Puerto Rico

Doral books US$54.6mn loss in Q1

Bnamericas Published: Friday, May 08, 2009
Puerto Rico's Doral Financial (NYSE: DRL) posted a US$54.6mn - or US$1.01 per share - net loss attributable to common shareholders in this year's first quarter, compared to a US$10.6mn - or US$0.20 per share - loss in 1Q08, the company said in its latest earnings release. Net interest income for the first quarter was down 7.4% to US$36.1mn due to weaker income from interest, higher provisions for loan and lease losses and a US$5.9mn increase in non-interest expenses driven primarily by a severance expense resulting from a workforce reduction during 1Q09. The provision for loan and lease losses was US$23.6mn in 1Q09, compared to US$4.8mn for the same period in 2008. This is because continuing deterioration of the Puerto Rican economy has affected the residential real estate market, causing lower home absorption rates on new construction, increased defaults on existing mortgages, weakening economic situations for existing borrowers, and therefore the need to increase loan loss reserves, Doral said. The company also said it initiated an offer to acquire a portion of its outstanding preferred stock in exchange for shares of common stock plus a cash payment, which is optional for preferred shareholders. Doral has targeted the acquisition of US$200mn par value (liquidation amount) of preferred shares and expects this transaction will further strengthen its capital position by increasing tangible common equity and its regulatory Tier 1 capital. "I think it's a great move to manage capital. Preferred holders will be intrigued by the offer since they are no longer receiving dividends. This is a move that we may see many banks take as they look to bolster their TCE [tangible common equity] ratio," Raymond James (NYSE: RJF) analyst Amanda Larsen told BNamericas. The preferred stock exchange offer is set to expire on June 8. MacKenzie Partners is acting as the exchange agent and information agent for this transaction. Doral said that it and its two banking subsidiaries, Doral Bank and Doral Bank, FSB, continue to maintain regulatory capital ratios above what is deemed well-capitalized. Doral - once Puerto Rico's largest mortgage lender - was founded in 1972 and had US$10.1bn in assets as of March 31.

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