Puerto Rico Banks

Puerto Rico banks posted a return on assets of 1.01% in Q1 2026, up 52 basis points from 0.49% in Q4 2025 and 68 basis points from 0.33% a year earlier. The YoY gain marks the strongest profitability improvement in the series shown, and the QoQ acceleration (+52 bps versus +68 bps YoY) indicates the trend is strengthening, not stabilizing. The cohort trails the national 1.20% ROA benchmark by 19 basis points, a gap that has narrowed sharply from the 87-basis-point deficit a year earlier.

The profitability improvement was driven overwhelmingly by efficiency-ratio compression. The efficiency ratio fell to 68.45% in Q1 2026, down 14.76 percentage points QoQ from 83.21% and 27.20 percentage points YoY from 95.66%. The YoY move is the largest efficiency gain in the series shown, though the cohort still trails the national 64.14% benchmark by 4.31 percentage points. Net interest margin held stable at 4.22%, up just 1 basis point QoQ from 4.21% but 10 basis points YoY from 4.12%, indicating the efficiency gain was driven by expense discipline rather than margin expansion. The cohort's 4.22% NIM sits 41 basis points above the national 3.82% benchmark, a structural advantage that has remained consistent across the series. The NIM stability QoQ (+1 bp) versus the YoY gain (+10 bps) suggests the margin-expansion phase has decelerated; the efficiency-ratio improvement is now the primary profitability lever.

The four-bank cohort shows no meaningful tier or specialization gradient—each institution is a distinct franchise. The efficiency-ratio compression from 95.66% to 68.45% YoY, while substantial, still leaves the cohort above the national 64.14% average, indicating room for further operating-leverage gains. If the efficiency ratio continues its current quarterly pace of improvement (approximately 7 percentage points per quarter over the two quarters shown), the cohort reaches the national benchmark by Q3 2026. The ROA trajectory—from 0.33% a year ago to 1.01% today—demonstrates rapid convergence toward the national 1.20% standard, with the remaining 19-basis-point gap likely to close if efficiency continues to improve and asset quality stabilizes.

Puerto Rico banks' loan growth accelerated to 92.97% in Q1 2026, up from 71.14% in Q4 2025 and 22.46% a year earlier. The YoY acceleration of 313.94 percentage points is the most dramatic expansion in the series shown, and the QoQ acceleration of 30.70 percentage points indicates the trend is strengthening, not stabilizing. The cohort's 92.97% loan-growth rate sits 86.77 percentage points above the national 6.20% benchmark, the widest gap in the series shown and a clear outlier relative to the broader U.S. banking industry.

Asset growth and deposit growth also accelerated sharply, though at slower absolute rates than loan growth. Asset growth reached 26.67% YoY, up from 19.68% QoQ and 12.33% a year earlier, accelerating 116.31 percentage points YoY and 35.47 percentage points QoQ. The cohort's 26.67% asset-growth rate exceeds the national 5.15% benchmark by 21.51 percentage points. Deposit growth accelerated to 30.84% YoY, up from 20.46% QoQ and 25.59% a year earlier, accelerating 20.54 percentage points YoY and 50.77 percentage points QoQ. The cohort's 30.84% deposit-growth rate sits 25.82 percentage points above the national 5.02% benchmark. The mechanical relationship is clear: loan growth at 92.97% YoY far outpaced deposit growth at 30.84% YoY, mechanically lifting the loan-to-deposit ratio by 10.17 percentage points YoY to 66.97%.

The four-bank cohort shows no tier gradient—each institution is a distinct franchise—but the growth profile is consistent across all three categories (assets, loans, deposits), suggesting a coordinated expansion phase rather than a single-bank outlier. The loan-growth rate of 92.97% is nearly fifteen times the national 6.20% rate, an extraordinary divergence that reflects either a recovery from a prior contraction (the YoY comparison base of 22.46% was already elevated) or a structural shift in the Puerto Rico banking market. The deposit-growth rate of 30.84%, while also well above the national benchmark, is running at only one-third the pace of loan growth, indicating the cohort is deploying existing liquidity into earning assets rather than funding loan growth exclusively with new deposits. If loan growth continues at the current quarterly pace (approximately 22 percentage points of acceleration per quarter over the two quarters shown), the cohort's loan-to-deposit ratio will reach the national 76.38% benchmark within two quarters.

Puerto Rico banks' delinquency rate fell to 1.42% in Q1 2026, down 10 basis points from 1.51% in Q4 2025 but up 18 basis points from 1.23% a year earlier. The QoQ improvement marks the first decline in the series shown, but the YoY deterioration indicates the trend is still elevated relative to the year-ago baseline. The cohort's 1.42% delinquency rate sits 72 basis points above the national 0.70% benchmark, the widest gap in the series shown and a structural credit-quality headwind that persists despite the recent QoQ improvement.

The nonperforming-asset ratio held stable at 0.85% in Q1 2026, down just 5 basis points from 0.89% QoQ but up 9 basis points from 0.76% YoY. The QoQ stability and YoY deterioration mirror the delinquency pattern, indicating elevated problem-asset levels that have not yet resolved. The cohort's 0.85% NPA ratio sits 34 basis points above the national 0.51% benchmark. Tier 1 capital fell to 19.19% in Q1 2026, down 1.05 percentage points QoQ from 20.23% and 24.18 percentage points YoY from 43.36%. The YoY decline is the largest capital compression in the series shown, though the cohort still holds 4.93 percentage points more Tier 1 capital than the national 14.26% benchmark, indicating ample cushion despite the rapid decline. The mechanical driver is clear: asset growth at 26.67% YoY outpaced capital accumulation, compressing the capital ratio even as absolute capital levels likely rose.

The four-bank cohort shows no tier gradient, but the risk profile reveals a tension: delinquency and NPA ratios remain elevated (72 and 34 basis points above national benchmarks, respectively) while loan growth accelerates to 92.97% YoY. The combination of rapid lending expansion and above-national credit stress suggests the cohort is either (a) working through a legacy credit cycle while simultaneously deploying liquidity into new originations, or (b) accepting higher credit risk to achieve the extraordinary growth rates shown. The Tier 1 capital decline from 43.36% to 19.19% YoY, while still leaving the cohort well-capitalized at nearly 5 percentage points above the national average, indicates the growth phase is consuming capital faster than earnings can rebuild it. If the Tier 1 capital ratio continues its current quarterly pace of decline (approximately 12 percentage points per quarter over the two quarters shown), the cohort reaches the national 14.26% benchmark within one quarter—a forward indicator worth monitoring closely.

Puerto Rico banks' loan-to-deposit ratio rose to 66.97% in Q1 2026, up 70 basis points from 66.27% in Q4 2025 and 10.17 percentage points from 56.80% a year earlier. The YoY expansion marks the strongest lending-posture shift in the series shown, driven by loan growth far outpacing deposit growth in absolute terms. The ratio remains 9.41 percentage points below the national 76.38% benchmark, indicating the cohort retains substantial liquidity headroom despite the rapid deployment of deposits into earning assets.

The deposit franchise showed resilience on the funding-mix dimension. Noninterest-bearing deposit share rose to 23.80% in Q1 2026, up 1.12 percentage points QoQ from 22.68% and 1.82 percentage points YoY from 21.98%. The cohort now holds 2.21 percentage points more NIB share than the national 21.60% average, a structural advantage on funding costs. Net interest income as a percentage of revenue fell sharply to 0.16% from 0.58% QoQ, but the YoY comparison is stable (up just 2 basis points from 0.14%), suggesting the QoQ decline reflects a one-quarter volatility spike in noninterest revenue rather than a structural compression of the interest-earning engine. The cohort trails the national 0.32% benchmark by 16 basis points.

Two forces are driving the engagement picture. First, loan growth at 92.97% YoY mechanically lifted the loan-to-deposit ratio despite deposit growth at 30.84% YoY—the lending expansion is nearly three times the deposit expansion in percentage terms. Second, the NIB share gain of 1.82 percentage points YoY occurred while total deposits grew 30.84%, meaning the cohort added noninterest-bearing balances at an even faster pace than interest-bearing balances, a rare funding-mix improvement during a high-growth phase. The spread between the cohort's 66.97% LDR and the national 76.38% is narrowing (up 10.17 points YoY versus a smaller national LDR shift), suggesting Puerto Rico banks are converging toward the national lending posture from a historically conservative liquidity position.