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First BanCorp (FBP) Concludes Acquisition of Banco Santander

Zacks Equity Research
·4 mins read

Recently, First BanCorp. FBP, the bank holding company for FirstBank Puerto Rico (FirstBank),completed the acquisition of Santander BanCorp and its wholly-owned subsidiary Banco Santander Puerto Rico, after receiving the regulatory nod from the board of governors of the Federal Reserve System and Federal Deposit Insurance Corporation in July. The merger deal has also been approved by the Office of the Commissioner of Financial Institutions of Puerto Rico for FirstBank.

Notably, Santander BanCorp and its subsidiary will be merged into FirstBank, which will be the surviving entity.

The deal solidifies First BanCorp’s top position in Puerto Rico's financial services industry expanding the capability in serving customers. The transaction provided a network of 73 branches and more than 445 ATMs throughout Puerto Rico, expanding market share in San Juan, Bayamon, Caguas and Guaynabo along with the western and southern regions of the island.

The new company is aimed at capturing market opportunities and boosting the client base. Moreover, the companies’ expanded scale, technological advancement and increased product offerings will help capitalize its market share.

Aurelio Aleman, president and chief executive officer of First BanCorp, commented, "Today we completed the acquisition of Banco Santander announced back in October 2019. The completion of this transaction marks a significant milestone in our journey. I want to acknowledge the hard work and dedication of both teams who have worked diligently on integration planning and execution throughout the operational disruption caused by the pandemic.”

Terms of the Deal

As of Jul 31, 2020, Banco Santander held $5.5 billion in assets, $2.7 billion in total loans and $4.2 billion in deposits.

Per terms of the agreement, First BanCorp paid cash of $394.8 million base purchase price for 117.5% of Banco Santander’s core tangible common equity reflecting $58.8-million premium on $336 million of core tangible common equity along with $882.8 million for Santander’s BanCorp excess capital (paid at par).

Strategically, the combined entity will grow on advanced technologies, innovative products, and create a competitive edge.Additionally, the combination will cater to various commercial and consumer clients with diversified products. On the completion, First BanCorp aims to offer superior client services.

Aurelio Aleman added, “We expect that the combined strength of our franchises will expand our earnings power and capital ratios, which already exceed the well-capitalized regulatory guidelines. This is a new chapter for First BanCorp and we are delighted to make evident to our shareholders, customers and employees what we are capable of accomplishing together."

Pre-integration, the respective First BanCorp or Banco Santander branches, websites, mobile apps, financial advisors and relationship managers will continue to serve clients. Notably, the conversion of operating systems is expected in mid-2021.

Bottom Line

While lower interest rates and economic slowdown due to the coronavirus pandemic will likely hurt First BanCorp’s profitability in the near term, a strong balance sheet position and inorganic growth efforts are expected to provide support.

Shares of this Zacks Rank #2 (Buy) rallied 7.1% over the last month compared with 6.1% growth recorded by the industry.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

So far this year, consolidations in the banking sector have been few and far between as the virus outbreak and resultant economic slowdown put brakes on the same. Nonetheless, a few notable deals this year include CapStar Financial Holdings, Inc.’s CSTR merger with Tennessee-based FCB Corporation; First Horizon National Corporation FHN and IBERIABANK Corporation’s all-stock merger of equals; and Franklin Resources’ BEN alliance with Legg Mason, Inc.

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