RIZAL COMMERCIAL Banking Corp. is eyeing to compete in the virtual bank space. — BW FILE PHOTO

RIZAL COMMERCIAL Banking Corp. (RCBC) will establish a rural bank that will join the digital banking race in the country, the bank said in a filing with the local bourse on Tuesday.

The Yuchengco-led lender said that it will also upsize its medium term note program (MTN) by $1 billion to $3 billion from the original $2-billion plan.

RCBC said in its filing on Tuesday that the rural bank will have an “electronic payment and financial services and cloud-based core banking licenses from the Bangko Sentral ng Pilipinas (BSP).” Its establishment will be subject to the approvals of the BSP, Securities and Exchange Commission, and other regulatory bodies, as necessary.

RCBC President and Chief Executive Officer Eugene S. Acevedo told BusinessWorld in an interview during the central bank’s annual reception for the banking community on Friday when asked about its plan to set up a digital-only bank: “We’re gonna be launching something in February but a lot of work and investments have been made in that space.”

In November 2019, RCBC Executive Vice-President and Chief Innovation and Inclusion Officer Angelito “Lito” M. Villanueva said the bank is looking into joining the digital-only banking race in the country. He noted that local players have yet to offer a digital-only bank as a separate proposition.

Mr. Villanueva has said that they will look into capturing the mass market as clients for their virtual bank. He also noted that good communication is key to make sure that their target market can appreciate the propositions of online-only banking.

For Mr. Acevedo, their digitization drive is more than just a “nice project” because it will help them with cost reduction as well.

“We see kasi digitization as not just something like a nice project, but really because digitization allows us to improve the customer experience in a huge way. While doing that, we are able to reduce our costs, significantly,” he said.

Mr. Villanueva earlier said they are eyeing to require an average daily balance of around P800-1,000 for their virtual bank.

He said 38% of about two million RCBC retail clients access services through their online app.

Current virtual banking players in the country are ING Bank N.V. Manila and CIMB Bank Philippines. Both started their operations in 2019.

These players currently do not impose a minimum balance requirement for their clients and do an electronic Know-Your-Customer process through their applications.

Singapore-based digital bank Tonik Financial, through its local unit Tonik Digital Bank, Inc., in December secured a license from the central bank to operate its own virtual bank.

Meanwhile, RCBC said the increase in its MTN program to $3 billion was approved by its board of directors last Monday.

The bank issued $300 million in five-year unsecured sustainability bonds in September to back its loan portfolio and green projects.

The said notes were issued at 3% per annum and was a drawdown from the then only $2-billion MTN program of the bank under its Sustainable Finance Framework, which was established to streamline sustainable financing instruments that can fund loans and projects with environmental and social impact.

RCBC saw its net earnings climb by 41% to P4.5 billion in the first nine months of 2019 from P3.2 billion in the comparable year-ago period, with growth fuelled by its core businesses.

The bank’s shares ended trading at P22 apiece on Tuesday, unchanged from its previous finish. — LWTN