Regulators OK Oriental Acquisition of Scotiabank Operations in Puerto Rico, USVI
With $560 million transaction consummated, Scotiabank customers given access to Oriental Bank infrastructure
SAN JUAN – San Juan-based OFG Bancorp announced Wednesday that its subsidiary, Oriental Bank, has received approval from federal and commonwealth regulators to complete its $560 million acquisition of Puerto Rico and U.S. Virgin Islands operations of Canadian financial institution Scotiabank.
The Federal Reserve System Board of Governors, the Federal Deposit Insurance Corporation and the Puerto Rico Financial Institutions Commissioner’s Office approved the acquisition, the bank holding company announced in a press release.
The USVI Banking Board has yet to approve Scotiabank’s operations in the territory but OFG expects to complete the acquisition by year’s end.
OFG Bancorp and Scotiabank announced in June the signing of a definitive agreement for OFG’s subsidiary, Oriental Bank, to acquire Scotiabank’s Puerto Rico operation for $550 million in cash and Scotiabank’s U.S. Virgin Island (USVI) branch operation for a $10 million deposit premium.
The acquisition strengthens Oriental’s position as “the premier retail bank in Puerto Rico,” the release said, noting that Oriental will have the second largest market share on the island in core deposits, branches, automated and interactive teller machines, mortgage servicing, and insurance brokerage, in addition to becoming the third largest bank in USVI by deposits.
Oriental will have a loan portfolio totaling $7.2 billion, deposits of $7.9 billion, and approximately 500,000 customers. Its mortgage servicing book “will expand five-fold to approximately $5 billion, providing critical mass to become a meaningful source of non-interest income,” the release reads. The bank will now have 460 ATMs and 11 Interactive Teller Machines, 55 branches, and more than 2,400 employees.
“We are combining two excellent franchises to create a strongly capitalized, market-leading institution,” said José Rafael Fernández, president, CEO and vice chairman of OFG and Oriental, noting that the ban will place a “special emphasis” on consumers and small businesses in Puerto Rico and the USVI. “We’re excited about welcoming Scotia’s valued customers and talented team into the Oriental family.”
Fernández said that for a transition period, Oriental will continue using Scotiabank’s platforms. Therefore, he said, customers can interact with the bank, and use branches, as they do currently without any need for change.
Moreover, Scotiabank customers will be able to use all Oriental ATMs free of charge and make credit card, mortgage, car and personal loan payments, and make deposits by cash or check through express mailboxes in all branches, he said.
OFG Bancorp reported a 1.4 percent year-to-year drop in net revenue, including lower net interest income, by the end of the third quarter this year, due to the sale of nonperforming loans and low-yield securities to make way for the $560 million acquisition.
Apart from the 55-year-old Oriental Bank, OFG Bancorp, a publicly traded company, has two other subsidiaries, Oriental Financial Services and Oriental Insurance, which provide retail and commercial banking, lending and wealth management products, services and technology, primarily in Puerto Rico.
At closing of New York Stock Exchange trading Wednesday, the value of OFG Bancorp (OFG) shares closed up 21 cents, or 0.97 percent, to $21.96. The Bank of Nova Scotia (BNS) shares closed up 20 cents, or 0.35 percent, to $56.57.