TEXT - S&P may still cut Oriental Financial Group rating

Fri Dec 21, 2012 2:27pm EST

Overview
     -- On Dec. 18, Puerto Rico-based regional banking company Oriental 
Financial Group announced that it had completed its acquisition of Banco 
Bilbao Vizcaya Argentaria Puerto Rico.
     -- We are keeping our ratings on Oriental, including the 'BB+' 
counterparty credit rating, on CreditWatch with negative implications.
     -- We expect to resolve the CreditWatch listing based on our assessment 
of the pro forma capital structure, interim financial results, and our updated 
financial projections.

Rating Action
On Dec. 21, 2012, Standard & Poor's Ratings Services kept its 'BB+' 
counterparty credit rating on Puerto Rico-based regional banking company 
Oriental Financial Group on CreditWatch with negative implications. Following 
the acquisition, $50 million of subordinated notes issued by BBVA PR are now 
obligations of Oriental Bank & Trust.

Rationale
The CreditWatch action follows Oriental's announcement that it has completed 
its previously announced acquisition of the Puerto Rico-based operations of 
Banco Bilbao Vizcaya Argentaria S.A. (BBVA S.A.). These consist of all of the 
outstanding common stock of BBVAPR Holding Corp. (the sole shareholder of 
Banco Bilbao Vizcaya Argentaria Puerto Rico (BBVA PR), a Puerto Rico-chartered 
commercial bank, and BBVA Seguros Inc., a subsidiary offering insurance 
services) and BBVA Securities of Puerto Rico Inc., a registered broker-dealer, 
for $500 million in cash. Immediately following the closing of the 
acquisition, BBVA PR merged into Oriental Bank & Trust, a wholly owned 
subsidiary of Oriental, with Oriental Bank continuing as the surviving entity.

CreditWatch
We expect that Oriental will be able to successfully integrate BBVA PR given 
its knowledge of the local market, similar geographic footprint, and 
experience integrating Eurobank, which it acquired in 2010 in a Federal 
Deposit Insurance Corp.-supported transaction. We will evaluate the ultimate 
business and financial profiles of the combined entity, as well as interim 
financial results, to update the rating on the company. We will also evaluate 
Oriental's plans regarding the integration, branding, advertising, and 
marketing of the combined companies. We could affirm the rating on Oriental or 
lower it by no more than two notches to 'BB-', based on the results of our 
assessment of the pro forma capital structure, interim financial results, and 
our updated financial projections.

Ratings Score Snapshot
Bank Holding Company Rating           BB+/Watch Neg/--
Issuer Credit Rating                  BBB-/Watch Neg/--

SACP                                  bbb-                 
 Anchor                               bbb+                 
 Business Position                    Weak (-2)            
 Capital and Earnings                 Very Strong (+2)     
 Risk Position                        Moderate (-1)        
 Funding and Liquidity                Below Average        
                                      and Adequate (-1)    

Support                               0                    
 GRE Support                          0                    
 Group Support                        0                    
 Sovereign Support                    0                    

Additional Factors                    0
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