The net income of Yuchengco-owned Rizal Commercial Banking Corp. (RCBC) was down by 6.9 percent year-on-year to P5.018 billion in 2020 from P5.388 billion previously due to a necessarily higher pandemic-related loan loss provisioning and slowdown in a movement-restricted economy.
Last year, RCBC said impairment losses was 26.1 percent higher at P9.330 billion compared to P7.397 billion in 2019. Its net interest income increased by 17.5 percent to P26.289 billion from P22.368 billion with lower funding costs and higher margins, while non-interest income fell by 14 percent to P11.608 billion from P13.490 billion.
The bank’s fourth quarter 2020 net income stood at P1 billion, up by 16 percent from P800 million same time in 2019.
The bank coped with COVID-19 lockdowns by aggressively pursuing digitalization and promoting its Diskartech app which is being groomed as its spin-off digital bank. In less than six months, the app has been downloaded by more than 3.5 million times. By the last quarter of 2021, Diskartech will offer loans and insurance products, not just basic deposit accounts.
“The pandemic has drastically changed customer behavior, but we are thrilled with how we can continuously provide the best banking experience to our customers and fellow Filipinos through innovative digital solutions,” according to RCBC president and CEO Eugene Acevedo. In 2020, RCBC’s digital transactions saw enrollment increasing by 288 percent year-on-year for its online retail mobile app, and active users rising by 55 percent. Its mobile point-of-sale ATM Go disbursed over P6.5 billion through 1,800 terminals last year.
In an online press briefing Tuesday, the bank’s head of treasury group Horacio Cebrero III and Ma. Christina Alvarez, head of corporate planning group, said RCBC is looking to expand its loan book by double-digit numbers this year as they hope economic activity will resume despite still being on community quarantine status, pending the rollout of the COVID-19 vaccines.
Cebrero said 2021 will continue to be challenging for banks, especially since the COVID-19 virus are producing variants and the local population have yet to be inoculated. This would impact on how soon or slow the economy will be gradually reopened.
On RCBC’s outlook for this year, Alvarez said the bank intends to build on accrual income. “We have been growing our loan book (and it’s) 4.4 percent in 2020. We believe there are pocket of opportunities for growth in 2021, so that will be for accrual income.”
As for fee-based income, she expects the volume of transactions will be increasing in 2021 since there will be more business activity as economy opens up and this would feed into fee income.
In general, this year will be better because of strong deposits growth, she also said. Total deposits as of end-2020 was at P535.8 billion. “Going into the first quarter – normally first quarters are low in terms of transaction volume and business -- for RCBC we’ve been working since December 2020 in building volume, business and the CASA. For the first half (of this year) we would want to grow our loan book along with the economy.” She is confident it will be double digit growth – “(double digit) is our target for the full year and usually this really builds up in the second and third quarter,” said Alvarez. She added, “it’s somewhere below 10 percent growth on the loans, if everything goes well and the vaccination plan of the government goes on track. In terms of provisioning, we will be tracking the loan growth.” Last year, the bank’s loans and receivables net of allowances and interbank loans increased by 4.4 percent year-on-year to P449.323 billion.
The crucial focus will be on RCBC’s operational efficiency and the rationalization they did in 2020 will benefit operating expenses this year.
“We will try to maximize on fees and other transactional banking products that we have but most of all we are also very, very focus on operational efficiencies. If you get it right on operational efficiencies, this is a very big contributor to your net income,” said Cebrero.
In 2020, RCBC reported a net non-performing loan (NPL) ratio of 2.9 percent versus 2.2 percent in 2019. “We feel that’s the peak for our portfolio. Our outlook for 2021 is an improvement,” said Alvarez. She said they will continue to be aggressive in their loan assistance program for their clients and so far, managing their NPL is “working well for us”.
Alvarez expects to see the first signs of NPL improvement within the first half of 2021 as they also start to grow their loan book. But, since this is still a pandemic year and Filipinos have yet to see vaccine shipments, RCBC will continue to maintain a high provisioning level but not as high as 2020.
“We plan to bring down the credit cost to lower than two percent to 1.5 percent of our loan portfolio,” she said. The P9.3 billion impairment losses set aside in 2020 was equivalent to two percent of their total loan portfolio.
RCBC’s gross income last year was up by six percent to P37.9 billion. Its diversified loan portfolio went up by five percent to P456.6 billion, on the back of SME and consumer loan growth despite the pandemic.
Operating expenses in 2020 was up only by 1.4 percent year-on-year to P22.1 billion. Cost-to-income ratio stood at 58.3 percent versus 60.8 percent in 2019.
After rationalization of operations during the lockdown periods, RCBC still has 447 branches and 1,426 ATMs for a 3.2 branch-to-ATM ratio.
As for capital base, it was at P101.5 billion as of end-2020 with a capital adequacy ratio of 16.1 percent and CET1 ratio of 12.6 percent. Last year, the bank issued $300 million of additional tier 1 capital notes and for 2021, Cebrero said they are eyeing at least another $300 million to $600 million offering, depending on market condition.
RCBC’s profitability held on last year, its return on equity was at 5.6 percent and its return on assets at 0.7 percent by end-2020, down from 6.5 percent and 0.8 percent respectively in 2019. Its net interest margin was up at 4.3 percent from four percent in 2019.