Oriental CEO: ‘It’s time to pull out of bankruptcy’
OFG Bancorp, the parent company for Oriental Bank, reported results for the second quarter ended June 30, 2021, that revealed diluted earnings per share of $0.78 compared to $0.56 in first quarter of 2021 and $0.39 in 2Q20.
Total core revenues were $133.3 million compared to $127.7 million in first quarter of 2021 and $128.2 million in 2Q20, or a 4% growth year-over-year. Net interest margin was 4.22% compared to 4.26% in first quarter of 2021 and 4.78% in 2Q20.
“We generated outstanding second quarter results. This reflects our larger scale and our focus on digital utilization and differentiation, combined with Puerto Rico’s early economic and post-pandemic recovery,” said OFG CEO José Rafael Fernández.
“The economy is clearly benefitting from a massive amount of federal reconstruction and COVID stimulus, which are more meaningful here compared to mainland states given the size of our economy as it relates to reconstruction funds and the size of stimulus payments compared to average income levels,” he said.
Proof of the positive economic uptick is the fact that Oriental generated $1.2 billion in individual and commercial loans during the first half of the year, he said. The bank declared $2 million in loans as non-performing during the same period.
New loan origination increased 27.7% from first quarter of 2021 with gains in all major categories, led by commercial and auto lending.
In a call with local media outlets, Fernández said the bank has benefited from its eight years of experience in the auto loan segment, combined with the technological advances that auto dealers have made to “make sure they too are closer to their clients.”
OFG’s Interest income grew 2.2% from first quarter of 2021 as average loan balances expanded 1.3%, excluding residential mortgage. Banking and financial services revenues rose 5.4%.
“Asset quality trends continued to improve as reconstruction and stimulus funds provided significant liquidity to businesses and individuals. As result of this, provision for credit losses was a net benefit of $8.3 million.
The reconstruction funds, the bulk of which have been freed up in the first six months of President Biden’s administration, are already laying down the groundwork to assign them to different projects across the island, “and I’ve begun to see our commercial construction clients working on certain projects with federal funds and contracts and I can venture to say that during the second half of the year, and next year we’re going to see a lot of reconstruction activity whether on roads or infrastructure in general,” the banking executive said.
He also predicted an upturn in construction projects of low- to moderate-income homes next year.
“I believe the private sector and individuals will benefit greatly from that and we’re going to see our income grow as a result,” he said.
‘It’s time to pull out of bankruptcy’
Regarding Puerto Rico’s bankruptcy proceeding, which is seemingly nearing a conclusion in coming months — based on recent events at the US District Court and instructions to the parties by Judge Laura Taylor Swain — Fernández said candidly that “it’s definitely time for Puerto Rico to pull out of bankruptcy.”
“It’s something that has to be addressed and resolved and Puerto Rico can no longer waste any more time on the small fight. We must emerge from bankruptcy and prove that we can run our house in an orderly fashion. It has to be done, and we’re 100% supporting an end to the process,” Fernández said during the call with members of the local media.
He also stressed that the liquidity that the government has accrued over the past five years of the bankruptcy proceeding, when it has not had to pay most of its creditors, should be used to pay what is agreed upon in the restructuring pact and invest in Puerto Rico’s infrastructure, along with what’s assigned in federal funding.
“It has to have a comprehensive economic development plan. Bankruptcy proceedings are never a straight-line process, and Puerto Rico has had its share of curveballs with the hurricanes and the earthquakes. But now we’re at a crossroads in which I believe we not only have to emerge from bankruptcy, but that we have to make a concerted effort between public and private sectors, and the Oversight Board to reach agreements so that we walk in the same direction going forward,” said Fernández.