Analyst: Buying BBVA’s Puerto Rico operations will ‘immediately transform’ Oriental Bank

Written by  //  July 2, 2012  //  Banking, Financial District  //  No comments

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Oriental is poised to become Puerto Rico’s second-largest financial institution.

Last week’s announcement by Oriental Financial Group of its intention to buy BBVA Puerto Rico’s operation for $500 million will “immediately transform” the former’s day-to-day operations into a more bank-like institution, something management has been striving for in recent years, an industry analyst said over the weekend.

In his scrutiny of the transaction announced Thursday, B.Riley Senior Analyst Joe Gladue said Oriental “becomes one of the major forces in the Puerto Rico banking market,” leaping from the bottom of the pile to the top of the heap to position itself right behind Banco Popular as the island’s second-largest commercial bank.

The transaction is expected to close toward year’s end, when Oriental will take over BBVA PR’s highly diversified loan portfolio and a better funding mix, as core deposits grow from 36 percent of funding to 57 percent while borrowings drop from 60 percent to 34 percent.

“The greater scale and addition of experienced lenders provided by the BBVA acquisition should help Oriental compete for more business in Puerto Rico. The bigger balance sheet will enable Oriental to pursue larger lending relationships,” Gladue said. “Oriental will have the second largest branch network on the island following the merger and the third largest asset base.”

BBVA was founded as Banco de Mayagüez in 1967. Twelve years later, the institution was bought by Banco Occidental, which in turn was acquired by Banco Vizcaya in 1982. In 1999, Banco Vizcaya merged with Argentaria, resulting in BBVA PR. At present, the bank has a network of about 36 branches and more than 1,000 employees islandwide.

BBVA was founded as Banco de Mayagüez in 1967. (Credit: © Mauricio Pascual)

In addition to a wide range of banking services including deposit accounts, loans, and banking cards, BBVA Puerto Rico offers insurance, mortgage, and stock brokerage services through BBVA Seguros Inc, BBVA Mortgage and BBVA Securities, respectively. BBVA PR has $5.2 billion in assets, $3.7 billion in loans, and $3.3 billion in deposits.

Upon announcing the deal, Oriental President José Rafael Fernández told the investment community that the transaction “combines two of the healthiest lenders in Puerto Rico to create a market leading bank and provides an expanded customer base and complementary products and services.”

He also referred to the timing of the deal, saying it comes as “Puerto Rico’s economy has stabilized and the fiscal situation has improved.”

Oriental’s growth spurt began in April 2010, after acquiring certain assets and liabilities of the defunct Eurobank in an FDIC-assisted transaction. The acquisition helped to create a network of 30 Oriental Bank branches islandwide. At the time, bank officials said they were able to keep most former Eurobank branches open, as there was virtually no overlapping with existing Oriental locations.

But now, it remains to be seen how many BBVA PR locations will remain open once the deal is squared away.

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