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Popular Auto Eyeing to Acquire Reliable Auto’s Assets

By on September 15, 2016

reliable-buildingSAN JUAN – Popular Auto, Banco Popular’s auto finance division, may be closing in on acquiring the assets of Reliable Auto, a person with knowledge of the matter told Caribbean Business.

According to the auto industry source, Popular already performed due diligence on Reliable and a decision on the asset purchase (auto loans and floor plans) could come as early as this week.

“As part of the deal, Popular would allegedly retain the Reliable employees,” the local auto-industry source, who asked to remain anonymous said.

As first reported by Caribbean Business last week, Reliable Financial Services—the Puerto Rico subsidiary of San Francisco-based Wells Fargo—was being placed for sale, and local financial institutions Banco Santander Puerto Rico, Popular and FirstBank Puerto Rico were among the possible buyers for Reliable’s assets.

Popular going at it alone

Initially, rumors centered on the possible sale to Banco Santander Puerto Rico, which does not have an active auto finance portfolio. Ultimately, the rumor honed in on a possible joint venture between Popular and FirstBank.

“With only the assets involved and not the entire operations, there’s no monopoly issue or regulatory approval needed if Popular acquires Reliable’s auto loans and floor plan portfolios on its own,” the local auto-industry source reiterated, ruling out a deal with FirstBank.

However, the source noted America’s Leading Partners could end up buying Reliable delinquent loans. According to the latest figures from the Puerto Rico Financial Institutions Commissioner’s Office (OCIF by its Spanish acronym), Reliable Auto’s auto loans portfolio stands at $1.8 billion, plus another $300 million in wholesale (floor plan) financing, with a 28% share of the local market.

Reliable is followed by Oriental Auto, with $903 million in auto loans and a 14% market share, according to OCIF. FirstBank and Popular are literally tied in third place, with $821 million and 12.61% market share, and $820 million and 12.6% share of the market, respectively.

“This acquisition would leave Popular with a local market share of more than 40%, in a market with a total auto loans portfolio of $6.5 billion,” the source added.

Representatives from both Popular and Reliable declined to comment on the matter, stating they do not comment on rumors.

Coincidence or perfect timing?

The possible sale of Reliable comes amid reports last week that Wells Fargo was fined $185 million for illegally opening millions of unauthorized accounts for their customers to meet aggressive sales goals.

The San Francisco-based bank will pay $100 million to the Consumer Financial Protection Bureau (CFPB), a federal agency created five years ago; $35 million to the Office of the Comptroller of the Currency, and $50 million to the City and County of Los Angeles. It will also pay restitution to affected customers.

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