Yuchengco-led Rizal Commercial Banking Corp. (RCBC) reported a net income of P4 billion as of end-September, 11.3 percent lower than same time last year of P4.512 billion, as the bank allotted P7.222 billion loan loss cover.
The provision for probable losses was up by 38.6 percent from end-September 2019’s P5.212 billion in anticipation of borrowers’ interrupted capability to pay due to the pandemic and resulting lockdown and other restrictions to the economy.
“We are confident on the level of coverage we have right now,” said RCBC’s Horacio E. Cebrero, senior executive vice president and treasurer, during the bank’s earnings’ result briefing. “We have made provisions for loan losses, more than the previous year’s first nine months, but we view that the amount that will be needed as additional provisioning in the months ahead will be less than what we have previously set aside.”
RCBC’s bad loans or non-performing loan (NPL) ratio was at 3.8 percent end-September, more than the two percent reported same time last year. Corporate planning head and information officer, Ma. Christina Alvarez, said they see this improving at the close of 2020, but still at the three percent level.
“For this year it’s a high already (3.8 percent NPL) and we see it improving until the end of the year. But when the Bayanihan 2 expires in December (60-day moratorium lapses) we might see new NPLs, there might be a new wave in 2021 because of that,” Alvarez told reporters. “What we’re trying to do now is to engage with the customers and prevent that, from having an NPL that is much, much higher.”
Alvarez said that while the bank’s core income is doing well, it booked higher provisions because of the uncertainty in outlook in the operating environment. “Higher provisions in 2020 partly affected return on equity and return on assets, but this is offset by better margins and cost to income ratio,” she said.
As for the bank’s NPL ratio and NPL coverage ratio, it reflects how its portfolio is developing with the prolonged quarantine measures. “However these ratios are expected to improve in the fourth quarter given the bank’s CARE program (COVID Assistance Recovery Enhancement program) and we have focused collection effort and improved provisions.” The CARE program extends the payment period and to keep the portfolio intact for a long period.
Alvarez said RCBC continues to have a positive outlook for 2021. “We might see more steady provisions versus the bulky provisions of 2020 (and) with the easing of the quarantine, we will have more volume both on the digital and branches, so that’s a two-pronged growth compared to 2020 where growth is mostly on the digital channels.”
Similar with most banks, the long lockdown period increased RCBC’s electronic channels’ business and its corporate clients' use of online payments and clearing. As of end-September, the bank’s digital banking enrollment grew by 196 percent year-on-year, while its send cash services and cardless ATM withdrawals' daily transactions went up by 521 percent and 3,535 percent.
Cebrero said they continue to see growth in their digital platform and digital applications, and the continued reengineering of operation processes as well as the consolidation of their branches are contributing to “strengthen our balance sheet for any downside risks that may appear in the months ahead.”
However RCBC is not that keen on applying for a separate digital bank license and prefers to grow their digital services from within its current set up.
“We will take our own initiative in doing the digitalization and digital platforms inside the bank as of now. (This is) very efficient for the meantime while we are growing the business,” said Cebrero.
In a disclosure to the Philippine Stock Exchange on Tuesday, RCBC president and CEO, Eugene S. Acevedo said the bank relatively is in a “healthy position” and that they have “yet to see the full impact of this pandemic.”
“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 onboarding more clients with our digital platforms,” said Acevedo.
As of end-September, the bank’s net interest income was up by 20 percent year-on-year to P19.659 billion due to reduced funding costs and better margins while its non-interest income dropped by 14.6 percent year-on-year to P9.695 billion.
The bank reported a 10 percent increase in customer loan portfolio to P452.2 billion with a 16 percent and eight percent growth in the SME and consumer loan segments as of end-September.
Overall, RCBC’s assets grew by nine percent year-on-year to P731 billion, while loans, deposits and capital increased by 8.6 percent, 17.1 percent and 17.5 percent respectively to P445.226 billion, P496.831 billion and P99.493 billion during the period.
In the meantime, RCBC economist Michael Ricafort said the bank expects the GDP to contract by a negative eight percent to a negative nine percent in the fourth quarter, bringing the full 2020 GDP decline to a negative 9.5 percent which is reasonable to expect, he said.
Ricafort thinks the peso and the local bond market will continue to do well for some time. “The peso is one of the strongest (in the region) for more than four years now, it’s consistent,” he said.
For 2021, he said GDP is estimated to grow by at least six percent, or range between six percent to seven percent due to the low base.
As for the peso-US dollar exchange rate, he said this could end between P48 to P48.50 this year. “Maybe next year if our economic recovery gains traction, we may see some pick ups in import so that would be the key driver so hopefully (exchange rate) could be somewhere in the P49 level,” said Ricafort.