Release Date: January 22, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Can you discuss the outlook for net interest margin (NIM) given the competitive deposit environment and potential rate cuts in 2025? A: Jose Rafael Fernandez, CEO, explained that the competitive environment in Puerto Rico remains intense but rational. OFG Bancorp has seen good customer growth, particularly with new products like the Libre and Elite Accounts. Maritza Arizmendi, CFO, added that they expect NIM to remain between 5.3% and 5.40%, with the investment portfolio helping to mitigate rate impacts.
Q: How are you managing expense growth, especially with early retirements and increased general and administrative expenses? A: Jose Rafael Fernandez, CEO, highlighted the success of their Digital First strategy, which has doubled transaction levels since 2021 while reducing branch transactions. This has allowed for workforce reductions and increased efficiencies. They expect quarterly expenses to average $95 million to $96 million, balancing business growth and investments in technology and people.
Q: Can you provide more details on the reserve build related to US commercial loans and auto delinquencies? A: Jose Rafael Fernandez, CEO, noted that the Puerto Rican economy remains solid, with stable consumer credit trends. Cesar Ortiz, Chief Risk Officer, added that the increase in delinquencies is seasonal, and non-performing levels are better than last year. The specific reserves for US commercial loans are due to unique operational challenges.
Q: What is the outlook for the effective tax rate (ETR) in 2025? A: Maritza Arizmendi, CFO, stated that the 2024 ETR was 24% due to higher business activities with preferential tax rates. For 2025, they anticipate an ETR of about 26%, continuing to benefit from similar activities.
Q: How is OFG Bancorp approaching capital allocation, particularly regarding buybacks and dividends? A: Jose Rafael Fernandez, CEO, emphasized the importance of maintaining a strong capital position. They plan to deploy excess capital in loans, dividends, and buybacks, aiming for a methodical approach to buybacks in 2025, similar to their strategy in 2024.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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