OFG - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Laurie, and I will be your conference operator today. Thank you for joining us for OFG Bancorp's Conference Call.

Our speakers are José Rafael Fernández, President, Chief Executive Officer and Vice Chairman; Ganesh Kumar, Senior Executive Vice President and Chief Operating Officer; and Maritza Arizmendi, Executive Vice President and Chief Financial Officer. A presentation accompanies today's remarks. on What's Relations the New and Files found homepage on Webcasts, be Other the in Box page. can the website Investor the Presentations It or on plans forward-looking about certain feature may call management's This goals, and expectations. statements statements in risks outlined filings. factor and SEC the OFG's subject risks of These are uncertainties to section from differ Actual anticipated. results materially may currently those We obligation to call of result a occur disclaim update afterwards. this any developments as information disclosed that in

Presentation that direct News you explanation are I the After to lines will included session. been Release. and to measurements Fernández. a now over there be have to our also All turn We prevent mute of in speakers' the on the like remarks, would question-and-answer non-GAAP call noise. Mr. placed background to

José Rafael Fernández

for third amount joining for to highlights remarks the you are My prepared of welcome and we supplemental quarter the slides of so focus quarter, call. can Thank on most our will us maximize the time morning. the significant There appendix. earnings Good Q&A. in third

turn to Slide Let's X.

extremely was the are year hurricanes increase performance consecutive business. that quarter our of per announce proud ahead significantly loan per were related another a provision. core $X.XX parts all earnings share XX%, that's Earnings loss a across of share, breakeven of sequential special quarter also of superior to ago, We included

the in seeing result metrics the increased of Our basis than basis. average this to of capabilities third common the quarter share. forward. confirms strong form value of a second We're book the second XX.XX% Capital XXX $XX.XX, from range. quarter, the absence X% quarter-over-quarter, strategies, earnings All our continue Total diligence sequential percentage the Net X% due per expansion. interest the XX is exceeding from cancelation an and and third growth sequentially assets revenue momentum build $XXX X% loan ratio more per basis The to increased on quarter. going all, growth now Tangible originated continued in increased on grow. improved revenues efficiency return-on-equity to entire net success Return annualized and reflected was most second margin key interest of primarily quarter, net of quarter performance the and cost points technology, the was in we points the increase has our million. of of share our the portfolio in at now double-digit higher had team. lease income this the

to than increased recoveries, net Please million. basis points, turn for some X of key our $XX strong fee Excluding Slide interest at cost margin X highlights. more revenue remained operational

the fourth high loans. quarter or $XXX million resulted loans; of yields $XXX reflects, basis Loan outpaced For proportion acquired this loan two, year-over-year paydown one, loans This originated in up on of row, originated loans commercial up remained commercial [ph] XX% the increased auto net no XX and accounts X% million. higher points loans; has higher-yielding $X.X originated basis our increased core a increase second of a quarter acquired rose points in The deposit only Average and market. beta core balances to deposit billion. minimal cost from ago. at year from loans. from X sequentially deposits X% in sequentially, XX% or growth with a and slight reflecting three, higher yields the Non-interest-bearing

originated the rate. for lending and at auto remains charge-off of of loans one adjustment production by and portfolio. the second the competitor level compared provision technology aftermath We consumer reflecting was increased $XXX reflect starting primarily rate and our core record due deal the and to from seasonally $XX second to nearly performed loan excellently. Credit value-add convenience business. innovative declined believe $XX highlights million, continued of We for are Provision non-performing established operating We're success up industry for was solutions, flow loans. acquired Auto to to our service gradually in owners provide strategic year's million, plan, opportunities second turning points, million, the reflects added The through the XX last the and customers. rate quarter, $XXX than primarily at quarter and XX our business of retail the continuing $XX customers to commercial production lower basis of positive. lending in deliver is This at continued strong the reflected lending more in growth solely across This net consist industries million. mortgage offset than to increase loan hurricanes. this a differentiation. to They residential subsidiary lower related in auto commercial product of loan in on a lending. believe the geographies. declined of million; participations to and focused customer less Commercial and an million basis $XXX array all in market's The continued OFG The superior loan net due points continued lower at a charges $XXX decline generated While a psychology quality drop embrace high to recently this stable. million, the quarter. lending USA pent-up market X% we

up growth XXXX. continued is highlights year-over-year customer X% quarter since include in now It X% our and accounts. early Third

customers Last achieving out hecho the about changed looking increased turn this and years after lower We X mobile interactive Slide at enable and part through rapido, slide to outlook. to Please quarter us growth online the and as to of more the our adoption Services for we facil, we're cost like our in ahead, talking clients; of opportunity OFG. are now title customers ahead. say channels. automated these challenge step-up here servicing of machines reach teller we to and ability at

We and now Mainland. rebuilding. an aggressive growth relationships new and We're primarily change in year. that, continued technology. faster, to demonstrate invest going activity economic the solution excited all by are develop Rico. lasting in that that, the again some businesses for and and optimize we're things internal Puerto Rico are [ph] Having better results have driven commercial to about Puerto and said forward. new still implement Our fourth consumers have to next on We To happen there businesses in further we has customers the quarter effort Maria, processes been and a to PREPA. expand service is happening. need prospects Since to continuing that believe To

privatize, to and for economic to legislation island. at Rico's problems However, contribute presentation. optimistic we continue also changer. open I regulation ability have to growth But that going economic could provide a need would services to revival. that depoliticize, this and diversify about of With the We're ourselves, forward. electric credit all real OFG game Q&A. must our Oriental. business this say resolve not with financial and and to we and the Puerto Puerto please stopping business call Operator, increasingly to the formal small be grow on Rico's and pending of the free permanently to We us become regulate encouraged engine end differentiate is reduce and taxes our Long-term, we're power to fiscal

Operator

first of the question Rabatin comes Piper Your of line Brett Jaffray. from Instructions] [Operator

Brett Rabatin

the first sheet. balance wanted to I things just of ask on a couple

the at give can great end the depending for You thinking have deposit on continue excess could that around some an growth just cash? just color you seemed bias to forward, quarter; then, a of plans And it little got you had cash the what are upward of here margin maybe us your suppose? from going and positive the about I like it bit flows

José Rafael Fernández

sheet as arise. From the and question ask, that we're A) -- the balance using be will you deployed opportunities cash

in ability opportunistic to market of advantage lending our the have that U.S. We in we be here and opportunities subsidiary. this are take and also potential recognizing

it and from deploying be capital will optimal accordingly we that occasion. So viewing always

how that's balance sheet. the we kind of So view

think prudent be for the we time to always, I also ability as a will decade, but a in opportunistic. have several years, almost and first grow we an

don't basis the kind a and we at that forward are I of it the how operating. So, quarterly more look build bit see term grow and on at we in on markets franchise going this basis, this longer how we -- we that's and look relationships how of we a we little

Brett Rabatin

it's your to you potentially capital as I then, -- of kind maybe to give -- levels; answer year? next more -- the think want ask able capital know a with if any I been can us might into hard And be doing start just you question but to insights you

José Rafael Fernández

continue know, you one. dialogue two, Number as so with regulators. we to have something, number we're So doing the we're the [indiscernible],

as decisions capital. that the we dialogue. our would gives comfortable, improving, think us a we next in better of quarters, become terms couple start best environment and would is of making I and tools I allocate more to that as how will continue expect more the collectively for the and

I be said as and good that, having we have And for we're be opportunity in perspective unfortunately the we [ph]. a our think Now we just to franchise a it capital the conducive expand opportunity from past here was let's and optimal to now see allocators. franchise grow; an so seeing will environment not clear it growth is,

Brett Rabatin

to want seem any see your And grow could commercial factor large a of continue might loan of then, have be that the maybe growth I by just would to give of it more more Does over approximation one know, single-digit you growth. actually kind next pace becomes auto in in loan last if possibly? or just like portfolio on And driven -- part the but year it one potentially don't we a outlook? mid-to-high

José Rafael Fernández

We're portfolio. seeing some the growth on good loan auto

so the think I that's far. driver main

commercials the Rico. that small also year. to subsidiary the commercial launched would in Puerto opportunities We And last look have here in certainly continue into we mid-sized we and U.S. see

it take quite rebuilding, few our we're for mean is So and we there that of we sure want and are there we make opportunities have yes, driving are advantage for an clients to -- that's I to that them. what's economy since now a

Brett Rabatin

results. the on solid Congrats

Operator

the Manna line next Bruyette of Woods. of Keefe, Glen & Your comes question from

Glen Manna

loan island? third was out Puerto some question seeing on in us you your was quarter wanted commercial on so seasonally the the typically, I were just really follow-up commercial of to slow, side, just growth of what And loan on Rico. the could because tell that customers especially you growth it maybe good

José Rafael Fernández

to want Slide Why you talk to about since XX don't guys you growth. turn

market. Let's since in XX, go first, a up Slide originated little the won't XX% loans bit share I I be performance you if And if from -- we're we the ourselves the in in on what each been our there will how has can't years. for much encouraging core tell last I it's grown you I'm are see on also you tell we it's but have -- you just and so And take several in that is XXXX, talk us. to to we each markets been we and you but XX%. our trying you is operating is of doing tell And to of each; things what advantage able deposits are coming market because differently being customers driven from that we're XX%, differentiating specifically very -- but you tell we're say that opportunities the can up growth almost inching markets to us here are while that's the around we've that market on can of

economy taking of this. it, efficiencies to the but I part from throughout what getting the put technology the our of of now in, it's that have advantage in taking here have when last ball in for we back that we're are years we are and are seeing living -- it ready We are a win we we market that. encouraged on invested because with because we've say the starting but done the advantage several the have a we're -- work don't growing, crystal that and and embrace customers the So we also are that place, we we of we

that we been robust. I be or we next or have following able quite higher So place really commercial you we'll -- to wouldn't quarter have well, auto results the the put see to and in higher and are say, Glen specific strategy go

hopefully, growing the that and we So days one that these market will deserve of better realize valuation. we're

Glen Manna

function your loans for a in U.S. And loan on that in growth your given was the that the the OFG was appetite slower USA growth this Puerto growth those quarter; Rico? or of

Ganesh Kumar

more judicious we said choosing cyclic market I to far is but feel it's the If these last the we've cyclic, numbers, and we out we of comfortable is that Obviously, it's done supply. [ph]. approach quarter, lack opportunity of factor it the wanted participating pretty and credit of a have but rather in been do could in, picking as than

Glen Manna

embedded provision? tell is the million in on I this of could that was can -- of how XQ And quarter, you hurricane up us think tell any put 'XX, the us hurricane back a provision you had $XX And related left? recapture provision there much in you

Maritza Arizmendi Díaz

Well, general ratios. quarter reflects the in provisioning trends for [indiscernible] this our in

have see, or was we and in certain than levels charge-off As you like the back getting the pre-Maria can portfolio. to instances, Maria net in the outer it better levels

the associated continue with assess So and reflects related risks we risks. provision that in including Maria associated general, the to portfolio all any

Glen Manna

And the left that of or do much originally number is you have of how not? [ph] special

Maritza Arizmendi Díaz

we further we so in something discuss That's that always can XX-Q, that report. in the elaborate

Operator

line of question from comes Twerdahl Your the next O'Neill. Alex Sandler of

Alex Twerdahl

but that just questions bit question little what and loans either we I of in talked on what the kind into -- call, that little more enough has charged sitting I if so at back the know general off back bit either reserve, follow-up that being released has about here knowing like, or to the that about a related hurricane be the but dropped shareholders. or XX-Q would allocated these answered that into got I been passed last reserve point of have apologize released you've into of time any reserve to you a and

Maritza Arizmendi Díaz

general, the we [ph] both, we second or needed of in reserve [ph] service allocate titles experienced and to been portfolio far. to general, to used that them. moratoriums we we we due higher the until results are not to but remember, In portfolio related have some that still have going think we have and within still the portfolio to will the continue continue so some to Maria in that monitor in shares still allocations are the quarter expiration I have that from

Alex Twerdahl

moratoriums? that from the the a be year like Will end of

Maritza Arizmendi Díaz

specific it's have each characteristics portfolio don't any period, so with has We individually. evaluated own each

Alex Twerdahl

is bit talk growth in other quarter you in or following you're deposit deposit low high bit is from a you're insurance kind obviously has that little been core deposit the you retail it particularly that payouts; betas touch this of just here? driving story on the a fantastic just sources and like little see then, where seeing seeing about in drove And hurricane, but growth can Puerto a from a that going commercial, from what's maybe it Rico what

José Rafael Fernández

It's pretty the much above. all of

have retail core good We growth.

not in growth part insurance those with late year all. they last commercial was We proportion being being growth last later that being and year core was also as some were good of very that the last on proportion in -- not are we're it we that side. the seeing years still all all the deposit But companies, areas. We're earlier -- on we're balances all, seeing deposit have core at significant seeing not that still not that it our not satisfied that earlier year, across

Alex Twerdahl

out, rate look is new there on any pressures pressure island? -- bring any are to deposits, is you in rate the to materialize there as And starting for --

José Rafael Fernández

Rico would say higher primarily type pressure I the now clients in in right costs. Somewhat is states in Puerto rate look more the bills we in on sensitive coming pressure look at short-term deposit a of all see terms of that, don't who and of little the market on kind treasury deposits at in and here is that. that bit the a any of changes there But

Alex Twerdahl

quarter? touch anything is delinquencies into a read specifically have that early -- that And looks that anything could stage there there? could Is the ticked up it you bit caused this there little little just a bit, like on auto to

José Rafael Fernández

balance, at portfolio look auto higher. our is can our You

but from optimizing of look and actually you the optimizing pre-Maria look size of dollar you we'll it's servicing, it's noticed perspective, at it of it we the higher our it on of at at when a [ph]… go So it a and never-ending process is perspective lower ongoing when from And part yes, levels. writing percentage than that our on portfolio, the

Maritza Arizmendi Díaz

level. portfolio saw Also, for was in low, for that than we pre-Maria title lower that particularly what quarter the

levels So with of that quality in comfortable we feel asset portfolio. the

Operator

the next question comes of Your [indiscernible]. from line

Unidentified Analyst

the of that start huge like seems much it with could but [Technical Difficulty] opportunity. that island Let me a to might quantification how be add

José Rafael Fernández

as you certainly the there and have from that No abroad is confirmed from Puerto evaluation zone; but is states by when specifics an zone. -- said that locally looking opportunity at just zones investors at created, qualified been XX% opportunity opportunity Rico

certainly but can interest. specific have numbers don't the I I see So

Operator

Instructions] [Operator question Sandler a of next Your follow-up O'Neill. from is Twerdahl Alex

Alex Twerdahl

the flows what's customer I you to ask been new -- or in new any follow-up [ph] mean, seen Just there -- read these leaving seen island? What numbers of wanted kind customer is recently you that recently. the and customer flows people new for have the is seeing you've reports the you're on another driving the a to and change long people see all time of of any island; you acquisition, returning

José Rafael Fernández

project macroeconomic our a trend. into can't results You

leading which are our picking shrinking customer market that as brand, levels we the we last and necessarily the is up see We player lot however, a here the a challenger advantage deposit not is not base over and mean more market the than does market are market year. of cash share flow growing. growing within But do we have

Alex Twerdahl

there complexion? of for is a who any quantify competitor, need customer who just any anyway of people new the from new But not they the company in the because a specific they who formed; that's from graduated customers, and returning just to mean just island, is I'm the sort who terms high -- or the school new is coming account bank -- to for new numbers and like is I is to over looking account,

José Rafael Fernández

very at not creations the household banking into and Look, customers. end there new day meet the of inflows think is many I

that is side market see it really our So is the purely growth. from growth in share you

Alex Twerdahl

you And that think how then, about do go on. --

José Rafael Fernández

that competitors going to is too. I remember significantly was Alex, less just there say

So a the also bank of market same population less that the at for is our the good is the and with competitors time shrinking market has size approach. has shrunk but but and our also

Alex Twerdahl

see think pick of do hard construction do years? meaningfully, of we're just I about way opportunities then and been of couple right loan And to is And that. demand move about years? consumer over a think next of the driven the money the a -- the then to how starting couple maybe couple starts we don't have probably piece you is quarters, seeing down. not the going pretty that of really progression to about of lot progression; think up next to know, and for another coming some see We're commercial that maybe the then, kind by going towards it's today how you that of consumer it into Obviously,

José Rafael Fernández

as it think seeing I just described Yes, we're too. it you

We as are they seeing the consumer are first rebuilding.

several we're start pieces the of we're stage opportunities their into stage to an at But You think to more the consolidation in and invest I moving the in it's see industries the businesses now hurricane is business in investment stage. -- and some stages latter into money to in of and which growth. evaluating going be is there businesses general, of play gain also if one and now the would the picking and other that general, first there the small in going looking is kind after next up to the is

Operator

of the [indiscernible]. from comes line question next Your

Unidentified Analyst

I and is the be on foresee very a how have island? front. just point and as lending recovery lending quarter, bank to in Do Oriental strong deployed it's process great -- the for on inflection for participating win rebuilding economy the construction you and at that questions it. Congratulations the Rican the this money capitalize two into Puerto construction of in also the infrastructure on space, in

José Rafael Fernández

ourselves We in seeing are business. building housing really construction not the

part have are not institution. We been of and as the we in that's past an who

certainly won't which is with on business. participate continue will industry have that been are and that of will to the that perspective indirectly So all from we the we side construction declines but involved

will. for sure, we So

Unidentified Analyst

-- of higher have reasoning was what questions. that? investment the more in more not of And retaining the taking foresee advantage the two do mortgages; the money curve? portfolio why One, these investment rates side deploying those then, ledger And you into decreased behind the

José Rafael Fernández

lookout capital look We're there kind a always target ROE of and want We on effective into. deploy the in you we an also to the way, we but that have benefit. tax IBE do the even most provides

couple As yields this interest there. the continue that capital, a rates of go last balances we quarter utilizing our we'll our of and investing get to re-evaluate seeing we're loans loan but can in up growing way given better at and quarters, the

Operator

the Instructions] Fernández return are [Operator Mr. this for time. to now questions There closing remarks. no call at further any I'll

José Rafael Fernández

us you this call. joining you Thank participating for today. for And thank in

conference Friday, call We for have our you a preliminarily thank a scheduled XX. January Have wonderful day, and again. fourth Until quarter great then, weekend.

Operator

for participating you conference Bancorp's in Thank OFG call.

your and day. disconnect a wonderful You have may now lines

OFG Bancorp (OFG) 19 Oct 182018 Q3 Earnings call transcript