Virus delays First BanCorp’s acquisition of Santander’s Puerto Rico unit

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First BanCorp’s pending purchase of Santander’s retail and commercial lending operations in Puerto Rico will be delayed by the coronavirus pandemic.

The $12.6 billion-asset First BanCorp said in a press release Thursday that the outbreak had slowed the regulatory review of the merger. The company originally planned to complete the deal this summer.

“We're working through requests from the different regulators that are looking at the deal … but the pace of the progress is different” because of the pandemic, Aurelio Aleman-Bermudez, First BanCorp’s president and CEO, said during an earnings call Thursday.

“What we're saying to the market is we see that, at this stage, [a mid-2020 closing is] unlikely,” he added.

The deal will likely close in the fourth quarter, Joe Gladue, an analyst at Alden Securities, wrote in a note to clients.

First BanCorp, based in San Juan, Puerto Rico, is the third-largest bank on the island by deposit market share. It agreed in October to buy branches and other assets from Spain’s Banco Santander for $1.1 billion.

The company said in its earnings release that it incurred $800,000 in one-time costs during the first quarter tied to the deal.

Santander’s Puerto Rican unit has 27 branches and $6.2 billion of assets.

Other banks that had announced mergers have warned of delays tied to the pandemic.

Puerto Rico’s governor locked down the island’s economy in March to help curb the spread of the virus.

First BanCorp reported that it earned $1.6 million in the first quarter, a sharp decline from $42.6 million a year earlier. The company recorded a $77.4 million loan-loss provision in the first quarter.

“We still believe that [First BanCorp’s] strong capital ratios have the bank in a good position to weather the current economic downturn and still complete the Santander transaction,” Gladue wrote in his note.

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M&A Puerto Rico Santander Coronavirus