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Local Financial Industry Displayed Strength In 2003
Leveraged historically low interest rates, focused on portfolio diversification, and pursued expansion plans
By LUIS A. RAMOS
December 25, 2003
Puerto Ricos economy was boosted in 2003 by the financial industrys growth in the commercial, mortgage, and securities sectors.
Assets held by the 11 commercial banks serving Puerto Rico increased from $66 billion in December 2002 to $73.6 in the third quarter of 2003, according to the Office of the Commissioner of Financial Institutions. There were notable gains in mortgage ($11 billion estimated) and commercial ($5 billion estimated) loan disbursements. And, at $31 billion as of Sept. 30, the sale of securities also outpaced 2002 figures.
As the interest rate on a 30-year fixed-rate mortgage loan remained under 6%, local mortgage bankers again had a banner year with high activity not only in refinancing, but also in first- and second-home purchases, consolidations, and home improvements. Doral Financial and R&G Financial retained their first and second rankings in the sector.
Other banking institutions also went after mortgage business. Banco Bilbao Vizcaya Argentaria (BBVA) created BBVA Mortgage and tripled its mortgage volume. First BanCorp, meanwhile, catered to this hot market by establishing FirstMortgage.
The much-talked-about boom in mergers and acquisitions didnt materialize, although many people believe it will happen in the next three years. Nevertheless, several players made moves here and abroad.
First BanCorp acquired Island Finances (a Wells Fargo subsidiary) 10 branches in Puerto Rico and 20 in other Latin America markets to meet the growing demand for home equity products. A year after acquiring the 15-branch Crown Bank in Central Florida, R&G Financial Corp. was able to double its assets to $1.2 billion and increase the number of its commercial offices to seven.
Popular Inc. kept up its expansion efforts on the U.S. mainland. By the end of 2003, it had 96 branches in six states and had established its North America headquarters in Chicago.
Oriental Financial Group acquired Caribbean Pension Consultants, a third-party administrator of pension plans in Boca Raton, Fla., with $400 million in private-sector pension assets. In an effort to become a major player in the consumer and commercial banking sectors, Oriental recruited top banking executives and launched Oriental Preferred to serve professionals and small & midsize businesses.
Citibank Puerto Rico recently moved from the corporations Latin American division to North America. Citipro, a personal financial planning program, was one of the first products to come from that move. Citibank Puerto Rico reported an overall 50% volume increase, with most of the credit going to its mortgage and insurance businesses.
Securities firms responded to the continuing weak economy by developing more fixed-income products. An estimated $7 billion shifted from banking institutions to the mutual fund industry.
UBS and Santander Securities launched new mutual funds in Puerto Rico. Santander Securities (along with Santander Asset Management) also joined the local Santander BanCorp franchise through a stock purchase valued at $62 million.
Underwriting commonwealth bond issues was a main source of business for securities firms in 2003, even though the activity amounted to less than the $7 billion last year. The Government Development Bank (GDB) ended 2003 with a $700 million bond issue to upgrade public housing complexes.
Doral Financial, W Holding, R&G Financial, and First BanCorp also engaged in private bond issues and in common or preferred stock issues.
Top government banking institutions experienced significant changes over the year. In little more than a year, Antonio Faria transformed the Economic Development Bank (EDB).
Faria and his executive vice president, Francisco Rodriguez-Castro, developed an Entrepreneur Business Card so that the EDBs small- and midsize-business clients can have immediate access to credit. The card grabbed international attention recently at the Fifth Conference of Visa Services for Governments in Scotland. They signed an agreement with the Society of Certified Public Accountants to certify government financial planners. They also launched, with the Office of the Commissioner of Municipal Affairs (OCAM by its Spanish acronym), a program to reimburse businesses part of the interest they pay on their EDB loans.
His accomplishments at the EDB earned Faria the distinction of being named the CARIBBEAN BUSINESS Person of the Year, Public Sector for 2003 (CB Dec. 18). In November, he was appointed head of the GDB and Rodriguez-Castro took over the EDB.
For the eighth time in a row, the GDB received a certificate of achievement for Excellence in Financial Reporting from the Government Finance Officers Association.
Other changes, challenges, achievements
UBS completed the process of changing its name from PaineWebber, which the company hopes will strengthen its corporate identity and its portfolio.
Propelled by the desire to unite its four major businesses, the local Santander franchise became Grupo Santander Puerto Rico. BBVA, meanwhile, launched a global campaign, "BBVA Forward," aimed at creating a new corporate culture that is focused on adding value to its services.
Earlier in the year, Banco Popular received a $21.6 million penalty from the U.S. Treasury Department for failing to report suspicious financial activities. The end of the year, however, saw Popular celebrating its 110th anniversary.
Local financial institutions continued to receive praise for their performance. Brean Murray & Co., a New York investment firm, held its second conference to highlight investment opportunities in Puerto Ricos financial institutions. According to the firm, the index of local bank stocks has appreciated 30.5% over the past 10 months, compared with 7.9% for the S&P Bank Index and 6.4% for the S&P 500 Index. Doral Financial and Westernbank also made U.S. Banker magazines top 10 banks for the second year in a row.
This Caribbean Business article appears courtesy of Casiano Communications.