CEO & vice chairman of OFG Bancorp—the bank holding company of Oriental—the uncertainty over the resolution of Puerto Rico’s fiscal woes has affected all sectors of the economy, including financial institutions.
However, he believes local banks have enough resources to weather the storm.
“Certainly, these are complicated and challenging times for the island’s economy. However, Puerto Rico banks have a very solid and robust capital base and over the past 10 years and following the 2010 bank consolidations [when three local banks were closed by U.S. regulators], local financial institutions are more solid and stronger, and much more focused than ever before,” Fernández told Caribbean Business during an exclusive interview.
Puerto Rico banks, he added, are prepared and ready to face the impending challenges—whether they happen or not—but everything depends on actions from the commonwealth government and politicians in the Legislature and their solutions to tackle the island’s problems.
As for Oriental’s capital strength, the bank president, CEO & vice chairman said it is very strong and robust, with more than 14% of regulatory capital.
“In reality, we control what we can control, and what we cannot control we work it out with our financial strength and the differentiation of our clients,” he said.
From Oriental’s perspective, Fernández said that, excluding the additional $30.4 million provisioning needed for a Puerto Rico Electric Power Authority (Prepa) loan, the bank had an excellent fourth quarter in 2015.
“We generated nearly 21¢ per share in available income to stockholders, we increased our customer base with 15,500 net new clients and generated $1 billion in loans as part of our contribution to Puerto Rico’s economy,” he said. “We have been reducing our exposure to government loans, with the only exposure left being Prepa, which we adequately provisioned during the quarter.”
For Oriental, being focused on its customers has been the differentiating factor that has allowed the bank’s core business to perform well, despite the difficult operating environment, Fernández indicated.
“As an institution, we have focused mainly on our individual and commercial clients, leveraged on three words—fast, easy and done,” said Oriental’s top executive.
Last year, Oriental invested 40,000 hours to train its staff, which Fernández labeled as investing in the future.
“There’s no time to waste; it’s time to build and prepare us for whatever lies ahead,” he commented.
No more consolidations, for now
While there may be some space left for additional bank consolidations on the island, Fernández does not see it happening in the short term.
“Not immediately; I see it happening over the next five years because there’s still too much uncertainty. In the same way that uncertainty affects the different industries in which to invest, uncertainty does affect the banking industry as well,” he said. “As an industry, we are much more cautious when it comes to transactions and implementing strategy plans.”