Oriental Bank

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Oriental Bank made it to middle age in good shape. At 55, this local institution is set to become the second largest bank on the island after it completes the acquisition of Scotiabank’s Puerto Rico operation.

At a price tag of $550 million, Oriental announced two weeks ago that it is purchasing the assets of the Canadian bank on the island and paying another $10 million for its stake in the U.S. Virgin Islands, a move that marks its debut in the neighboring territory.

“The acquisition provides the combined companies with greater prospects for growth, profitability and employee engagement,” Oriental Bank’s president, José Rafael Fernández, said in a press release. “We are combining two excellent banks to create a strongly capitalized, market leading institution focused on the needs of consumers and businesses in Puerto Rico and the U.S. Virgin Islands.”

Upon closing the deal, the bank will have a diversified loan portfolio totaling $7.2 billion, low-cost deposits of $7.9 billion and approximately 500,000 customers. Oriental also expects the transaction to expand its mortgage servicing book five-fold to approximately $5 billion.

While Oriental, which opened its first branch in Humacao in 1964, celebrated the merger, others in the banking sector warned about a trend in the industry, where big international players are bowing out and leaving the field mainly to local institutions.

Over the past decade, the number of consumer banks in Puerto Rico shrank from 14 to six. With Scotiabank’s upcoming departure, only five retail banks are left: Banco Popular, FirstBank, Oriental Bank, Banco Santander, and Banesco. Citibank only offers institutional banking services.

This means that Santander, which reduced operations on the island last year, remains as the sole international player.

Former Financial Institutions Commissioner Rafael Blanco Latorre told THE WEEKLY JOURNAL that Scotia’s adieu -after opening its first branch in San Juan in 1910- sends a negative message to the financial community because the presence of big international banks is a symptom of good economic conditions.

“These banks make strategic decisions based on economic activity. They establish in places where there is an expectation of growth. The fact that they are leaving is an indicator for the foreign investor that Puerto Rico is no longer attractive and that they don’t see a potential for growth that justifies their presence here,” Blanco stated. “When tracing their map of opportunities, these institutions settle in countries where they forecast promising conditions and attractive returns.”

According to Blanco, it’s a reality that Puerto Ricans have to grapple with due to the island’s decade-long economic slump, the government’s inability to pay off its $70 billion-plus debt load and the uncertainty caused by the debt-restructuring process.

“In that sense, there is no other option than the forced consolidation of institutions that don’t see opportunities in this market,” Blanco indicated.

Despite the uncertain economic climate, Oriental is betting on the island’s future.

“The banking market in Puerto Rico through consolidation is not necessarily shrinking, on the contrary with capital put to work to grow, it actually expands the market,” Fernández said. “In spite of the uncertainty and the current fiscal challenges that Puerto Rico faces, economists project economic growth for Puerto Rico.”

Reporter for The Weekly Journal. She is a curious and fearless journalist, equipped with 16-plus years of writing. Cynthia received a bachelor’s degree in Spanish and English Literature from Sacred Heart University.

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