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First BanCorp Foresees Another Good Year Of 12% To 15% Growth

Bank also experiences a surge of significant growth in commercial and construction loans


February 8, 2001
Copyright © 2001 CARIBBEAN BUSINESS. All Rights Reserved.

First BanCorp President Angel Alvarez anticipates another good year for FirstBank with 12% to 15% growth, or after tax earnings of $75 million to $80 million, and the opening of two branches annually in Puerto Rico and one annually in the U.S. Virgin Islands during the next five years.

FirstBank‘s figures for 2000 highlighted growth in all areas. Net income was $67.3 million compared with 1999’s $62 million, total assets were $5.9 billion vs. $4.7 billion (a 25% growth), deposits were $3.3 billion vs. $2.5 billion, and the loan portfolio grew from $2.7 billion in 1999 to $3.5 billion in 2000. Last month, the bank reached total assets of $6 billion.

The bank, whose forte had been consumer lending, has experienced a pattern of significant growth in other areas for a more balanced loan portfolio. Commercial and construction loans and commercial mortgages grew by $431 million, for a total of $1.6 billion, or almost 43% of the total loan portfolio. Luis Beauchamp, senior executive vice president and chief lending officer, said this area is expected to continue its growth pattern this year. He said the bank is now regularly making big loans, such as a recent $70 million loan to a single borrower. Beauchamp added part of that loan will now be resold but First Bank will retain a large portion of the loan in its portfolio.

Residential mortgage loans increased $273 million, for a total of $750,000, or 21% of the loan portfolio. This sector is also expected to grow significantly with the anticipated drops in interest rate this year. Consumer loans were $1 billion, or 33% of total loans.

Alvarez expects to open the next bank branches in the San Juan metro area. While Bayamon and Carolina each have four branches, each city can use another branch. Caguas has two branches already and in three months will have a third one opening at Plaza Centro. The bank, which is the third largest financial institution in Puerto Rico, has 48 branches on the island.

There are an additional 27 branches of First BanCorp. subsidiary Money Express, a thrift institution with a $5,000 lending cap. Alvarez said the thrift, created by the bank in 1995, has 70,000 customers and he anticipates revenue of $100 million this year.

First BanCorp bought last September the $56 million First Virgin Islands Savings & Loan Corp. which together with the previous acquisition of a Citibank branch there totals three branches in St. Thomas and one in St. Croix. Alvarez anticipates a 25% growth this year for the U.S. Virgin Islands operation. Current total assets in the USVI are $50 million and this year should total $250 million. In five years, Alvarez anticipates total assets of $500 million for the USVI branches. The building of a bank branch in the USVI represents a $1.5 million investment.

Among the new services to be introduced by the bank this year is a credit card, which could be Visa or Mastercard. The new card will allow holders to buy online using Latin America’s most important web portal. Alvarez said the target are local clients but because the portal is so prominent in Latin America he does not rule out the possibility of expanding the credit card’s clientele to other Spanish-speaking countries in the future.

Alvarez said FirstBank clients will receive automatic increases in their lines of credit or overdraft credit lines without requesting them. "We have already started doing this but now it will be done more automatically."

FirstBank offers online banking and is the only local bank to offer cash management via the Internet. Alvarez explained clients can access their accounts directly through the Internet while competitors clients must first access the financial institution’s internal systems. Through the cash management service, clients can see on screen everything relating to their account, including checks in transit, "simply by pressing a button."

Alvarez considers Internet banking the way of the future but he anticipates it will be another decade before it will be profitable for banks. "The ideal thing, in terms of cost, would be not to have to open another branch. Instead we could serve our clients through the Internet and our call center. But the reality is we still have to combine both with brick & mortar."

The call center, first established in 1983, is now located on the second floor of bank headquarters in Santurce. In a year, the bank will have spent $3 million in technology for the call center. Clients will eventually be able to do everything by phone, eliminating a bank visit. Investment Information technology (IT) is very much in the forefront of Alvarez’s plans to improve the bank, with investment in IT exceeding $20 million in the last three years.

Part of this investment included $3 million spent in putting all client information in the bank’s computer network. "When a customer comes to the bank the officer has the customer’s whole banking background in front of him, so that in addition to giving clients better service, an officer can also offer other products the client is not using." This on-screen information is now in practically all of the branches.

FirstBank will start selling insurance this year. "We’re waiting for the licenses and the regulations so that we can start selling insurance at our branches. We will not be purchasing an insurance company but rather using all the local companies to do the underwriting."

As far as the local economy is concerned, both Alvarez and Beauchamp are optimistic that it will suffer slightly "maybe for three or four months but in the second semester will improve".

Banks will benefit from recent Fed action to cut interest rates. Lower rates allow banks to increase the interest spread, thereby boosting their earnings. By the same token, higher bank earnings mean their stocks will increase in value. For the foreseeable future then, local bank stocks which took a thrashing for most of last year are likely to hold their current prices and may even go up, Alvarez said.

This Caribbean Business article appears courtesy of Casiano Communications.
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