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Reliable Financial May Be Up for Sale

By on September 9, 2016

SAN JUAN – Reliable Financial Services, Puerto Rico’s largest auto finance company, may be up for sale, Caribbean Business has learned.

According to auto industry sources, while the company’s auto loans portfolio is the island’s largest at $1.79 billion as of first quarter (1Q) of this year, it represents a grain of sand to parent company Wells Fargo, with total assets of $1.85 trillion and $86.1 billion in revenue in 2015.

Ten years after its inception in 1987, Reliable was acquired by Minneapolis-based Northwest Financial. In 1998, San Francisco-based Wells Fargo merged Northwest Financial, acquiring Reliable in the process.

reliable-building“Wells Fargo has bigger fish to fry, so maybe it’s time to unload Reliable, given Puerto Rico’s troubling economy and the tough business environment,” commented a local auto industry source, who asked to be anonymous.

Initially, rumors centered on the possible sale to Banco Santander Puerto Rico, which does not have an auto finance portfolio, the source said, adding that now, the rumor points to a possible joint venture between Popular Auto and FirstBank, to avoid the first from falling into monopoly territory.

“If Popular were to acquire Reliable’s entire auto loans portfolio, its share of the market would hover around 45%, which could raise monopoly concerns from the government,” the source indicated. “However, if Popular splits the portfolio with FirstBank, it would avoid that.”

Last year, Popular acquired and then sold several Doral Bank branches and assets to FirstBank, after the Federal Deposit Insurance Corp. closed the troubled financial institution. This move prevented Popular from ending up having a larger market concentration.

Tough market

reliable-auto-logoThe loans portfolio of Reliable Auto—the leader in auto financing in Puerto Rico—fell slightly in 1Q 2016, although it was able to retain its dominant share of the market, numbers from the Financial Institution’s Commissioner’s Office revealed.

Reliable’s auto loans portfolio of $1.79 billion in 1Q 2016 was down 0.11% from 1Q 2015, but the company achieved an overall 24.9% share of the market, down a smidgen from 24.92% in 4Q 2015.

However, Popular Auto, the leader in auto leasing on the island, achieved a $1.749 billion auto loan and lease portfolio in 1Q 2106, up 1.79% from 4Q 2015, with an overall 20.22% share of the auto finance market, and a 65% share of the local auto leasing market.

Popular Auto’s auto portfolio during 1Q 2016 was split 56% for loans and 44% for leases.

Meanwhile FirstBank reported a 1Q 2016 auto loan and lease portfolio of $1.08 billion, down 2.71% over 4Q 2015 with a 14.99% share of the market, with a split of 79% for loans and 21% for leases.

Representatives from Reliable, Santander, Popular and FirstBank declined to comment, saying they do not make statements on rumors.

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