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Last September, after Hurricane Maria hit Puerto Rico with the kind of force he saw once in his life, Ignacio Alvarez got in his car and drove to the popular headquarters in San Juan.
Alvarez had already crossed several hurricanes before. So when he saw fallen trees and damaged terraces around his neighborhood, on the outskirts of San Juan, he was not too worried.
"Sometimes it looks worse than it really is," said Alvarez.
But as Alvarez drove from the suburbs of San Juan into the city, the scale of the damage soon became evident. He saw telephone poles that had been hit in the street. Electricity was available on the island, and telecommunications lines – on which the bank relied to transmit data between its branches – were not available.
Alvarez and his management team were quick to evaluate the damage, set up satellite phones and check with the island's employees. As the days went by without electricity, Alvarez even queued for four hours to recover the essence of the company's generators.
"It was like walking dead, everyone was lining up," Alvarez said, remembering the first days after the storm. "I lived Hurricane Georges [in 1998] and Hugo [in 1989]but it was a different scale.
All in all, Maria devastated Puerto Rico. Nearly 3,000 people have died as a result of the storm, according to a study by George Washington University, which has since been criticized by President Trump. As residents ran out of power in the months following the storm, Popular became a vital cash provider as companies accumulated greenbacks and residents waited hours in front of ATMs and branches.
But a year later, even after the restoration of nutrition and the return to the case, it is clear that Maria had a lasting impact. The biggest signs of this at Popular, the island's largest bank, may be the changes the company has made to prepare for the next storm.
"Not only did we survive, but we also came out stronger," said Alvarez, reflecting on the past year.
In recent months, for example, Popular has designated 55 of its more than 170 branches across the US to serve as "Bunker Branches". The sites will have external fortifications, such as stronger shutters on the windows. In addition, computer systems – which are currently being tested – will be connected to satellite communication networks, allowing these branches to be essentially functional if the telecommunication system is again failing.
One of the biggest logistical difficulties faced by Popular immediately after the storm was the inability to transmit information from its branches to its central operations. Employees were forced to rely on paper balances.
Finally, Popular implemented what it called the "Jedi System", sending the young employees of Popular's head office to deliver USB sticks containing general ledger information for the company's branches. The so-called "Jedis" often left early in the morning and returned after hours.
Popular also sent a boat daily to his branch in Culebra, a small island off the east coast of Puerto Rico.
"We had a backup system with radio transmission, but that did not prove to be effective," Alvarez said.
Only a handful of branches was demolished by the storm and permanently closed.
In addition, Popular has purchased larger generators, designed to last longer. According to Alvarez, the company has also created a stock of additional parts and trained more employees in basic repair.
"We have taken a number of steps," said Alvarez. "You learn from the last disaster. The next can be totally different. "
While analysts were preparing for major loan losses after the storm, given the scale of housing and other property destruction, these losses have not yet materialized.
As at June 30, net write-offs were stable year-over-year at $ 57 million. Non-performing loans, however, increased 4% to $ 785.3 million. In the months following the storm, the company remained profitable – excluding the one-off accounting adjustments related to the corporate tax cut, but including a significant reserve taken in the third quarter for potential losses related to corporate income tax. 'hurricane.
One of the factors that prevented credit losses was a moratorium on foreclosures by federal agencies and local banks, Alvarez said.
Popular, for its part, recently hired additional employees to help troubled homeowners change the terms of their loans.
"I do not think we're going to see this avalanche of seizures that people have said we're going to see," said Alvarez. However, he has said he expects them to "go up" as banks and agencies become less lenient in the coming months.
In addition, new jobs in construction and other sectors, created in response to federal disaster recovery assistance, will also help borrowers stay at home, he added.
A disaster relief measure promulgated in February allocated about $ 20 billion in disaster relief in Puerto Rico for urban renewal, Medicaid and the restoration of the power grid. In total, the territory hopes to receive recovery assistance of about $ 86 billion in the coming years, including through private insurance, according to the island's financial supervisory board.
"It will be a huge stimulating effect," said Alvarez.
Yet, Popular faces a number of major economic challenges in its original territory.
The emigration from the island, which has been going on for years, has accelerated after the storm. According to statistics from the San Juan Airport provided by Popular, passenger departures have exceeded by nearly 200,000 the number of arrivals after the storm between August and December.
From early 2018, people started coming back. Yet there were fewer than 100,000 net arrivals between January and March.
"This is the long-term challenge for Puerto Rico," said Brett Rabatin, an analyst at Piper Jaffray, about the exodus of residents to the Americas. "They have to create jobs. They must invest more in education. They must create an environment for people to have a reason to be in Puerto Rico. "
In addition, Puerto Rico is in a debt crisis because it owes about $ 74 billion to creditors.
Rabatin said that even in a struggling economy, oligopolistic control of the banking sector on the island gives it a major competitive advantage. The $ 48 billion asset company accounts for about half of Puerto Rico's bank branches and controls more than 40 percent of its total deposits, according to the Federal Deposit Insurance Corp.
Citigroup, meanwhile, controls 32.5% of the deposit market, while smaller competitors, such as $ 12 billion of First Bancorp and $ 6 billion of OFG Bancorp, control 9% and 7%, respectively. %.
Popular US operations, which have recently expanded to private wealth management and trust services, have also strengthened results.
Alvarez, for his part, is proud of the size of his business last year. While the storm devastated the island, it also unified the employees and recalled the company's mission to provide financial services.
"When you're in a situation like this and you know people need their banking – they need their money, they need higher credit lines to buy supplies – to make sense. mission that, in my opinion, is difficult to understand in the ordinary, everyday world, "said Alvarez.
After leading the business to one of her toughest hours, Alvarez, who is entering her second year as CEO, says she's ready for what's ahead.
"We have big challenges, but I'm relatively optimistic about the future," Alvarez said.
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