AURELIO ALEMÁN, PRESIDENT & CEO OF FIRSTBANK - INTERVIEW WITH TOP 100 INNOVATION CEO
Aurelio Alemán, President and CEO of FirstBank has been selected by the Judges of World Biz Magazine's Annual Awards to be a recipient of the Top 100 CEOs in Innovation Award 2022. This selection follows a stringent process that evaluated over 40,000 nominees to select the exclusive list of 100 winners.
Aurelio Alemán graduated from the University of Puerto Rico, where he obtained a bachelor’s degree in Business Administration. His career has spanned 40 years in the finance sector, including diverse positions in management, business, credit, operations, and technology areas in institutions such as FirstBank where he started his career, and also at Citibank and Chase Manhattan Bank. He rejoined FirstBank in 1998 as Executive Vice President in charge of the consumer lending business. In October 2005 he was named COO and in 2009, he was appointed CEO.
During the last 13 years as CEO, his team’s most significant accomplishments include the Corporation’s turnaround strategy including a $520 million recapitalization in 2011. Also, its return to profitability in 2012, ahead of market expectations, accompanied by strengthening of the franchise in terms of product offerings, talent depth, and employee engagement. In 2015, the Corporation participated in a novel transaction partnering with a competitor to acquire Doral Bank in an FDIC assisted transaction. Thus, expanding the institution’s footprint and growth potential. Later in 2020, it acquired Banco Santander Puerto Rico, consolidating FirstBank’s position as the second-largest financial institution on the island.
Giving back to the community has also been an important component of Aurelio Alemán’s career. He has served on the board of Directors of various community organizations, including leading a non-for-profit organization that supported the recovery of Puerto Rico after the passing of Hurricanes Irma and Maria. He has served for two terms, from 2011-2013 and 2019-2021, as President of the Puerto Rico Bankers Association.
"Our brand essence is about partnering with our customers throughout their lives to achieve their dreams and goals together and treating our customers as if they were the owners of the Bank."
Your distinguished career in the finance sector spans 40 years. What are some of the key reasons behind your success and longevity?
AA - The three biggest reasons would be:
• A strong focus on execution, accountability and treating everyone respectfully.
• Always taking care of my team.
• Working hard but also having fun while doing so.
FirstBank fulfills a critical role in Puerto Rico with over 700,000 customers across the Island (also in Florida and the Virgin Islands). Share with us some of the characteristics of your customer base and how FirstBank meets their diverse needs?
AA - While close to 90% of its customers are primarily concentrated in Puerto Rico, FirstBank has ensured strategic presence across all three regions. Ensuring a well-balanced geographic market alignment is vital and continuously assessed to the latest market geographic information, as the 2020 Census information confirmed. Overall, the organization ensures meeting the diverse needs of its customer base through various initiatives:
1. FirstBank focuses on serving all types of customers from any socio-economic level and ensuring market alignment, benchmarked against Census assessments.
Close to 80% of FirstBank customers come from the moderate-income socio-economic segment, while approximately 15% come from middle and upper middle socio-economic segments (both in line with market information).
2. Understanding specific financial needs from both Retail and Commercial customers, FirstBank offers a wide variety of products and services tailored to guarantee efficiency and customer satisfaction throughout any life stage.
With the objective of becoming the customer’s one-stop-shop, FirstBank continuously focuses on improving customer service by maximizing cross-sell opportunities with more than 12 products-services offerings.
Some of these are: transactional deposit accounts, time or term deposit accounts, credit cards, lines of credit, auto loans, personal loans, mortgages, commercial loans, SBA services, insurance services, digital solutions for both retail and commercial customers, among others.
3. FirstBank continues to strengthen its product offerings to mature professionals (generation-X & baby boomers) as they compose approximately 60% while enhancing its product and services offering to target young professionals, specifically with increased focus and investment in digital channels.
"At FirstBank, we are obsessively focused on providing an outstanding customer service and experience throughout all our channels. To achieve this, we have established dedicated teams that work on enhancing all customer touchpoints as well as developing new functionalities and service capabilities. Providing an omnichannel best-in-class customer experience is the key differentiation from our competition."
How does FirstBank stand out in the market?
AA - At FirstBank, we are obsessively focused on providing an outstanding customer service and experience throughout all our channels. To achieve this, we have established dedicated teams that work on enhancing all customer touchpoints as well as developing new functionalities and service capabilities. Providing an omnichannel best-in-class customer experience is the key differentiation from our competition.
Our brand essence is about partnering with our customers throughout their lives to achieve their dreams and goals together and treating our customers as if they were the owners of the Bank. This is achieved through on-going trainings and development activities for front facing and back-office personnel. This is supported by the recently formally established Customer Experience Strategy area which leads efforts to promote this service and customer experience focused culture, conducts internal and external surveys analyzing customer journeys to identify pain points and eliminate them.
Share with us some of FirstBank's key successes over the last 12 months.
AA - FirstBank achieved strong financial results in 2021, with a net income of $281 million compared to $102.3 million the prior year. Notwithstanding the continuous impact of the devastating COVID-19 pandemic our management team showed exceptional performance and leadership in managing the Corporation in the face of the pandemic while running the operations.
Core results for the year reflect transformational progress on multiple fronts. In 2021, we completed the timely integration of the Banco Santander Puerto Rico acquired operations, executing all the operational efficiencies planned as part of the transaction and achieving the established financial targets. The transaction allowed us to expand our footprint while strengthening our leadership position in the Puerto Rico market.
Other significant accomplishments during the year include the significant progress we’ve had regarding digital adoption supported by the onset of the pandemic, maximizing the significant investments during recent years in terms of digital offerings. The adoption of digital channels continues to grow significantly, with digital engagement improving across all businesses. Finally, in 2021, we were able to deliver on our commitment to increasing shareholder value by returning approximately 112% of our 2021 earnings through stock buybacks and common dividend payments.
"Our efforts on the digital front are a continuous never-ending proposition to ensure addressing evolving customer needs and provide an outstanding customer experience."
Talk to us about innovation at FirstBank.
AA - One of FirstBank’s key strategic priorities has been executing on initiatives that support innovation to provide an outstanding customer experience. This is an important component to differentiate ourselves from the competition and continue to grow in the markets we serve.
In recent years, we have strived to put in place a suite of products and services that enable our clients to interact with FirstBank through innovative self-service digital solutions and “brick-and-mortar” channels. Our omnichannel value proposition includes the ability to process consumer and mortgage loans, capture deposits, and receive payments/transfers digitally through our self-service digital channels while providing an expanded branch network with state-of-the-art technology that provides a “high-touch” experience for those customers that prefer conducting business in physical facilities.
In 2021, we were able to provide in record time digital capabilities to provide the Payment Protection Program and aid our commercial customers. Moreover during the year we also deployed a digital solution at our auto dealer clients providing them with the only end-to-end digital contract management system in Puerto Rico, improving both the customer and dealer’s experience in the high growth and highly competitive auto lending business. We’re also partnering with a FinTech firm which will allow us to process commercial loan originations and improve our small/medium and SBA commercial segment penetration. As part of our plans underway we plan to invest in our corporate portal capabilities to enhance our digital sales capabilities including on-line deposit account opening and streamlined consumer products originations. Our efforts on the digital front are a continuous never-ending proposition to ensure addressing evolving customer needs and provide an outstanding customer experience.
The global finance sector has undergone a seismic shift due to Fintech, how is FirstBank ensuring it stays at the cutting edge of the sector?
AA - The financial services industry is undergoing major changes driven by disruptive fintech companies that are not only nimble and armed with enhanced technological capabilities but that are also enabled by groups of investors that have been promoting their expansion in recent years. Therefore, it is of the utmost importance for us to remain open-minded about innovation, invest in adequate technology, and not be complacent. FirstBank is constantly evaluating emerging fintech trends and accounting for them in its IT-related strategic assessments. As a result, we have redirected some of our IT spend towards partnering up with certain fintech companies that complement our omnichannel value proposition and allow us to better compete in an increasingly digital financial ecosystem. For example, this year we established a partnership with a fintech company that provides us with a tool to fully digitalize our small business origination process from end-to-end and provide our clients with a seamless customer experience. We expect to continue focusing on increasing our IT spend towards these types of partnerships in order to remain competitive in the markets we serve.
FirstBank successfully acquired and integrated the operations of Banco Santander Puerto Rico. How has this acquisition strengthened FirstBank?
AA - During 2020, FirstBank acquired Banco Santander Puerto Rico with $5.5 billion in assets consolidating its leadership position as the second largest financial institution in the Island. Providing the second largest branch network in Puerto Rico with greater geographical presence in the regions of San Juan, San Juan – Sub Metro, West, and South of the Island. The acquisition expanded the organization to serve more than 700,000 customers in Puerto Rico, the Virgin Islands and Florida. It also provided greater capacity of resources, experience, and human talent for future growth in both the retail and commercial segment. Increased capacity for the development of innovative products, services, and solutions to serve our individual and commercial customers.
"I am constantly inspired by my team of more than 3,000 employees and our customers, that have endured so many challenges during the past years and continue being resilient, adaptable, strong, battling their way through."
"FirstBank and I personally worked together with various CEOs in supporting the wider community efforts and distributed approximately $50MM in donations as part of larger relief efforts on the island."
Puerto Rico has had to overcome the devastation of the dual hurricanes Irma and Maria. Share with us some of the aspects you are proudest of regarding the resilience of your customers, the Island’s recovery, and FirstBank’s role in supporting both.
AA - I am constantly inspired by my team of more than 3,000 employees and our customers, that have endured so many challenges during the past years and continue being resilient, adaptable, strong, battling their way through. Also, one of my biggest inspirations is to contribute to the community, to support Puerto Rico’s recovery the Bank established the One for All - First Relief Program which included various financial relief alternatives for customers, including: Auto and Personal Loans (90 days automatic payment extension; Credit Cards - $0 minimum payment for three billings; Mortgage and Commercial Loans – tailored made solutions for each individual case with merit.
In addition, FirstBank and I personally worked together with various CEOs in supporting the wider community efforts and distributed approximately $50MM in donations as part of larger relief efforts on the island.
"Banks will play a crucial role throughout this process and can play a significant role in providing custodial wallets and solutions, since it is likely that many customers (at the mass adoption stage) will not want to deal with the risks and liabilities associated to storing and securing private keys. Additionally, some of the non-custodial solutions do not provide the ease of use or user experience that non-tech savvy people desire in managing crypto, which in the minds of many is still a complex or hard-to-grasp concept."
What are your thoughts on crypto currency; its future, and how industry stalwarts like FirstBank can best position themselves to ensure they are key players in the industry?
AA - Crypto currencies are here to stay and will be a meaningful part of commerce and monetary activity in the future. What is yet to be determined is the extent to which crypto currencies will permeate through financial transactions and commerce, and the time it will take for them to become ubiquitous and enjoy mass adoption.
An important variable that will influence the extent and timing of crypto will be the regulatory and legal framework that develops around them in the coming years. To the extent that governments take a more conservative and anti-crypto stance, such as is the case in China, the progress will be slowed and the magnitude of crypto will curtailed, however governments will likely not be able to completely eliminate their use and adoption. On the other hand, to the extent that governments take a more proactive approach in providing a regulatory and legal framework for the adoption and use of Cryptocurrencies, we will see a meaningful adoption by individuals and corporations.
Additionally, the adoption by businesses will be another important variable in vetting the legitimacy of crypto currencies, which in turn will drive more adoption by consumers and individuals.
Banks will play a crucial role throughout this process and can play a significant role in providing custodial wallets and solutions, since it is likely that many customers (at the mass adoption stage) will not want to deal with the risks and liabilities associated to storing and securing private keys. Additionally, some of the non-custodial solutions do not provide the ease of use or user experience that non-tech savvy people desire in managing crypto, which in the minds of many is still a complex or hard-to-grasp concept. Most consumers will want to know they have access to crypto and that such crypto is managed in a safe way. Furthermore, banks already enjoy the trust of millions of customers who entrust banks with their assets (money, investments, properties, and belongings). Banks have the security, systems and processes that make them the natural candidates to provide custodial services.
However, for Banks and businesses to fully adopt crypto as part of their business models, more clarity will be needed on the regulatory front which includes, compliance, legal and tax considerations.
You are a person of great influence. If you could inspire a movement in Puerto Rico to achieve the greatest amount of progress for the Island, what would that be?
AA - Promoting the benefits of actively contributing to the economy by being part of the formal economy and working labor force. Puerto Rico has a low labor participation rate and would significantly benefit from increasing participation in the labor force. This requires educating the larger public and particularly the unemployed on the benefits of working in the formal economy and how this opens up the doors to additional financial and other types of benefits including medical insurance and credit among others.
What improvements do you want to see in your industry and how are you contributing to realizing them?
AA - The three key areas to prioritise would be:
Increased and timely collaboration between industry players and regulators to maximize the ability of banks to leverage disruptive innovation opportunities like crypto currencies and blockchain, among others.
Increase intelligence and tools to monitor and defend against cyber security to reduce the possibility and impact of these events.
Expansion and collaboration in ESG and community efforts to continue to contribute to the well being of our communities and stakeholders.
"Cultural inclusion starts from the top down. It is imperative that business leaders display inclusive behavior, feel comfortable working with all types of people and also have a desire to build a diverse culture and hire people who are open to working with people of all different nationalities, skin colors, genders and sexual orientations."
Can you share a few steps that business leaders must take to truly create an inclusive, representative, and equitable society?
AA - Diversity is an important issue for any business. But it’s not enough to hire different types of people – everyone needs to feel like they are truly welcome, safe and free to be themselves in the workplace. Cultural inclusion starts from the top down. It is imperative that business leaders display inclusive behavior, feel comfortable working with all types of people and also have a desire to build a diverse culture and hire people who are open to working with people of all different nationalities, skin colors, genders and sexual orientations.
In line with this, recruitment strategies need to support this inclusion. An important component of supporting inclusion is being close to employees and asking them for feedback on how to improve your company’s diversity and inclusion in the workplace. These can include employee surveys, company all-hands discussions or campaigns. Giving your employees multiple ways to share their feedback, their perspective and their stories will create an open dialogue that can lead to more positive outcomes and increased inclusion tailored to the specific needs of your employees. Overall, increasing inclusion can improve your company culture and ultimately help your bottom line.
What are your top 3 career achievements you are proudest of so far?
AA - The top three would be:
Completing the successful recapitalization of FirstBank in 2010 after becoming CEO and leading the subsequent organizational turnaround.
Completing the Santander acquisition strengthening our leadership position in Puerto Rico.
Leading an organization comprised of more than 3,000 hardworking and dedicated colleagues with the primary mission of improving the banking experience of our customers while supporting our clients and their communities everyday through multiple initiatives, contributions, and outreach programs.
"Great leaders are courageous, have integrity, are honest, humble, and have a clear focus. They also make people accountable for results, care about their teams, and provide direction, development experiences, and recognition."
What makes a good leader?
AA - Great leaders are courageous, have integrity, are honest, humble, and have a clear focus. They also make people accountable for results, care about their teams, and provide direction, development experiences, and recognition.
A great leader also possesses a clear vision to propel the organization forward. Builds to invest in developing and maintaining differentiating factors and competitive advantages to reach the organization’s goals and objectives.
What excites you most about the future of FirstBank?
AA - Today our organization has a larger asset and capital base as well as a strengthened organizational and governance structure to support the future growth plans of our businesses, continue to strengthen our market position and achieve the goals we have set. This includes new members of the executive team, as well as new areas and leaders focused on elevating our customer experience, accelerating our digital transformation, and strengthening our capabilities in technology and operations management.
We are experiencing economic growth in all three regions, which positions us toward an excellent 2022 and beyond.
FirstBank has approximately 700,000 customers and 3,100 employees, offering full retail and commercial banking services in Puerto Rico, Florida, and the Virgin Islands.
First chartered in 1948, FirstBank was the first Savings & Loan institution established in Puerto Rico with a $200,000.00 capital investment. Since its inception, the Bank has played a fundamental role in improving the quality of life in Puerto Rico by helping thousands of citizens to acquire their first home, thus enhancing their social and economic status. In 1962, First Federal opened its first branch in St. Thomas, becoming the first Puerto Rican savings and loans institution to operate in the U.S. Virgin Islands. It converted to a commercial bank charter and changed its name to First Federal Savings Bank in 1983. By 1987, First Federal went public trading on NYSE under FBP. In 1994, the company was renamed FirstBank Puerto Rico, and in 1999, the Bank established First BanCorp as its holding company. In 2002, FirstBank acquired Chase Manhattan Bank operations in the U.S. Virgin Islands, and in 2004 First BanCorp opened commercial loan origination office in Miami. Later expanded its presence in the Florida market with the acquisition of UniBank (Ponce General Corporation) in 2005 which was consolidated with the commercial loan origination office and rebranded to FirstBank Florida the following year. In 2015, FirstBank completed the FDIC-assisted acquisition of 10 branches of Doral Bank and $500+ million in deposits.
More recently, during 2020, FirstBank acquired Banco Santander Puerto Rico with $5.5 billion in assets consolidating its leadership position as the second-largest financial institution on the island.
For more information about FirstBank, please visit 1firstbank.com
This article appeared in World Biz Magazine's Q2, 2022 Issue