Oriental: Uncertainty looms about PR debt restructuring

Written by  //  July 24, 2017  //  Banking, Financial District  //  No comments

Print Friendly, PDF & Email

Oriental President José Rafael Fernández

Upon releasing second quarter results, Oriental Financial Group President José Rafael Fernández said despite solid performance, there is a “great deal of uncertainty” moving forward regarding the economic impact from Puerto Rico’s fiscal restructuring.

During a call with analysts Friday, the executive said the outcome is not clear as to Title III bankruptcy proceedings under the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA,) since they are just getting underway.

“If the speed of change and execution in the last 12 months since the enactment of PROMESA is any indication of the future, Puerto Rico has a long road ahead to recovery,” Fernández said.

“Much more concerted and bold efforts are required from all stakeholders, including the private sector leadership to resolve the debt crisis and at the same time rebuild the economy. While hopeful, we continue to monitor local conditions closely,” he said.

Its second quarter results for the period ended June 30 show that net income available to shareholders increased to $13.6 million, or $0.30 per share fully diluted, compared to $11.7 million, or $0.26 per share fully diluted, in 1Q17 and $10.9 million, or $0.25 per share fully diluted, in the year ago quarter.

During the period, OFG opportunistically sold a $38 million performing term loan with an indisclosed municipality, resulting in a $4.3 million pre-tax loss. The sale reduced OFG’s exposure to this sector by approximately 27 percent from March 31, 2017, to $140.8 million after July payments.

“Highlights for the quarter included two transactions that de-risked and de-leveraged the balance sheet. We took advantage of an opportunity and sold a $38 million municipal loan,” Fernández said.

“This resulted in a $4.3 million loss, but more importantly, it reduced our exposure to this sector by 27 percent after July principal payments are taken into consideration,” he added. “We also unwound a $100 million repurchase agreement, selling $166 million in related mortgage-backed securities and generating a $6.9 million tax advantage gain.”

Meanwhile, the financial institution’s credit quality remained stable, with a small decline in non-performing loan and the total delinquency rates, he said.

“Our results continue to reflect the strategies we have implemented on a consistent basis in the face of Puerto Rico’s fiscal and economic environment,” Fernández said.

“First, the focus on building our unique retail franchise where we provide value added service and develop close relationship with our customers, this has resulted in higher customer satisfaction levels, a stronger brand and higher yields on retail loans,” he added.

As a result, the bank’s net interest margin improved by 8 basis points in comparison to the first quarter of the year, to 5.18 percent, the numbers showed.

During the second quarter Oriental released a new and redesigned version of its mobile banking app, and also finished deploying deposit taking capabilities in all 47 branch ATMs.

“We’re very encouraged with the adoption levels and customer feedback. This is part of our highly successful strategy of differentiating ourselves by delivering unparalleled customers experience,” he said.

“Our retail franchise continues to grow, increases in mortgage and consumer loan production, and with a solid origination levels in all the loans. The number of net retail clients continues to increase 5 percent year-over-year,” Fernández said.

Leave a Comment

comm comm comm