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Public Sector: Antonio F. Faria, President Of The Government Development Bank;
Private Sector: Jose R. Gonzalez, President & CEO Of Santander Bancorp


December 18, 2003
Copyright © 2003 CARIBBEAN BUSINESS. All Rights Reserved.

Person of the Year, private sector: Jose R. Gonzalez

Jose R. Gonzalez stepped in to head Santander BanCorp (aka Grupo Santander Puerto Rico) at a crucial moment for the financial institution. Much of the organization was in a tailspin after the retirement in 2000 of Banco Santander icon Benito Cantalapiedra. In two years, there were as many chief executive officers of holding company Santander BanCorp, one from Spain and one from Colombia.

Profitability had collapsed and customers had started fleeing to other banks in Puerto Rico. Santander had lost its premier ranking in several banking categories.

The turnaround began in earnest when Gonzalez was tapped in 2002 to become the first Puerto Rico-born president & CEO of Santander BanCorp, after serving a year as vice president & chief financial officer. All of Santander’s businesses, except for the commercial banking area, had been showing signs of recovery since 1999, but it was Gonzalez who lit a spark throughout the institution.

His principal challenge was to increase Santander’s share of the local market to at least 20%. The institution realized that would require agility, efficiency, and responsiveness to customers.

"Having a name isn’t enough; you still have to compete in services and delivery. To be the best provider, you need to identify the problems and provide solutions as quickly as possible," said Gonzalez. "We [at Santander] have the tools and I know what needs to be done to be profitable and recover market share. We just have to work as a team to achieve it."

Creating a universal bank

His strategy involved recruiting personnel, expanding and maximizing the branch network, and improving the offerings in the commercial and consumer banking areas. The key, however, would be the universal banking concept—the integration of Santander’s insurance, banking, mortgage, and securities subsidiaries.

The strategy seems to be working. Net income for the third quarter (3Q) of 2003 was $8.2 million. That is nearly 257% higher than the $2.3 million reported in 3Q 2002.

Gonzalez recognizes that Rome wasn’t built in a day and that there is still a lot to do and improve. Santander has maintained total assets of around $7 billion. Earnings per common share amounted to $0.17 in 3Q 2003, an increase of 467% compared with $0.03 in the year-ago quarter. Between 3Q 2002 and 3Q 2003, market capitalization increased from $488 million to approximately $1.1 billion and stockholders’ confidence elevated the stock price from $11.50 to $25.05. Although cash and cash equivalents decreased, investment securities increased $197 million and net loans, including loans held for sale, increased $242 million.

"One step is all you need to start a long journey. We will stay the course and keep together to see our plans materialize," said Gonzalez.

He is confident Santander will return to its leadership role in Puerto Rico’s financial industry. A strategic direction has been plotted for every one of Santander’s businesses.

Grupo Santander Central Hispano (GSCH) should be pleased. Although Banco Santander lost its supremacy in originating loans for new projects, Grupo Santander Puerto Rico has already recovered 50% of its share in permanent mortgages, according to Gonzalez.

Meanwhile, Santander Asset Management and Santander Securities (the latter is the No. 2 full-service brokerage in Puerto Rico) will become part of Grupo Santander Puerto Rico by year’s end. The $62 million purchase will improve Santander BanCorp’s earnings per share and give Santander Securities direct access to new capital. Santander Asset Management and Santander Securities currently manage nearly $6 billion in customer funds, giving them a 20% share of the local securities market.

As the dollar-currency franchise of Spain-based parent GSCH, Grupo Santander will continue to position itself to become a major presence in the Latin America and U.S. mainland banking markets. In 2002, GSCH, the largest banking organization in Latin America, generated profits of $1.3 billion despite currency fluctuations throughout the region. That same year, LatinFinance magazine named Grupo Santander Central Hispano the Best Regional Bank in Latin America, in recognition of its efforts to develop a retail banking franchise in the region.

Working to advance Puerto Rico

In the year since his appointment to Santander, Gonzalez has been elected president of the Puerto Rico Bankers Association (PRBA) and board member of the Federal Home Loan Bank of New York. The latter is a congressionally chartered, $85 billion wholesale bank that serves more than 300 community lenders in New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands.

Gonzalez believes the PRBA should be more assertive about conveying the messages of the island’s financial industry. "After all, we, the financial industry, are the second-largest contributor to the Puerto Rico economy," he said. "We should let it be understood that we are the necessary intermediaries between the depositors and the borrowers."

He is also conscious of the responsibility to contribute to society. One way Santander does that is through the Community Reinvestment Act (CRA). A federal statute enacted in 1977, CRA seeks to encourage banks to do more to meet the credit needs of all people in their communities, but particularly those in low- and moderate-income neighborhoods.

Under the statute, regulators must regularly assess the record of each bank and ascertain the extent to which it is fulfilling its obligations to the community. Out of five evaluations over the past 10 to 15 years, including this one, Santander has consistently ranked "outstanding," Eugenio Alonso, senior vice president & CRA officer, told CARIBBEAN BUSINESS (CB June 12).

Santander has pumped more than $400 million into community development islandwide and teamed up with municipal governments to promote new businesses. Between 1999 and 2002, Santander originated $1.7 billion in loans that meet the criteria for CRA compliance. These include small-business loans and farm loans.

"We want to grow, but we want to grow with Puerto Rico," said Gonzalez. "I am satisfied our organization is on the right track to achieve volume and profitability." Gonzalez gives Santander’s employees a lot of credit for getting the institution back on track. "The support from the staff has been incredible," he said. "The best part is seeing the excitement and optimism throughout the company as we enter a new era."

Jose R. Gonzalez: banker, lawyer, teacher

Jose R. Gonzalez, president & CEO of Santander BanCorp (aka Grupo Santander Puerto Rico), knew from an early age that he wanted to be a banker.

He graduated magna cum laude with a bachelor’s degree in economics from Yale University. Four years later, he had completed a joint master’s degree in business administration and law degree at Harvard University.

During summer breaks in college, Gonzalez interned at Ponce Savings & Loans Bank. "I still remember Marcelino Suarez at Ponce Savings & Loan Bank making room for me every summer," said Gonzalez. "Fortunately, many Marcelinos have crossed my path throughout my career. Wherever I have gone, people have given me opportunities."

The first place he went after graduating was to law firm O’Neil & Borges. For three years, he specialized in corporate and tax law and financial structuring. Gonzalez wasn’t totally disjoined from the banking world as he also dealt with financial institutions’ regulatory laws In 1983, The First Boston Corp. became the first major financial entity to recognize Gonzalez’s banking potential. He worked as an investment banker handling corporate and public financing and gained valuable experience in the design and marketing of public and private issue placements for government, industrial companies, and financial institutions.

After three years at First Boston Corp., the 31-year-old Gonzalez was named president & CEO of the Government Development Bank (GDB) in 1986. Public financing became his only game for three years.

At the GDB, he structured and negotiated approximately $6 billion in public debt and managed an investment portfolio of $3.5 billion. He also supervised the portfolio management of $3 billion in long-term investments by several public-sector retirement systems.

"The pace at the GDB was grueling. When you have that level of public debt renegotiation and that size of investment portfolio, you are on day and night for the entire week," said Gonzalez. "Somebody needs to do it so the government can continue to operate."

Although he had a full plate at the GDB, Gonzalez found the time to serve as president or board member of various entities such as Puerto Rico Telephone, the Puerto Rico Maritime Authority (Navieras), the Public Employees Retirement System, and the Governor’s Economic Advisory Council.

In 1989, First Boston Corp. recruited him again, this time to be president & general manager. He was responsible for all local operations, including sales, negotiations, and investment banking.

Gonzalez’s next move, to Mova Pharmaceutical, might seem an unusual one for a banker. "A manufacturing site is a great place to observe product flow and productivity," he said. "I was responsible for the treasury, accounting, and information systems, besides the financing, and the production line was a magnificent place to see how all these functions relate to one another."

It didn’t take long, however, for Gonzalez to return to banking. In 1996, Grupo Santander Central Hispano, the largest bank in Latin America and 33rd in the world, appointed him president & CEO of start-up Santander Securities.

In less than five years, Gonzalez had steered the brokerage house to become the second-largest full-service securities firm in Puerto Rico. In conjunction with Santander Asset Management, it handles nearly $6 billion in customer funds.

"It [the success] took place in a relatively short time, but it wasn’t easy. We are dealing with a first-class financial industry in Puerto Rico," said Gonzalez. "We had to plan and implement carefully while leveraging opportunities such as buying out Merrill Lynch’s portfolio and increasing our branch-network participation."

Santander Securities is to become part of Santander BanCorp in 2004. "We are excited that Santander Securities is formally joining our team. It will certainly strengthen our group," said Gonzalez.

In 2001, Gonzalez was named executive vice president & chief financial officer of Santander BanCorp and chairman of Santander Securities. Since October 2002, he has been president & CEO of Santander BanCorp. That month he also assumed the presidency of the Puerto Rico Bankers Association. And earlier this year he was elected to the board of the Federal Home Loan Bank of New York, a congressionally chartered, $85 billion wholesale bank that serves more than 300 community lenders in New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands.

Gonzalez also teaches occasionally at University of Puerto Rico’s law school. "I have been in banking since my teen years, but I also have the teaching spirit and would love to have time to do it more often," he said.

Despite all of his professional responsibilities, Gonzalez always makes time for his family. He has been married for 23 years to Dacita Bruno, an assistant principal at the San Ignacio Academy in Rio Piedras. The couple has three boys: Jose Ramon, 21; Ricardo, 16; and Eduardo, 12.

"I am grateful that my family has been incredibly supportive all these years," said Gonzalez.

Person of the Year, public sector: Antonio F. Faria

From Commissioner of Financial Institutions, to president of the Economic Development Bank (EDB), to president of the Government Development Bank (GDB), Antonio F. Faria has been arguably the most successful top executive in the three-year-old Calderon administration.

His recent appointment as GDB president—some say one of the most powerful positions in government—comes in the wake of excellent performances in his two previous government jobs and a long career as a successful banker.

In little more than a year, Faria spearheaded an incredible transformation at the EDB.

Faria, who was a private banker for three decades, assumed the presidency of a beleaguered EDB in June 2002. The agency was suffering from low morale, a cumbersome loan process, and a loan delinquency rate of 45%.

By May 2003, the EDB had more than doubled its loan production from $40 million to over $100 million, increased loan disbursements from $25 million to $60 million, and lowered the loan delinquency rate from 45% to 19%.

"The ultimate question when you occupy the president’s chair at the EDB is how to maintain the balance between a good-looking balance sheet and the mandated development function," said Faria. His strategy for addressing the many problems at the EDB was to run it like the bank it should be.

"But before launching new initiatives and hiring personnel, the first thing I did was to change the nonworking light bulbs in the lobby during a ceremony of sorts. It is amazing how morale can be lifted with such as simple act," said Faria.

Among the personnel he brought on board were Francisco Rodriguez and Emilio Hernandez: Rodriguez to be executive vice president for business development and Hernandez to be in charge of collections, both new divisions at the EDB.

Targeting commercial banks, tourism

Faria was responsible for a major shift in the EDB’s philosophy. The new EDB was more willing to share loan risk and to participate in major financing deals. It set out to broaden its clientele by partnering with commercial banks and revising its definition of a small & midsize business (SMB) to include those with up to 500 employees.

To attract commercial banks and other clients, the EDB addressed its slowness in originating and disbursing loans and raised the loan ceiling from $1.5 million to $5 million.

"The perception out there was that the EDB was too slow, taking four months to approve a loan," said Rodriguez (CB June 12). Faria said loan applications are now processed in as little as a week, with an average of three or four weeks. Loans are disbursed an average of three weeks later.

"I wanted them [commercial banks] to understand the EDB is here to work with them and to act quickly when they’re interested in the EDB’s participating in a deal," said Faria, who noted the EDB isn’t a threat to commercial banks since it doesn’t accept deposits from clients.

Some of the large financing deals in which the EDB has been involved include a $5 million refinancing of Supermercados Grande, a $5 million financing of the Rincon of the Seas Hotel & Resort, and a $3 million loan package to parador Villas de Sotomayor in Adjuntas. BBVA, Citibank, and R-G Premier Bank also joined the Supermercados Grande deal, which will allow the locally owned supermarket chain to revamp its stores.

Villas de Sotomayor benefited from Faria’s partnering with the Puerto Rico Tourism Co. to create the Tourism Guarantee Fund. Now, smaller tourism businesses, including hotels, paradors, restaurants, tour operators, and transportation services providers, can turn to the EDB for this loan guarantee mechanism.

Instant credit

The Entrepreneur Business Card, launched in February, is a credit card for the EDB’s clients. It gives them instant access to a $25,000 revolving line of credit with a 7.5% interest rate.

No longer must an EDB customer provide copies of expenses, payments, purchase orders, and other documents to obtain a credit advance. This often led to a seven- to 10-day disbursement-processing period. "This card puts a fast and flexible financing alternative into our clients’ hands," said Faria.

The Entrepreneur Business Card was recently hailed as a model during the fifth International Conference of Visa Services for Governments in Edinburgh, Scotland (CB Dec. 4). Attendees included government institutional-card issuers such as the U.S. General Services Administration, Australia’s Civil Aviation Safety Authority, and the United Kingdom’s OGC Buying Solutions and National e-Procurement Project.

Interest reimbursements

With the Office of the Commissioner of Municipal Affairs (OCAM by its Spanish acronym), the agency allocates U.S. Housing & Urban Development Community Block Grant funds for reimbursing businesses part of the interest they pay on qualified EDB loans.

Registered EDB clients in participating municipalities (of which there were 57 as of June) are entitled to a reimbursement of 25% of the interest payments on their loans if they are self-employed or have up to three employees. The reimbursement increases to 50% for businesses with four to eight employees, with a maximum 75% reimbursement given to those with nine or more employees.

As of May 30, the EDB had reimbursed $773,000 on $31.8 million in loans. "It is a considerable amount," said Faria. "Imagine an EDB entrepreneur with nine or more employees and a 6% loan interest rate having that rate effectively reduced to 1.5%."

A new challenge

The EDB was running smoothly when Gov. Calderon called in November to offer Faria the government’s top banking position, president of the GDB. Francisco Rodriguez was named to succeed Faria as EDB president.

"It was a challenge taking over a bank with $9 billion in assets and $2 billion in capital," said Faria. Less than a month into his GDB presidency, Faria said he will continue his predecessor Hector Mendez’s work but will also pursue new sources of income given that low interest rates have yielded paltry investment gains.

The GDB has close to $2.8 billion in pending transactions. These include the recently executed $700 million bond issue that will go toward modernizing public housing; a $570 million bond issue for the proposed Port of Americas; a $350 million bond issue for the forthcoming convention center in Isla Grande; and a $180 million bond issue for the forthcoming Puerto Rico Coliseum in Hato Rey. Faria will also try to make progress on troubled tourism projects such as the Fairmont Coco Beach Resort in Rio Grande, the Cayo Largo Resort in Fajardo, and Martineau Bay in Vieques.

It is a familiar position for Faria, who will be expected to work his magic as he did at the EDB. He is confident that the GDB, too, will be able to set itself on the right path.

"It is a matter of having drive and a sense of urgency, and of being able to execute," said Faria.

Antonio F. Faria: A banker’s banker

Antonio F. Faria, president of the Government Development Bank and past president of the Economic Development Bank, began demonstrating his leadership abilities when he was elected president of his sixth-grade class in San German. Since then, he has led a distinguished professional career.

Faria obtained a bachelor’s degree from Catholic University in 1970. He went on to earn a master’s degree in business administration with a major in finance from Inter American University in 1979.

In the meantime (1971-1978), he learned the ropes of the banking industry at Citibank and Banco Central de Economias. "My banking beginnings with Citibank were ironic," said Faria. "Being from the western region of the island, I applied for a job with Citibank hoping it would get me to the San Juan metro area. Citibank did call me several months later, but my first assignment was to be in Mayaguez."

For 18 years starting in 1978, Faria worked for Banco Central Hispano. His assignments included creating corporate divisions and supervising the commercial finance and credit departments.

Banco Central Hispano afforded Faria many opportunities for professional growth. He went from vice president in charge of credit to vice president & senior lending officer to senior vice president responsible for the corporate banking group and the Latin American offices.

From 1994 to 1996, Faria was executive vice president of Banco Central Hispano, in charge of the daily operations. At the time, the bank had $2.3 billion in assets and a loan portfolio of $1.2 billion. Between 1993 and 1996, Faria also served on Banco Central Hispano’s local and international boards of directors.

Faria’s performance had been noticed by others outside of Banco Central Hispano. In the 1990s, he was appointed to several prestigious organizations such as PaineWebber Trust Co. of Puerto Rico and the Puerto Rico Home Builders Association. He also served on the executive committee of the Puerto Rico Bankers Association and as chairman of the Puerto Rico Chamber of Commerce’s banking committee.

Faria joined PaineWebber (now UBS) soon after Banco Santander acquired Banco Central Hispano in late 1996; he was recruited to be senior vice president in charge of investment banking at PaineWebber Inc. of Puerto Rico. In 1999, PaineWebber Trust Co. of Puerto Rico made him its executive vice president & chief operating officer. That year, he also obtained his Series 7 license, which is required to sell all types of securities products except commodity futures.

Faria answered the call to public service in 2001, when he became Financial Institutions commissioner. He perceived his role as a facilitator rather than a regulator of financial companies. "I am extremely proud to have opened the lines of communication between financial entities and the Office of the Commissioner of Financial Institutions," said Faria.

While Financial Institutions commissioner, Faria was also a member of the Governor’s Economic Advisory Council and of the Integral Agricultural Development Fund (FIDA by its Spanish acronym). In addition, he was vice chairman of Promoexport, a government agency that promotes the export of local products and services.

In June 2002, he was appointed president of the Economic Development Bank, which was suffering from low morale, low productivity, and a high loan-delinquency rate. Faria tackled the problem as a banker would, and turned the bank around in a year, doubling loan production, more than halving the delinquency rate, creating new loan products, and expanding the client base. In November 2003, he was called upon to lead a similar transformation at the Government Development Bank.

Faria is certain he will be able to accomplish his goals with the support of the employees and his family. "Wherever I have gone, my family has always been there with me, and that has made all the difference," he said. Faria is married to Lyzette and has three children: Ingrid Nanette, Antonio Francisco, and Ana Mercedes.

This Caribbean Business article appears courtesy of Casiano Communications.
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