Fitch Ratings upgrades First BanCorp to ‘BB;’ assigns stable outlook
Fitch Ratings announced it has upgraded First BanCorp’s (FBP) Long-Term Issuer Default Rating to ‘BB’ from ‘B+,’ with a stable outlook.
“The upgrade primarily reflects Fitch’s review of FBP’s blended operating environment score as well as the resiliency of FBP’s financial profile despite the significant challenges in Puerto Rico’s operating environment over the past several years,” the firm stated.
“Although Puerto Rico’s long-term economic prospects suffer from unfavorable demographic trends when compared to peers, the overall income level on the island, coupled with the impact of the unique benefits that Puerto Rico receives from its status as a US territory, combine to provide a comparable operating environment to similarly rated jurisdictions outside of the U.S. mainland,” it added.
The upgrade also reflects Fitch’s view that FBP’s financial profile has proven to be resilient, despite the significant challenges that Puerto Rico has faced in recent years, including the default of the Commonwealth of Puerto Rico in 2016 and the destruction caused by hurricanes Irma and María in 2017.
“Since 2017, the bank’s earnings performance, asset quality, capitalization and funding profile have remained stable or seen improvement,” it confirmed, noting that the bank’s “solid franchise on the island, as evidenced by…it’s number two overall market share in Puerto Rico, continues to support the bank’s overall ratings.”
“That said, Fitch considers FBP’s business model to be relatively weaker than higher-rated peers in Puerto Rico and other jurisdictions, given the bank’s lower level of revenue diversification,” it stated.