After only three months as CEO of Puerto Rico’s biggest bank, Ignacio Alvarez already faces a career-defining challenge: Playing a leading role in the restoration of the island’s banking system after the devastation of Hurricane Maria.
“If you’re not here in Puerto Rico, you can’t perhaps imagine the level of destruction that we’ve had,” Alvarez, CEO of the $41 billion-asset Popular, said in an interview.
The San Juan company, which holds a third of the island's deposits, operates about 170 branches under the Banco Popular brand, in addition to its offices on the U.S. mainland. In the five days after the powerful hurricane ripped through the Caribbean, downing trees, pummeling homes and washing out roadways, Alvarez focused on assessing the damage.
Executives used satellite phones to call employees in far-flung areas, such as the small island of Vieques, and also ordered technicians to visit branches in hard-hit communities by car. So far, the news has been mixed: All employees are safe, but some lost their homes, according to Alvarez. The storm, meanwhile, demolished four bank branches and inflicted a range of relatively minor problems, such as broken windows and water damage, on the company’s other locations.
With electricity and cell service knocked out across Puerto Rico, restoring banking services will likely be a long haul. Popular has so far opened about 18 branches (11% of the total), including a handful around San Juan, with the help of diesel-powered generators. The company estimates that it can open and operate 60 branches while still preserving its diesel supply.
Getting ATMs back online is also proving difficult, as power is spotty and communication lines are down.
“We have to get the banking system up and running,” Alvarez said, noting that is sole only focus at the moment. “Our clients have to have access to their wire transfers” and other services.
In addition to Popular, community banks such as the $12 billion-asset First Bancorp and the $6 billion-asset OFG Bancorp, both also based in San Juan, each control less than 10% of the island's deposits, according to the Federal Deposit Insurance Corp. Citigroup does a lot of business on the island, too.
Before Hurricane Maria, of course, Puerto had already been in dire financial straits; this spring it filed for the largest-ever local-government bankruptcy, unable to repay roughly $70 billion in debt.
Since the storm hit late last week, officials on the island have offered bleak assessments of the damage, saying that the response from the federal government has been slow.
Media reports over the weekend said many residents were isolated without cell service, and running low running low on food, water and gasoline. A crack in a dam on the northwestern part of the island also prompted further evacuations.
“This is a game-changer,” Governor Ricardo Rosselló told CNN on Monday. “We need to prevent a humanitarian crisis from occurring in America.”
About half of the transmission towers in Puerto Rico may be down, and more than 90% of the distribution system could be destroyed, according to a recent note from Keefe, Bruyette & Woods, citing reports from the Federal Emergency Management Agency.
Alvarez said that the primary hurdle in restoring financial services is the lack of phone service and electricity. Getting those services up and running could take a while, as officials over the weekend predicted that restoring power could take as long as six months.
“It’s very difficult because so much of the modern world depends on communications,” Alvarez said.
In the meantime, Alvarez said Popular is working closely with the local government, which he said has provided security for transporting cash to ATMs. Additionally, Richard Carrión, the company’s executive chairman, has also been instrumental in organizing charity donations in New York.
Popular also plans to waive fees on its ATMs for out-of-network customers and is working on an initiative to provide temporary relief for customers who have loan payments coming due.
It’s unclear what kind of immediate impact the hurricane and recovery efforts will have on Popular’s bottom line. “We’re not in a position to [assess] that yet,” Alvarez said.
Over the long term, however, there could be an economic upside to the hurricane damage, according to Alvarez.
Federal disaster aid and insurance payouts could be a boon to the local construction industry, which has struggled for years in Puerto Rico’s depressed economy. Much-needed improvements to the island's infrastructure could also be around the corner.
As for Popular, Alvarez said that employees are in good spirits about the recovery.
“We’ll be back — and we’ll be back sooner than people expect,” he said.