Cantor Fitzgerald Sees P.R. Bank Consolidation

March 11, 2010, Caribbean Business Online

Global financial services firm Cantor Fitzgerald is projecting a “rationalization” in the island's banking industry that will see Popular Inc. shut out of an anticipated Federal Deposit Insurance Corp.-mandated consolidation, while First BanCorp and Doral Financial could be in a position to bid on other local banks, including R-G Financial.

Doral Financial, however, could be headed toward a sale of its own, a prospect that would gain momentum if it fell short in a bid for another bank, according to Cantor Fitzgerald, which cited R-G as the most likely target for Doral. R-G Premier Bank, the bank subsidiary of R-G Financial, is one of three banks on the island under FDIC cease & desist (C&D) orders. The other two are Eurobank and Westernbank.

Those scenarios were outlined in separate analyst reports issued Wednesday by Cantor Fitzgerald as the Wall Street firm announced it has extended its coverage to Popular Inc., First BanCorp and Doral Financial. It put “hold” ratings on all three banks: Popular (price target $2.25) Doral Financial (price target $4) and First BanCorp (price target $2.25).

Cantor Fitzgerald projected a marked improvement for Popular in 2011 due to a variety of factors.

“We expect a better 2011: (a) a rebound in the Puerto Rico economy; (b) much lower provisioning, due to improved credit quality; and (c) a wider net interest margin, due to rationalization of Puerto Rico banking and Fed rate hikes.”

Cantor Fitzgerald analysts said Doral Financial, the holding company of Doral, could be a player on both sides of the consolidation of the island banking industry.