OFG Bancorp reports core revenue growth in 3Q, driven by digital strategy
OFG Bancorp (OFG), the financial holding company for Oriental Bank, reported total core revenues of $172.2 million during the third quarter (3Q) ended Sept. 30, up slightly when compared to $170.5 million in the second quarter of 2023 and by nearly 10% from the $156.8 million in the third quarter of 2022.
Earnings per share (EPS) diluted for the current quarter were $0.95, compared to $0.93 in 2Q23 and $0.87 in 3Q22.
“Third quarter results reflected year-over-year increases of 10% in core revenues and 9% in EPS. Highlights include continued loan growth, stable core deposits, low cumulative deposit beta of 19%, increased operating leverage, and strong performance metrics. We also benefited from overall higher interest rates and benign credit conditions as economic activity in Puerto Rico continues to do well,” said OFG CEO José Rafael Fernández.
In a call with analysts, the executive pointed to several strategies that the bank has adopted to fuel growth, including expanding digital channels. He noted that, year-to-date in September, 87% of all routine retail customer transactions and 92% of all retail deposit transactions were made through digital and self-service channels.
“This has been driven by 11% growth in digital enrollment, 14% growth in digital loan payments, 5% growth in kiosk usage and the success of our recently deployed Oriental Servicing portal,” he said.
The bank’s website, which he called a “cornerstone of our self-service strategy,” allows customers to perform numerous transactions and access documents that are frequently requested by phone or in-person at branches.
“New features to the portal will continue to be added on a regular basis. All this continues to validate our strategy and investments in technology. As I have mentioned before, they help us provide more value-added service, increase our efficiency and assign more staff for new business development activities,” he said.
Total assets increased to $10.3 billion from last quarter. Fernández told analysts that based on growth and outlook for next year, it will remain above $10 billion.
Customer deposits remained stable at approximately $8.5 billion, and loans held for investment totaled $7.3 billion, up 2% from the second quarter. New loan production was approximately $563 million, in line with the last five quarters. Investments increased to $2.1 billion, and cash decreased to $533 million.
As for other highlights, for the third quarter, Oriental reported a net interest income of $141.8 million, compared to $139.6 million in 2Q23, and $126.5 million in 3Q22. The results of 3Q23 reflected the full effect of the 25 basis point increase in the Federal Reserve Board’s funds rate from 2Q23 and a partial effect of 3Q23’s 25 basis point increase.
Total interest income was $165.7 million during the most recent quarter, compared to $158 million in 2Q23, and $134.7 million in 3Q22. When compared to 2Q23, 3Q23 primarily reflected higher yields (7.84% vs. 7.76%), attributable to increased average balances of loans and higher yields on variable-rate loans.
“All our businesses performed well, and we continue to generate steady year-over-year revenue and earnings growth. Highlights include increased loan balances, stable core deposits with low cumulative beta, increased operating leverage and strong credit and performance metrics,” Fernández said.
Dorado on the radar
While technology has been at the forefront of the bank’s growth, Fernández said branches continue to be an important component of the institution’s islandwide sales and service network.
During the third quarter, a new branch was opened in Dorado, an area he described as having good commercial and retail opportunities.
“Dorado is a growing high-net-worth suburb of San Juan that has attracted many new residents from the mainland. We already have a 9% market share there, and we think we can grow further,” Fernández said.
“These developments, both digital and physical, continue to better position us to serve our customers and communities and grow our businesses,” he added.
