Oriental CEO ‘pleased’ PROMESA Board is active

Written by  //  October 24, 2016  //  Banking, Financial District  //  No comments

Oriental President José Rafael Fernández

Oriental President José Rafael Fernández

Oriental Bancorp reported $11.7 million in net income for the third quarter of 2016 ended Sept. 30, representing $0.26 per share fully diluted, compared to $10.9 million, or $0.25 per share fully diluted, in the previous quarter. In the year ago quarter, OFG reported $1.1 million, or $0.03 per share fully diluted.

In a call with analysts, OFG President José Rafael Fernández said the bank’s overall performance continued strong, with a return on average assets at 0.91 percent and return on average tangible common stockholders’ Equity at 7.06 percent were the highest they’ve been in the last five quarters.

New loan generation totaled $226.8 million. Banking and wealth management fee revenues remained level versus second quarter of 2016. Retail and commercial deposits grew 2.2 percent. Net new customer accounts continued to increase at a 4 percent annualized rate.

“We continue to deliver consistent earnings while being proactive in our business development strategies and prudently managing balance sheet risk,” he said.

“We are particularly pleased to have found an optimal exit point for the Puerto Rico Electric Power Authority credit facility. This eliminated our single largest credit exposure and significantly reduced our Puerto Rico government related exposures,” he added. “It also meaningfully increased our capital ratios and contributed to improved credit quality through a major reduction in non-performing loans.”

As previously announced, Oriental Bank sold its participation in a PREPA fuel line of credit, with the transaction settling after the quarter end. The sale eliminated $183 million of non-performing assets.

“We acquired it [the PREPA loan] in our purchase of BBVA Puerto Rico operations in December of 2012. While we were hopeful PREPA’s agreement with creditors would restructure the credit into a viable and profitable term loan, our thinking evolved over time,” Fernández said.

“Continued uncertainties regarding the economy of Puerto Rico forced us to take a closer look into execution risks as well as how the credit will fair over the next six years. Ultimately, we decided the better option was to take advantage of an opportunity to exit deposition, eliminate the destruction, and immediately improve our overall credit quality and capital positions,” he said.

In the final analysis, “we are pleased with the decision as clearly reflected in the improved statistics in today’s presentation. With PREPA behind us, we look forward to continuing to pursue our strategic goal of becoming the best bank in Puerto Rico with no additional distractions,” Fernández noted.

Bank executives also noted that its total Puerto Rico government exposure fell by half to $202.4 million, when taking the sale of PREPA into account.

With regards to the macro situation in Puerto Rico, Fernández told analysts the bank is “pleased to see” that the Puerto Rico Oversight, Management and Economic Stability Act board has started its activities.

“We look forward to seeing them gaining more momentum in exercising their legal mandate of instilling fiscal discipline while providing a path towards a consensual resolution among all stakeholders,” Fernández said.

“As to the state of Puerto Rico’s economy, it remains under pressure because of significant levels of political and fiscal uncertainty. The reality is that a clear path towards sustainable economic growth is imperative and cannot be further delayed. For that to occur, we need strong leadership and we’re confident that the fiscal Board will provide it,” he said.

“It’s going to take a quite a bit of effort to make sure that Puerto Rico gets back on track from a fiscal perspective and from a budget — balance budget perspective. So, I think everyone here in Puerto Rico that runs a business is tiptoeing into slightly more optimistic, little bit more certainty, but not necessarily a completely — liberated in terms of what the prospects are,” Fernández said during the Q&A portion of the analyst call transcribed by Seeking Alpha.

Finally, Fernández noted that the current elections period “adds another level of uncertainty.”

“We have politicians in Puerto Rico still going out and being a populist and making promises that are clearly unattainable. So, that also for prudent business managers creates another layer of uncertainty,” the banking executive said.

“We are hopeful that once the elections are over and once the Board gets more traction on the issues at hand in Puerto Rico that we will have more clarity, and we are hopeful that next year we will see a clear path toward economic growth,” he added.

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