Canadian lender Scotiabank has signed an agreement to divest its operations in Puerto Rico and the US Virgin Islands to Oriental Bank.

Under the terms of the agreement, OFG Bancorp subsidiary Oriental Bank will acquire the Puerto Rican business for $550m in cash. The Scotiabank’s US Virgin Island (USVI) branch operation will transfer to Oriental Bank for a $10m deposit premium.

As of 31 March  2019, the combined Puerto Rico and USVI operations had $2.5bn in net loans and $3.2bn in deposits. It had 21 branches, 225 ATMs and employed around 1,000 employees.

Scotiabank group head of International Banking and Digital Transformation Ignacio (Nacho) Deschamps said: “We are pleased to have reached an agreement with Oriental Bank, a prominent local bank with a strong reputation for providing high quality products and services to customers.

“We are confident that Oriental Bank, with the support of a talented team, will be well positioned to continue to grow the businesses and provide continuity to customers and employees in Puerto Rico and the USVI.”

The divestment is expected to result in a loss of C$400m ($304.8m) after-tax for Scotiabank in Q3 2019.

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After closing, the Canadian lender expects an after-tax gain of around $50m. Accordingly, the adjusted total net loss will be between C$300m and C$360m after-tax.

The deal is expected to improve its credit quality and reduce gross and net impaired loans. Additionally, it will  help Scotiabank to focus on its core markets.

In the last four years, Scotiabank has exited or announced pull-out plans from 19 countries.

The completion of these latest Scotiabank divestments is subject to customary regulatory approvals.