Scotiabank's Fort Street, Basseterre Branch.

TORONTO, Canada — The Bank of Nova Scotia announced on Wednesday that it had reached an agreement to sell its operations in Puerto Rico and the US Virgin Islands to 55-year-old Oriental Bank, a subsidiary of San Juan, Puerto Rico-headquartered financial-services company OFG Bancorp, subject to regulatory approvals and customary closing conditions.

“Until regulatory approvals are obtained and the transaction closes, all operations, branches and products will continue to operate as usual. Oriental Bank and Scotiabank will work together to help facilitate a smooth transition for the business,” the release noted.

Oriental Bank is a diversified financial institution that provides personal and commercial banking services to customers, primarily in Puerto Rico. Oriental Bank was founded in 1964 and is headquartered in San Juan, Puerto Rico. The firm has expanded over the years as a result of organic growth and strategic acquisitions. Oriental is committed to broadening its operations and providing the highest quality of products and services to the people and businesses of Puerto Rico and the USVI.

“As a result of this announced transaction and as required under IFRS, the bank will record a loss of approximately $400 million after-tax in Q3 2019 and will be reported for accounting purposes in the other segment. The majority of this loss represents the carrying value of goodwill relating to Puerto Rico. Upon closing, an after-tax gain of approximately $50 million will be recorded relating primarily to accumulated foreign currency translation gains and the premium received on the USVI operations.

“These amounts may be subject to adjustment at closing which may revise the bank’s total net loss to between $300 million to $360 million after-tax. The transaction will improve the bank’s credit quality, as it reduces gross and net impaired loans, and increases common equity Tier 1 (CET1) ratio by approximately five basis points.

“With this transaction, and others which have previously been publicly announced, the repositioning of our international footprint will be substantially complete,” the release said. “Our sharper geographic focus allows us to drive sustainable earnings growth in these key markets, improve earnings quality and the customer experience while reducing risk,” the release said.

Credit Suisse and Scotiabank’s Global Banking and Markets Division acted as co-financial advisors to Scotiabank on this transaction. Sullivan & Cromwell LLP acted as Scotiabank’s legal advisor on the sale.

Last November, Republic Financial Holdings Limited (RFHL) announced that it had agreed to acquire Scotiabank’s operations in the Eastern Caribbean, including Anguilla, Antigua and Barbuda, Dominica, Grenada, St Kitts and Nevis, Saint Lucia, and St Vincent and the Grenadines, as well as operations in Guyana and St Maarten.