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Puerto Rico's Oriental Financial Group (NYSE: OFG) is aiming to lift its ROE to 12% and ROA to 1% in 2012 on better net interest income and a more variable rate type of loan book, president and CEO José Rafael Fernández told a conference call.
"If you see what should happen at the end of this year in terms of the maturing repos that we have and the strategies we have implemented with our swaps, we should have a significantly better net interest income. And if we execute on our commercial banking strategies, we should have a more variable rate type of loan book. All those things would play in 2012 and beyond," he said.
Oriental's first quarter net income fell 74% to US$3.08mn on 1Q10, for a 0.17% ROA and a 1.15% ROE.
Results were affected by an income tax expense of US$5.4mn for the re-measurement of the deferred tax asset due to reduction of corporate tax rates in Puerto Rico, and a US$4mn one-time loss on the sale of forward-settled interest rate swaps.
However, pre-tax operating income of US$13.1mn increased 4.7% from the year-ago quarter and more than doubled from 4Q10, as banking and wealth management operations continued to perform well and net interest income rebounded strongly.
Exactly one year ago, Oriental closed the purchase of US$1.7bn in assets and 22 branches from Eurobank in an FDIC-assisted transaction.
The acquisition lifted Oriental to the fourth spot - from ninth - among Puerto Rican banks, increased its assets by 30% to US$7.2bn and allowed it to enter the leasing business.
"Amid signs that the economy may be stabilizing and that loan and deposit pricing are becoming more rational, we remain on track to increase our market share this year in the local commercial lending business," Fernández said.
To read the group's full earnings release, go to this link