RCBC posts lower profit in Q3 on higher reserves

RIZAL COMMERCIAL Banking Corp. (RCBC) booked a lower net income in the third quarter as it increased loan loss provisions and waived fees for clients affected by the coronavirus pandemic.

The bank reported a net profit of P892 million in the July to September period, down 51.78% from the P1.85 billion logged in the same quarter a year ago, RCBC Corporate Planning Head Ma. Christina P. Alvarez said in a virtual press conference on Tuesday.

The decline was attributed to the extended implementation of lockdowns in the period.

This brought the Yuchengco-led bank’s net earnings for the first nine months to P4 billion, 11.31% lower than the P4.51 billion it booked in the comparable year-ago period.

Annualized return on equity stood at 6.2%, while return on assets was at 0.7%.

The bank’s gross income grew by 6% to P29.4 billion at end-September on the back of a 20% growth in net interest income to P19.7 billion, it said in a disclosure on Tuesday. RCBC attributed this to lower funding costs and improved margins.

RCBC’s loan portfolio expanded by 10% to P452.2 billion as lending to small and medium enterprises and individual consumers rose by 16% and 8%, respectively.

Its credit card receivables also jumped by 21% as the number of card holders increased by 8% to over 900,000 at end-September.

Amid an increase in credit extended, the bank’s net non-performing loan ratio stood at 3.8% in the period, higher than the 2% seen the prior year.

RCBC said it expects its NPL ratio to settle at 3% by the end of the year following eased quarantine restrictions.

The bank allotted P7.2 billion in loan loss reserves, 38.6% higher compared with the year-ago level, which the bank said is “a conservative stance to proactively manage the higher risks brought about by the pandemic.”

“In anticipation of when the Bayanihan II ends where we can have the flexibility, we’ll see if we can do a little bit more. We’re constantly communicating with customers and [currently], we’re comfortable with it,” Ms. Alvarez said.

“We are taking care of the portfolio of overseas Filipino workers (OFWs). We see some stress in that area, but in general we don’t have large exposures to hotels or those vulnerable right now,” Ms. Alvarez said.

She said the bank is restructuring the OFW loans, which mostly consist of house loans worth less than P3 million, due to these workers’ constrained finances amid the pandemic.

“To further manage credit risk, RCBC shifts its focus on businesses with strong fundamentals prior to entering the pandemic, which have a strong probability of getting back to positive operations once mobility restrictions are lifted,” RCBC added.

Meanwhile, deposits reached P497 billion, jumping by 17% from the comparable year-ago period, which RCBC attributed to an increase in current account, savings account or CASA deposits.

RCBC added that its non-interest income declined by 15% in the period due to waived fees on several transactions amid the pandemic. Electronic fund transfers through PESONet and InstaPay among corporate clients grew by 268% from last year, while enrolments to its digital banking platform soared by 196%.

The bank’s operating expenses inched up by 0.6% to P16.4 billion which the bank attributed to “additional COVID-related expenses.”

Its cost-to-income ratio stood at 55.8%, improving from 58.7% last year, which it said was due to operating efficiency amid its digital transformation.

RCBC’s capital base stood at P99.5 billion as of September. Its capital adequacy ratio was at 15.8% while its common equity Tier 1 ratio stood at 12.4%, both above the regulatory minimum.

“We continue to strengthen our balance sheet in order to soften further impact in the coming months. Our digital capabilities have gained traction and we will focus on on-boarding more clients with our digital platforms,” RCBC President and Chief Executive Officer Eugene S. Acevedo was quoted as saying in the statement.

RCBC shares closed at P17.80 apiece on Tuesday, up by 40 centavos or 2.3% from its previous finish. — KKTJ