Safe and Sound

Banco Santander Puerto Rico

San Juan, PR
3
Star Rating
San Juan, PR-based Banco Santander Puerto Rico is an FDIC-insured bank started in 1972. As of December 31, 2017, the bank had equity of $897.9 million on $5.11 billion in assets.

With 1,058 full-time employees, the bank holds loans and leases worth $3.25 billion, including real estate loans of $2.41 billion. U.S. bank customers currently have $4.11 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Banco Santander Puerto Rico exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for account holders when a bank is experiencing economic instability. Therefore, a bank's level of capital is a crucial measurement of an institution's financial strength. From a safety and soundness perspective, the more capital, the better.

Banco Santander Puerto Rico achieved a score of 26 out of a possible 30 points on our test to measure capital adequacy, exceeding the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Banco Santander Puerto Rico's Tier 1 capital ratio was 27.50 percent, higher than the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, Banco Santander Puerto Rico held equity amounting to 17.58 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of troubled assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

A bank with lots of these types of assets may eventually have to use capital to cover losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Banco Santander Puerto Rico scored 28 out of a possible 40 points, lower than the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 6.62 percent of Banco Santander Puerto Rico's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Banco Santander Puerto Rico's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

Banco Santander Puerto Rico scored 0 out of a possible 30 on Bankrate's earnings test, coming in below the national average of 15.12.

One important measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. Banco Santander Puerto Rico's most recent annualized quarterly return on equity was -0.48 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $-4.3 million on total equity of $897.9 million. The bank had an annualized return on average assets, or ROA, of -0.08 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.