Puerto Rico’s Office of Financial Institutions Commissioner George Joyner said although the deal is pending regulatory approvals, he sees “no major obstacle” for Oriental’s acquisition of Scotiabank de Puerto Rico’s assets to happen.
In an interview on the “En Una Hora” program that airs on 11Q 1140 AM, in which News is my Business participates, Joyner confirmed Oriental has submitted “a lot of papers. I don’t know if all the papers, but a lot of papers,” related to the deal announced in June.
As part of the proposed transaction, Oriental Bank will acquire Scotiabank’s Puerto Rico operation for $550 million and its U.S. Virgin Island branch operation for $10 million, as this media outlet reported.
Scotiabank’s Puerto Rico and USVI operations will be merged into Oriental Bank and its related businesses. The acquisition is subject to customary regulatory approvals, including the Office of the Financial Institutions Commissioner, the Federal Reserve and the Federal Deposit Insurance Corp., among others.
In the interview, Joyner said the transaction is taking place “at the best time for commercial banking in Puerto Rico because we’re having record profits, and deposits have increased significantly, when looking at the four institutions that remain, even looking at Scotiabank, whose portfolios are well reserved.”
“We’re not seeing any scenario where losses should occur, that is, it is a very solid moment for commercial banking in Puerto Rico for this type of transaction to happen. That’s not to say that we want ScotiaBank to leave,” he said.
While he acknowledged there will be one less retail banking institution in Puerto Rico — leaving Oriental, Banco Popular, FirstBank and Banco Santander — Joyner said there is room for the arrival of community banking operations to meet the needs of specific segments of the population.
“I believe that there is room for that type of bank in Puerto Rico. There’s an interest from federal agencies, and the FDIC to promote new charters,” Joyner said.
As of the first quarter of this year, Puerto Rico’s local commercial banks had $62 billion in assets, according to the local regulatory office known as OCIF for its initials in Spanish.
Consumer banking is ‘transforming’
While Joyner said it is worrisome when a company decides that Puerto Rico is no longer part of its strategy, he said when it comes to commercial and consumer banking, there is a transformation underway.
“I think we’re beginning to see a transformation of how people consume financial products because it is not necessary for the bank to have a branch for an individual to access banking services, which can now be done via the internet and through mobile banking,” said Joyner.
“People are changing the way they consume banking products and Puerto Rico’s financial and banking institutions are moving in that direction. I believe this is going to be a stimulus to move more in that direction to reach customers wherever they are,” he said.
“If commercial banks in Puerto Rico don’t do it, someone from the outside will. Credit card companies, for example, will come in to capture high-margin, high-credit store clients,” he said.
Furthermore, he said Puerto Rico consumers have the option of putting their money and getting their financial tools from local and federal credit unions, which reported a combined $9.5 billion in assets during the first quarter of this year, the OCIF reported.