the classifications for local banks incorporate limiting rating factors, and current rating levels are indicative of the significant challenges the institutions face.
Local banks ended 2010 with $75.6 billion in assets. (Credit: Víctor Román)
Puerto Rico’s main banks had more than $75.6 billion in combined assets at the end of 2010, reflecting a year-over-year drop of 15.6 percent, according to a report released by the Office of the Commissioner of Financial Institutions.
That drop, however, is likely related mostly to the closing of three failed banks in April 2010, when the Federal Deposit Insurance Corp. took action against Westernbank, Eurobank and R-G Premier Bank. The three financial institutions were sold to Banco Popular, Oriental Bank and Scotiabank, respectively.
Puerto Rico’s commercial banks responded for 44.8 percent of the island’s total financial system, which garnered $171.1 billion in total assets in 2010.
According to the OCIF, as the regulatory agency is known by its Spanish initials, the 11 banks still doing business on the island ended last year with $49.7 billion in net loans, $48.4 billion in deposits and $6.8 billion in capital. A total of 435 branches were in operation throughout the island as of Dec. 31, including those operated by foreign banks doing business in Puerto Rico.
The report shows that last year’s combined totals were the lowest on record since 2006, when Puerto Rico entered into a protracted economic downturn that persists.
In terms of loans — a key indicator of a bank’s economic health — the 11 banks had a combined portfolio of more than $51 billion. Sixty one percent of that amount, or $33.1 billion, were mortgage loans; 20.4 percent, or $9.9 billion, were commercial, industrial and farming loans; and nearly $5.7 billion, or 11 percent, were loans granted to individuals.
All of the loan segments reflected year-over-year drops, according to the OCIF’s report. The banking sector was one of the hardest hit as a result of the recession, which resulted in record numbers of loan defaults and a slowdown in economic activity.
However, a separate report issued by the OCIF shows that the percentage of late payments on loans has been reduced, which could be a potential sign of improvement.
Meanwhile, bank deposits totaled $48.4 billion in 2010, down $11.5 billion year-over-year.
Brokerage houses, cooperatives show improvement
Local brokerage firms and cooperatives have apparently been able to weather the financial storm, as both segments reflected growth patterns in 2010.
The OCIF analysis shows that local brokerage houses racked up more than $5.9 billion in assets and capital in 2010, up 82 percent from the $3.2 billion on record for 2009. The segment commands 3.2 percent of the island’s financial assets.
Last year’s totals have been the highest for the sector in the last six years, which is the period the OCIF included in its report.
Meanwhile, cooperatives reported $7.4 billion in assets in 2010, also up from the $7.1 billion on record for the prior year. However, the current figure is as of September 2010, the OCIF noted. The island’s cooperative institutions are responsible for 10.4 percent of Puerto Rico’s overall financial assets.
Also on the improvement track are government-owned banks, such as the Economic Development Bank, which finished 2010 with $16.4 billion in assets, up from the $13.8 billion reported for 2009.
Business reporter with 29 years of experience writing for weekly and daily newspapers, as well as trade publications in Puerto Rico. My list of former employers includes Caribbean Business, The San Juan Star, and the Puerto Rico Daily Sun, among others. My areas of expertise include telecommunications, technology, retail, agriculture, tourism, banking and most other segments of Puerto Rico’s economy.
“As awareness about the importance of supporting local businesses grows, the ‘Miércoles Naranja’ (Orange Wednesday) initiative now extends to the entire month of November. We all win by shopping ‘local’; specifically, by supporting the small and medium-sized business sector, which generates the majority of direct jobs in our economy.”
— Lourdes Aponte, president of the United Retailers Center, commenting on the 12th edition of Santa’s List, a survey conducted by ad agency Arteaga & Arteaga. Among its findings, the survey’s report points to six sales opportunities for businesses during the holiday season. These include “Miércoles Naranja” (Orange Wednesday), the period from Nov. 15 to Dec. 15 coinciding with the distribution of Christmas bonuses, Black Friday, Cyber Monday, and the weeks leading up to Christmas and Three Kings Day.