Oriental CEO: Puerto Rico seeing ‘beginnings of an economic rebound’
Puerto Rico is starting to see the “beginnings of an economic rebound,” as the effects of the influx of federal economic aid and the possibility of the return of pharmaceutical companies are putting the island in a better position heading forward.
That optimism is there for José Rafael Fernández, CEO of OFG Bancorp, the financial holding company for Oriental Bank, who added, however, that “there are tremendous uncertainties and there’s tremendous challenges. And there are still several things that need to settle in the near future and beyond for the Puerto Rico economy to have safe sailings into the future.”
His comments came during the discussion of the financial institution’s results for the third quarter ended Sept. 30, 2020, which was a “strong third quarter” for the bank.
“We had a strong third quarter performance in our core business. This was due to an improved macro-economic environment in Puerto Rico and the U.S. Virgin Islands coupled with our being resilient, agile, and more than ready to service the changing needs of our customers and communities,” he said.
During the call, Fernández said the possibility of an on-shoring by US-based manufacturing companies in Puerto Rico has gained unexpected bipartisan support that is “encouraging.”
“I think it’s a matter of also the federal government starting to realize that the end game in Puerto Rico is not about sending federal funds all the time, it’s also to assist in creating economic development longer-term and in a recurring way,” he said.
“And again, it hasn’t been played out yet, but it looks like it’s moving in that direction. And certainly, that’s a lot better than just waiting for a hurricane to receive federal funds,” he said.
Fernández added that another necessary component for Puerto Rico’s recovery has to do with the ability by local politicians to work with the Financial Oversight and Management Board for Puerto Rico.
“Politicians and politics in Puerto Rico are now lame ducks, because everything has to go through the Fiscal Board. So, it’s just a political event that we go through,” he said.
“But in reality, at the end of the day, they’re going to have to realize that if they want to get reelected, they’re going to have to sit down and play with the Fiscal Board in a more constructive way than they have done in the past. And I expect that will happen, whoever wins, because it’s in their own best interest also,” he said.
Third quarter shows year-over-year growth
During the three-month period, Oriental reported $127 million in revenue, versus $128.2 million in the second quarter of 2020 and $99.3 million in the third quarter of 2019.
Provision for credit losses fell 23% to $13.7 million from $17.7 million in the second quarter and 69% from $43.8 million in the third quarter of 2019. Customer deposits grew $212.6 million to $8.5 billion on Sept. 30, 2020 from June 30, 2020.
Due to the increased deposits as well as repayments of loans and securities, cash increased $383 million, to $2.3 billion. As a result, total assets grew $83.6 million to $10 billion, which OFG does not anticipate exceeding on Dec. 31, 2020, the financial institution said.
Loan production totaled $457.8 million compared to $506 million in the second quarter of 2020. Excluding Paycheck Protection Program loans, production increased $227.8 million, driven by commercial, auto, mortgage and consumer lending. Net loans were $6.6 billion on Sept. 30, 2020 compared to $6.7 billion on June 30, 2020.