FirstBank Puerto Rico

We could raise our ratings on the FirstBank in the next 12 months if we are confident it will sustain its RAC ratio in excess of 15% after factoring in potential credit losses and capital deployment. While we expect charge-offs to increase from 2020, the outlook also reflects the possibility that loan performance may not weaken as much as we expect, which could result in lower provision expenses and higher profitability than anticipated. A higher rating would also depend on continued momentum in the Puerto Rican economy and vaccine distribution easing the impact of the pandemic, as well as the inflow of funds from private insurance and government stimulus bolstering consumer financial strength and helping business prospects. We could revise

...FirstBank Puerto Rico remains highly concentrated in Puerto Rico, but the local economy remained resilient throughout multiple crises. We view First Bank's concentration in Puerto Rico as a constraint on the rating owing to the territory's relatively weak economy compared with most mainland U.S. regions. However, we think the Puerto Rican economy will continue to benefit from ongoing fiscal stimulus related to the COVID-19 pandemic and continued disbursement of private insurance payments and federal aid following Hurricane Maria, which should support asset quality metrics in the near- and medium-term. We expect FirstBank 's capital ratios to decline from their robust levels at year-end 2020, but remain strong. As of year-end 2020, the company's Tier 1 capital ratio was 17.6% and its risk-adjusted capital (RAC) ratio was 16.8%. We currently expect the RAC ratio to decline to the upper end of the 10%-15% range we consider strong primarily because of increased share repurchases, though our...

Full Report