Puerto Rican financial services company OFG Bancorp (NYSE: OFG) announced better-than-expected revenue in Q1 CY2025, with sales up 2.4% year on year to $178.6 million. Its non-GAAP profit of $1 per share was 3.4% above analysts’ consensus estimates.
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OFG Bancorp (OFG) Q1 CY2025 Highlights:
- Revenue: $178.6 million vs analyst estimates of $175.2 million (2.4% year-on-year growth, 2% beat)
- Adjusted EPS: $1 vs analyst estimates of $0.97 (3.4% beat)
- Adjusted Operating Income: $59.45 million vs analyst estimates of $79.74 million (33.3% margin, 25.4% miss)
- Market Capitalization: $1.84 billion
StockStory’s Take
OFG Bancorp began 2025 with results that exceeded Wall Street’s revenue and non-GAAP profit expectations, prompting a positive market reaction. Management cited strong operating execution as a key driver, highlighted by growth in both loan and deposit balances and a continued shift toward digital banking. CEO Jose Rafael Fernandez pointed to “consistent financial results” supported by technology investments and a growing client base. CFO Maritza Arizmendi noted that non-interest expense remained in line with internal projections, with deposit growth partly influenced by seasonal factors and ongoing customer acquisition.
Looking forward, OFG Bancorp’s outlook is shaped by its ongoing Digital First strategy and the evolving economic environment in Puerto Rico. Management emphasized continued investment in customer-facing innovations, with Fernandez stating, “We will continue to invest in and deploy new customer innovations to further differentiate our business model, increase efficiencies and, most important, help both our retail and commercial customers.” The company expects deposit and loan momentum to persist, while keeping a close watch on potential macroeconomic and geopolitical volatility that could affect local conditions. Credit trends are expected to remain stable, supported by a strong balance sheet and risk management discipline.
Key Insights from Management’s Remarks
Management attributed the quarter’s performance to sustained digital adoption, resilient loan and deposit growth, and stable credit quality, while also pointing to seasonal effects in deposit flows and expenses.
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Digital banking momentum: OFG saw significant growth in digital activity, with 96% of retail transactions now conducted via digital or self-service channels. The launch of a new omni-channel mobile app, smart banking insights, and Apple Pay for debit and credit cards increased customer engagement and usage of digital services. Fernandez highlighted that “around 25% to 26% of our checking accounts and certificates of deposit are opened through the digital channel,” reflecting a notable shift away from traditional branch openings.
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Deposit and loan growth: The company reported continued increases in both retail and commercial deposits, as well as growth in auto, consumer, and commercial loans. While deposit inflows benefited from seasonal factors such as tax refunds and child tax credits, management expects underlying growth to persist, driven by both new and deepening client relationships. Arizmendi explained that “average core deposits were $9.6 billion, up close to 1%,” and that non-interest-bearing deposit growth contributed to the overall increase.
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Expense discipline amid volume incentives: Non-interest expenses decreased sequentially, aided by a volume incentive payment from business partners. However, the quarter also included higher seasonal compensation costs and technology-related expenses, reflecting the company’s ongoing investment in digital capabilities. Arizmendi noted that excluding these one-time items, expense levels were in line with expectations.
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Stable credit environment: Credit quality remained steady, with net charge-offs and delinquencies showing little change year over year. Chief Risk Officer Cesar Ortiz explained that consumer credit portfolios, particularly auto loans, benefited from better collateral recovery and improved loan origination standards implemented in 2022. Ortiz added, “We expect a stabilization on both portfolios on all required metrics.”
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Resilient margin and investment strategy: The net interest margin held up, supported by higher-yielding investment securities and lower government deposit costs. The company acquired $100 million in mortgage-backed securities and maintained a balanced approach to asset-liability management. Arizmendi said, “We have a range between 5.3% to 5.4% margin for the year,” dependent on funding mix and renewal of government deposits.
Drivers of Future Performance
Management expects digital adoption, core deposit growth, and ongoing investment in technology to drive performance, while monitoring economic and credit trends.
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Digital platform expansion: OFG plans to further enhance its digital offerings, aiming to boost customer acquisition and retention. The company’s Digital First strategy is central to differentiating its services and improving operational efficiency, with Fernandez emphasizing ongoing innovation and the roll-out of additional customer-facing tools.
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Deposit and loan growth outlook: Management expects deposit growth to continue, underpinned by both branch and digital channels. While some deposit inflows are seasonal, Fernandez indicated confidence in the underlying trend, noting, “We do expect to continue to see some deposit growth from here.” Loan growth is also anticipated to remain robust, particularly in commercial and auto segments, as the company leverages strong client relationships and a healthy commercial pipeline.
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Credit quality vigilance: While current credit trends are stable, management remains cautious about potential normalization of consumer charge-offs and the impact of macroeconomic volatility. Ortiz described continued stabilization in loan portfolios, but the company is prepared to adjust risk management practices if conditions change.
Catalysts in Upcoming Quarters
In coming quarters, StockStory analysts will closely track (1) progress in digital product adoption and customer migration to self-service channels, (2) sustainability of core deposit and loan growth beyond seasonal effects, and (3) credit quality trends, particularly in consumer lending. We’ll also watch for updates on government deposit renewals and the impact of economic developments in Puerto Rico on OFG’s performance.
OFG Bancorp currently trades at $41.93, up from $36.32 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).
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